JPMorgan analysts anticipate a potential decline in Bitcoin’s price following the upcoming halving event scheduled for April.
The event, which will halve the rewards for Bitcoin miners from 6.25 BTC to 3.125 BTC per block, is expected to negatively affect miners’ profitability and increase the cost of Bitcoin production.
According to a report led by Nikolaos Panigirtzoglou, this increase in production costs could set a new price floor for Bitcoin at approximately $42,000 post-halving.
The analysts highlight that the Bitcoin production cost has historically acted as a lower bound for its market price. Currently estimated at $26,500, the production cost is projected to double to $53,000 post-halving.
However, a potential 20% reduction in the Bitcoin network’s hashrate, due to less efficient mining rigs exiting the market, could adjust the production cost estimate to $42,000, considering an average electricity cost of $0.05 per kWh.
This adjustment in production cost is expected to influence Bitcoin’s price to stabilize around $42,000 after the initial post-halving excitement fades. Presently, Bitcoin is trading at approximately $62,730, indicating a significant gap from the projected post-halving price level.
Bitcoin Mining Concentration to Increase
The report further suggests that the post-halving landscape will favor Bitcoin miners with lower electricity costs and more efficient equipment, potentially leading to an increased concentration in the mining industry.
Publicly listed Bitcoin miners, in particular, are expected to gain a larger market share by leveraging their ability to reduce overall costs and protect profitability.
Additionally, the analysts foresee possible mergers and acquisitions among Bitcoin miners as a strategy to capitalize on business synergies and mitigate the impact of reduced profitability.
