A new report from JPMorgan warns of an impending price correction for the world’s top cryptocurrency. Future publication via CFOTO/Getty Images
Bitcoin's price has reached more than $63,000 as of Thursday, a high not seen in the past two years, according to JPMorgan analysts, but Bitcoin's upcoming halving event could push the price higher. The price could drop to $42,000.
“Bitcoin production costs have empirically served as a floor for Bitcoin prices,” analysts said in a report released Wednesday, adding that post-halving production costs would double to around $53,000. I predict that it is possible. This could potentially reduce the Bitcoin network's hashrate by 20%, meaning fewer miners would be competing to generate Bitcoin at the same time.
“This $42,000 estimate is also the level where we expect Bitcoin price to head once the Bitcoin halving-induced euphoria subsides after April,” the analysts wrote.
The halving, expected around April 19th, will slow down the rate at which new coins are minted, reducing the reward miners earn per block from 6.25 Bitcoins to 3.125 Bitcoins. While reduced supply has historically caused prices to soar, increased production costs could also impact Bitcoin prices, as fewer miners will be able to maintain profits.
JP Morgan analysts conclude that “horizontal integration through mergers and acquisitions among Bitcoin miners across regions is also possible to take advantage of business synergies,'' and the share of listed miners in the hash rate will increase. He pointed out that there is a high possibility that
Bitcoin is nearing an all-time high of about $69,000, and cryptocurrency providers like Coinbase, which has suffered outages due to a surge in app and site traffic, are exhausted. However, JPMorgan's bearish forecast could undermine optimism that this upward trajectory will continue for the long term.
“We expect consolidation,” said Fred Thiel, CEO of Marathon Digital Holdings, the world's largest publicly traded mine. luck. He added that around 10% to 25% of miners, likely smaller players, will go offline at some point. But Thiel expects some of it will come back once costs are optimized.
How an increase in production costs will harm miners is closely related to the price of Bitcoin. Even if it goes up, they will still be making the same amount of money “a few months after the halving,'' said Alessandro Cecere, head of marketing at mining pool Luxor.
In fact, after the last three halvings in 2008, 2012, and 2016, hashrate briefly declined and then recovered.
But like JPMorgan, Galaxy CEO Mike Novogratz told Bloomberg TV on Thursday that he sees some bearish signals, at least in the short to medium term.
“I wouldn't be surprised if there were some fixes or consolidations,” he added during the interview. “A correction could see a correction to the mid-$50,000s before rallying toward new highs.”
