JPMorgan analysts say that one of the most anticipated catalysts for further growth in the price of Bitcoin may eventually cause a decrease in the corresponding indicator.
An update of the mentioned digital currency’s code called Halving is planned for April. As a result of this action, the number of tokens issued daily will be halved, to about 450. It is expected that there will be a shortage of supply for this reason.
Bitcoin has shown rapid growth of about 45% in the current year, reaching $62,000. At the same time, demand from exchange-traded funds approved in January increased sharply.
The price of Bitcoin has historically increased after the Halving event. The so-called cost of production of the miner functioned as the lower bound of the asset.
JPMorgan analysts note that the average cost of producing Bitcoin is $26,500 per unit, which will mechanically double after updating the code. However, increased mining difficulties push smaller miners out of operation. For this reason, the difficulty of mining maybe 20% lower than originally expected. With less support from the lower bound, the Bitcoin price may return to the $42,000 mark after April. The corresponding assumption is contained in a note by JPMorgan strategists published this week.
Analysts base their vision on two main assumptions. In this case, it is taken into account that the cost of electricity for miners after halving is estimated at an average of five US cents per kilowatt hour and may vary depending on location and scale. The second factor is that Bitcoin mining becomes more energy-intensive after April, which is why some private miners with a less efficient fleet of machines and limited access to capital will drop out of the market.
As we have reported earlier, Sustainable Miners to Suffer Less From Bitcoin Halving.
