In a recent report, JPMorgan analysts, led by Nikolaos Panigirtzoglou, have raised concerns about a potential sharp decline in the price of Bitcoin following the upcoming halving event scheduled for April. The halving event, set to reduce Bitcoin miners’ rewards from 6.25 BTC per block to 3.125 BTC, is anticipated to negatively impact miners’ profitability, leading to a surge in bitcoin production costs.
“The bitcoin production cost has empirically acted as a lower bound for bitcoin prices,” the analysts stated, highlighting their prediction that the production cost could rise to around $42,000 post-halving. Currently estimated at $26,500, this figure could mechanically double after the halving event, reaching $53,000.
Despite this prediction, the analysts acknowledge a potential 20% decline in the Bitcoin network’s hashrate post-halving. This decline is attributed to less efficient mining rigs exiting operations due to reduced profitability. Taking into account an average electricity cost of 0.05 $/kWh, the analysts assert that this reduction in hashrate could lead to a central point in the estimated production cost range dropping to $42,000.
“The $42,000 estimate is also the level we envisage bitcoin prices drifting towards once bitcoin-halving-induced euphoria subsides after April,” the analysts explained. This suggests that while an initial surge in bitcoin prices might occur due to the halving event, a subsequent decline could bring the cryptocurrency closer to the $42,000 mark.
As of the latest market data, the current price of bitcoin stands at around $62,730. The analysis by JPMorgan prompts investors and enthusiasts alike to closely monitor the market dynamics post-April, with potential implications for the broader cryptocurrency landscape.
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