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JPMorgan Chase & Co and Deutsche Bank AG suggest that the upcoming Bitcoin software update known as the “halving,” occurring once every four years and previously believed to be a significant factor in supporting the cryptocurrency’s value, is already factored into the market prices.
Author: María Paula Mijares Torres, Bloomberg News
Published Date: Apr 18, 2024
Article Content
According to JPMorgan analysts, the impact of the halving is expected to affect Bitcoin mining more than its price. As unprofitable miners exit the network, a consolidation within the sector is foreseen, with publicly-traded companies poised to seize market share opportunities.
The analysts further noted that publicly-listed Bitcoin miners are in a favorable position to capitalize on this new landscape due to better access to funding, particularly through equity financing. This enables them to expand their operations and upgrade to more efficient equipment.
Deutsche Bank analysts share a similar sentiment, anticipating no significant surge in Bitcoin prices post-halving. They explained that since the Bitcoin algorithm has already accounted for the halving event, its impact has been integrated into the market dynamics.
The halving event reduces the mining reward by half every four years, which is the fixed amount of Bitcoin released to miners for validating transactions. Data from mempool.space indicates that this adjustment likely took effect late Friday.
Historically, after previous halving events, the total mining capacity, known as the hashrate, has decreased as some miners find it less profitable to continue due to reduced rewards. Deutsche Bank analysts highlighted that engaging in mining becomes less lucrative as the rewards diminish.
Despite the absence of drastic price fluctuations, Deutsche Bank remains optimistic about Bitcoin’s price stability, citing factors such as potential Ethereum ETF approvals, central bank rate cuts, and regulatory developments.
Moreover, the rise in layer-2 solutions and DeFi activities, enhancing the network’s utility, contributes to a positive outlook for the Bitcoin ecosystem and the broader cryptocurrency space.
Both JPMorgan and Deutsche Bank anticipate a potential shift of Bitcoin mining operations from the US to regions with lower energy costs like Latin America or Africa post-halving. This move aims to repurpose inefficient mining resources and extract salvage value from idle rigs.
Assistance provided by Isabelle Lee.
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