Bittensor's First Halving: Why Am I Still Bullish on $TAO?
TechFlow Selected TechFlow Selected
Bittensor's First Halving: Why Am I Still Bullish on $TAO?
$TAO quickly recovered its price after the brutal altcoin selloff on October 10, demonstrating strong resilience.
Navigating Web3 tides with focused insightsAuthor: Sami Kassab
Compiled by: TechFlow
In December 2025, Bittensor will undergo its first halving, triggering mixed reactions within the community. Some remain calm and confident, believing the network can adapt; others feel uneasy, thinking the protocol may need adjustments. Such reactions are not surprising.
If we look back at Bitcoin’s first halving, we see a similar emotional landscape: pessimists firmly believed Bitcoin would spiral into oblivion, while optimists argued the system would adapt because the incentives demanded it.
In short, the pessimists were wrong. Bitcoin still exists today and has proven the effectiveness of programmed monetary policy. We believe Bittensor’s halving will yield a similar outcome.
However, there is one key difference between Bitcoin and Bittensor: Bittensor has two tokens—TAO and Alpha (subnet tokens)—that follow different halving schedules, making the situation more complex.
We’ll break it down in detail, but first, our long-term view is clear: the halving is bullish for both TAO and subnet tokens, even if, like Bitcoin, the exact timing of its impact is hard to predict.
Overview
If you don’t want to dive into details, here’s the summary:
For TAO, the halving will cut token issuance in half, meaning less TAO in circulation and fewer TAO available for sale. This is clearly bullish.
Think of it this way: in Bitcoin, miners earn BTC directly, and the halving reduces their income and sellable supply. In Bittensor, subnets earn TAO, so the halving means less TAO flows into these subnets, reducing the amount of TAO that miners, validators, and token holders can sell.
For subnet tokens, the situation is more complex. The core of a subnet is a liquidity pool, and the TAO halving will cut on-chain liquidity injections by half. Tighter liquidity leads to higher volatility, amplifying price movements in both directions.
For example, if a subnet market (sum of prices) rose 1% last week under current liquidity, that same move could be marginally doubled post-halving. Net capital flow will become the sole driver of subnet prices.
Here’s how we see it:
-
Bittensor remains the undisputed leader in the AI and crypto space.
-
TAO quickly recovered its price after the brutal altcoin liquidation on October 10, showing strong resilience.
-
The subnet market (sum of prices) appears to have bottomed out.
-
Fundamentals of leading subnets are improving, with buybacks starting to generate real income for tokens.
-
Products like Yuma’s subnet asset management offering, Grayscale’s public TAO trust filing, and more Bittensor DATs launching will make subnets more accessible to institutional and retail investors.
-
Yields from TAO staking (Root) continue to decline, which may push TAO into subnets as investors seek to avoid dilution and capture upside potential.
Therefore, our view is this: we believe subnet capital flows are about to turn positive. In a post-halving environment of higher volatility and tighter liquidity, this is a tailwind for subnet tokens.
Detailed Breakdown
The Bittensor protocol allocates TAO to each subnet’s liquidity pool proportionally to the price of the subnet token (Alpha). This mechanism was introduced in February 2025 via the Dynamic TAO upgrade, marking Bittensor’s shift toward a market-driven token distribution model.
The injection of TAO into liquidity pools is designed to stabilize subnet token prices. When the chain injects TAO into one side of the pool, it simultaneously injects Alpha into the other side to maintain balance. After the halving, TAO injections will be reduced by 50%, and corresponding Alpha injections will automatically decrease to prevent price swings.
For example, if a subnet currently holds 10% of issuance and trades at 0.1 TAO (assuming a price sum of 1 for simplicity), it receives 0.1 TAO and 1 Alpha per block. Post-halving, the same subnet will receive 0.05 TAO and 0.5 Alpha per block.
The main effect is slower growth of TAO and Alpha liquidity within subnet pools. Reduced liquidity means increased price volatility, both up and down. Essentially, subnet tokens will trade with higher beta.
This impacts miners the most. As structural sellers facing dollar-denominated costs, they regularly convert Alpha to TAO (then TAO to USD) to cover expenses. After the halving, reduced liquidity means each Alpha sale yields less TAO due to shallower TAO depth and higher slippage. Thus, the amount of TAO extracted and sold from subnet pools will decrease.
Subnet owners can respond to this imbalance by reducing miner emissions by approximately 50%, effectively creating an “Alpha halving.” While this won’t fully restore pre-halving conditions, it brings the system closer to equilibrium. By reducing the amount of Alpha entering circulation, subnets can slow the rate at which Alpha is sold against thinner TAO pools, preventing faster liquidity depletion. Aligning Alpha emission cuts with the TAO halving can stabilize subnet prices and reduce overall network volatility.
Alternatively, subnets can offset the halving’s impact by gradually increasing structural demand—possibly through buybacks—reducing the need to cut miner emissions.
Impact Analysis
The immediate effect of the halving is that subnets will receive less TAO. This pressure will force less efficient miners off the network—a pattern seen after every Bitcoin halving.
Weaker subnets will also struggle. With incoming TAO halved, liquidity growth slows, miner margins shrink, and maintaining participation becomes harder. This reinforces the Pareto distribution, concentrating emissions toward stronger subnets. Effectively, the network reallocates TAO from weaker to stronger subnets.
Meanwhile, new subnets will face greater challenges when bootstrapping liquidity. They will compete for a smaller pool of TAO issuance, meaning less value flowing into the Dynamic TAO system, starting from zero. Since Alpha injections into liquidity pools are also halved, new subnets’ circulating supply will grow slower than older ones. Lower circulating supply keeps the Root Prop higher for longer, meaning new subnets face stronger systemic selling pressure than their predecessors.
But this is only one side of the story. If TAO’s price rises due to reduced selling pressure, subnet owners may not need to significantly cut miner emissions—or any at all. Miner profitability could return to pre-halving levels, and the challenge of bootstrapping liquidity for new subnets could ease as the dollar value of TAO issuance increases. Like Bitcoin, this effect may not appear immediately, but gradually emerge as supply reduction catches up with demand.
Antifragility
The halving will bring shock and volatility. The impact of reduced supply takes time to manifest. But after Bitcoin successfully validated programmed monetary policy, there’s no reason to doubt its effectiveness. With an equally strong community, we believe Bittensor will follow the same path.
Nassim Taleb argues that low volatility creates fragility by hiding stress until the system collapses. In contrast, systems exposed to regular shocks become stronger. Bittensor’s halving is such a shock. It’s an unintentional stress test that makes the network more resilient. This is just the first of many shocks—and if the network is to thrive over the coming decades, it must endure such trials.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
@Old_Samster
