Why Did Bittensor Crash More than 20% Following Its Halving This Week?

On Monday, it became official-Bittensor (CRYPTO: TAO) completed its halving event. Similar to Bitcoin and other top-tier projects that reduce the amount of new tokens minted over periods of time via cutting token rewards in half over specific durations, this anti-inflationary move in most other time frames would have resulted in a surge over the course of the past week. Instead, Bittensor has now declined 22.1% over the past seven trading days (as of 12:45 p.m. ET on Friday) and appears to have mostly downside momentum when viewed over one-month and one-year time frames.

As is the case with other top tokens (most notably Bitcoin), these halving events slash the rewards for companies mining tokens and validating transactions on the network in half. In doing so, the declining amount of new token issuance improves the underlying supply and demand fundamentals of these projects over time. It is supposed to provide a relative floor for Bittensor's token price.

That's clearly not been the case, so let's dive into what's driving this week's very negative sentiment for this top-50 cryptocurrency by market capitalization.

A sell the news event

Source: Getty Images.

The whole adage "buy the rumor, sell the news" appears to be in play with Bittensor over the past week. Many in the Bittensor community were clearly very excited about this halving event earlier this month, and there are good reasons for that. These events occur every few years, reducing the supply of new tokens issued and increasing the underlying scarcity of TAO tokens. This provides existing investors with a more stable stake in the future value generated by a particular network.

The reality is that Bittensor's decline this year has been relatively consistent. As a project tied to the artificial intelligence buildout, concerns about AI valuations have affected not only high-profile equities but also blockchain-based projects like Bittensor. With a relative lack of deal flow surrounding new AI application launches, the fact that Bittensor hasn't been able to match its 2024 peaks is concerning.

I'll have to keep an eye on Bittensor from here and focus in particular on whether this AI-related crypto project can start to build a bottom and recover. But down more than 22% this past week (and a whopping 50% over the past year), momentum is clearly not on the side of Bittensor bulls right now.

Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Bittensor. The Motley Fool has a disclosure policy.