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The much-anticipated Bitcoin halving event, scheduled for around April 19-20, 2024, is just around the corner. This quadrennial event cuts the reward for miners in half, impacting both the supply of new Bitcoin and the profitability of mining operations. While past halvings have been followed by significant price increases, a new report from JPMorgan (JPM) suggests a different outcome for Bitcoin post halving this time.
Bitcoin Post Halving: Market Overbought?
Scheduled for around April 19-20, the Bitcoin halving is a programmed event that cuts the reward for miners in half. This quadrennial occurrence aims to slow down the rate at which new Bitcoins enter circulation. However, according to a research report by Wall Street giant JPMorgan (JPM), the market might react negatively in the short term.
JPMorgan’s analysis of open interest in Bitcoin futures suggests the market is currently “overbought.” This means there might be a larger number of investors holding long positions (expecting the price to rise) than short positions (expecting the price to fall). In such scenarios, a correction, or price decrease, is often seen to bring the market back to a more balanced state.
Price, Production Costs, and Competition from Gold
JPMorgan’s report highlights several factors that could contribute to a price dip following the halving. Firstly, the current price of Bitcoin, hovering around $61,200, sits above both JPMorgan’s volatility-adjusted comparison with gold (setting Bitcoin’s value at $45,000) and their projected production cost of $42,000 after the halving. Historically, production costs have acted as a floor for Bitcoin prices.
Secondly, the report notes that venture capital funding for cryptocurrency projects remains subdued despite a recent resurgence in the crypto market. This could indicate a lack of strong bullish sentiment from institutional investors.
Impact on Bitcoin Miners
The biggest impact of the halving might be felt by Bitcoin miners. With the reward cut in half, less profitable miners may be forced to leave the network. This could lead to a significant drop in the hashrate, a measure of the network’s processing power.
JPMorgan anticipates consolidation within the mining industry, with publicly listed miners potentially gaining a larger share. Additionally, the report suggests that some mining firms might relocate to regions with lower energy costs, such as Latin America or Africa, to maintain profitability with less efficient mining rigs.
Uncertainties Remain
JPMorgan’s analysis offers a potential scenario for Bitcoin post halving. However, the cryptocurrency market is known for its volatility, and other factors could influence price movements. Whether a price correction occurs, or the halving triggers a longer-term bull run, remains to be seen.
