Analysts from JP Morgan, an American multinational financial corporation, have disclosed the potential for a significant price correction in Bitcoin, predicting that the cryptocurrency could see its price drop to $42,000 after the Bitcoin halving event.
Bitcoin Price Prediction Post Halving
While many crypto analysts foresee Bitcoin’s dramatic rise to new all-time following the highly anticipated Bitcoin halving event, JP Morgan analysts have remained bearish. According to the analysts, a rise in production costs and mining difficulties could push the price of BTC down to $42,000 after the BTC halving event concludes.
The Bitcoin halving, which is a pre-programmed event that occurs every four years aims to lower inflation by reducing the amount of new BTC created. The “halving” refers to the 50% reduction in the rewards paid to BTC miners, resulting in less Bitcoin being mined, and a subsequent decrease in the supply of the cryptocurrency.
Since BTC’s inception in 2009, there have been a total of three halving events, with the first occurring in November 2012, the second in July 2016, and the third in May 2020. The next Bitcoin halving event is scheduled for April 2024, and various projections indicate a continuation of historical trends, foreseeing sustained price surges in BTC during this period.
Across the last three halving cycles, BTC has witnessed exponential gains, rising to new all-time highs as decreased supply elevated the cryptocurrency’s value. Despite this reoccurring historical technical pattern, JP Morgan analysts have foreseen a bearish outlook for BTC, underscoring the pronounced impact a reduction in mining profitability will have on the cryptocurrency’s price.
“This $42,000 estimate is the level we envisage BTC prices drifting towards once Bitcoin-halving-induced euphoria subsides after April,” JP Morgan analysts stated.
At the time of writing, BTC is trading at a record high of $61,565, reflecting a 20% price surge over the past seven days, according to CoinMarketCap.
Tough Road Ahead For BTC Miners
JP Morgan analysts have disclosed that the halving event could greatly impact Bitcoin miners leading the mining sector to become grossly concentrated.
In their report, the analysts revealed BTC production costs as a lower bound for prices, highlighting that post-halving production costs could potentially surge to $53,000 and lead to a 20% decline in Bitcoin’s network hash rate. This development could result in fewer miners competing to produce BTC and subsequently affect its price.
Additionally, the JP Morgan analysts have revealed the potential for small mining businesses to go out of business, highlighting that following the event, Bitcoin mining rewards would reduce from 6.25 to 3.125 BTC. This reduction in mining profitability, added to the increase in mining difficulties, could negatively affect how lucrative the mining business is, potentially resulting in numerous private miners dropping out since costs would be significantly higher than profitability.
BTC price at $61.900 | Source: SOLUSD on Tradingview.com
Featured image from CNN, chart from Tradingview.com
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