JPMorgan predicts downward pressure on Bitcoin following reward halving

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19th April 2024 – (New York) In a recent forecast by JPMorgan, the leading financial institution anticipates a potential decline in Bitcoin’s valuation following the upcoming reward halving, scheduled around 19th to 20th April. This event, which occurs every four years, reduces the rate at which new bitcoins are generated, thereby decelerating the growth of the cryptocurrency’s supply.

According to the analysis presented in a research report on Wednesday, JPMorgan highlighted concerns over the current “overbought” conditions in the market. This was evident from the high level of open interest in Bitcoin futures, suggesting a possible price correction in the near future.

The bank also pointed out that Bitcoin’s current price of approximately $61,200 remains substantially above its fair value when adjusted for volatility in comparison to gold, which JPMorgan estimates to be around $45,000. Moreover, the projected production cost of Bitcoin post-halving stands at $42,000. Historically, this production cost has served as a critical lower boundary for the cryptocurrency’s pricing dynamics.

The implications of the halving extend beyond just pricing concerns. JPMorgan analysts, led by Nikolaos Panigirtzoglou, expect significant operational impacts on Bitcoin mining operations. The report predicts a notable decline in the network’s hashrate as less profitable miners withdraw, leading to a consolidation of activities among larger, often publicly-listed mining companies.

Additionally, the analysts foresee strategic shifts within the industry, with some mining firms potentially relocating to regions like Latin America or Africa. These areas offer lower energy costs, which could make them attractive for deploying less efficient mining rigs that would otherwise be unviable, thus salvaging some value from these assets.