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JP Morgan Warns: Bitcoin Correction Coming After Halving

JP Morgan Warns: Bitcoin Correction Coming After Halving

JP Morgan analysts who work for the American multinational financial firm have revealed that there may be a significant correction in the price of Bitcoin. They forecast that following the halving event, the cost of the cryptocurrency might fall as low as $42,000.

Forecast for Bitcoin Prices After Halving

JP Morgan analysts have remained pessimistic even though many cryptocurrency analysts predict that Bitcoin would soar sharply to new all-time highs after the much-awaited halving event. The researchers expect that when the BTC halving event ends, the price of BTC may drop to $42,000 due to increased production costs and mining challenges.

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By lowering the quantity of new Bitcoin issued, the pre-programmed event known as the Bitcoin halving, which takes place every four years, seeks to reduce inflation. Bitcoin miners experience a 50% reduction in rewards, known as “halving,” which decreases the amount of Bitcoin mined and subsequently reduces the cryptocurrency’s circulation.

Three halving events have occurred since Bitcoin’s launch in 2009: the first in November 2012, the second in July 2016, and the third in May 2020. The next halving event for Bitcoin is set for April 2024. Based on past performance, it is anticipated that there will be consistent price increases for BTC during this time.

The value of Bitcoin has increased exponentially throughout the last three halving cycles, reaching new all-time highs as a result of a reduction in supply. JP Morgan analysts have projected a pessimistic prognosis for BTC despite this recurring historical technical pattern, highlighting the significant impact a decline in mining profitability will have on the cryptocurrency’s price.

“Once the euphoria surrounding the April Bitcoin halving fades, we see BTC prices drifting towards this $42,000 estimate,” JP Morgan analysts said.

According to CoinMarketCap, at the time of writing, Bitcoin is trading at a record high of $61,565, which represents a 20% price increase over the previous seven days.

Strict Path Ahead For Bitcoin Miners

According to JP Morgan analysts, the halving event may significantly affect Bitcoin miners, which might cause the mining industry to become highly consolidated.

The experts showed that post-halving production costs may rise to $53,000 and cause a 20% drop in Bitcoin’s network hash rate. Their research also disclosed BTC manufacturing costs as a lower bound for prices. This might lead to fewer miners competing to manufacture Bitcoin, impacting the cryptocurrency’s price.

The analysts at JP Morgan have also disclosed the possibility of small mining companies going out of business, emphasizing that the rewards for mining Bitcoin would drop from 6.25 to 3.125 BTC after the event. When mining challenges rise in tandem with declining profitability, the mining industry may become less profitable, leading to many private miners quitting because expenses would outweigh profits.

Bitcoin price chart from Tradingview
BTC price at $61.900 | Source: SOLUSD on Tradingview.com

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