JPMorgan stated in a research report dated February 28 that the upcoming bitcoin (BTC) halving event in April is expected to negatively impact miners’ profitability due to reduced rewards and higher production costs. This could ultimately lead to lower prices for the cryptocurrency.
$JPM got this idea by looking at the history of Bitcoin’s production cost. This cost has usually been a kind of floor for Bitcoin’s price. The bank thinks that after something called the halving, the production cost might drop to $42,000.
Right now, JPMorgan says the production cost is about $26,500. But after the halving, it could double to $53,000. However, there’s a chance that the Bitcoin network might not be as strong after the halving. If that happens, the production cost could go down, along with the price of Bitcoin, to $42,000.
The bank’s experts, led by Nikolaos Panigirtzoglou, think that $42,000 is where Bitcoin’s price might settle after the halving excitement fades away in April.
JPMorgan suggests that Bitcoin might not reach the same portfolio allocation as gold due to its significant volatility. The bank predicts a price of $45,000 for Bitcoin if its risk level aligns with that of gold. Despite a current net inflow of $9 billion into Bitcoin ETFs, indicating a potential market cap of $3.3 trillion and a price exceeding $67,000, JPMorgan deems this scenario unrealistic. Bitcoin’s volatility, approximately 3.7 times higher than gold’s, suggests a potential ETF market of $62 billion, with $9 billion already invested.
This news is important for people who “mine” Bitcoin. Mining is how new Bitcoin is created. If it costs a lot to mine Bitcoin, then some miners might have trouble making money. But if it’s cheaper, they might do better. The bank also thinks that bigger mining companies, especially the ones that are listed on the stock market, will do better after the halving. They might even get more of the market, like what happened in 2022.
Update:
The upcoming halving of $BTC this week might lead to Bitcoin miners facing potential annual losses totaling as much as $10 billion.
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