- Bitcoin could fall 33% after its long-awaited halving event in April, JPMorgan says.
- While past halvings have historically served as catalysts for gains, this one could start a chain of events that would push price down to $42,000 once euphoria clears, according to the firm.
Beyond the hype around newly launced ETFs, bitcoin bulls are getting excited about what has historically been a big catalyst for further gains for the token: a "halving" event that will reduce supply and theoretically boost the asset's price. The next one is slated for April.
But the event will also reduce the number of tokens issued on a daily basis by half, meaning miners will get half as much of an issuance award, hurting their profits amid higher production costs.
JPMorgan sees the aftermath of this presenting downside risk for bitcoin, which recently surged above $60,000 for the first time in more than two years. The firm notes that while production costs have put a floor under the price of bitcoin in the past, that boundary could be pushed lower after the halving.
Once the dust settles after the halving, JPMorgan says bitcoin could fall as far as $42,000, or 33% from the $62,608 level where it was trading on Friday.
The bitcoin network's hashrate is the focal point of this forecast. JPMorgan says it could fall 20% immediately after the halving, "mainly due to less efficient rigs exiting mining as they become unprofitable."
"This 20% drop would bring the hashrate closer to its historical trend," JPMorgan analysts wrote in a Feb. 28 research note. "This would effectively cut the central point of our estimated production cost range to $42k."
They continued: "This $42k estimate is also the level we envisage bitcoin prices drifting towards once bitcoin-halving-induced euphoria subsides after April."
Still, there are signs that bitcoin demand is far from abating, following the approval of a swath of ETFs that have increased the accessibility of the cryptocurrency. This past week, BlackRock's bitcoin ETF took in $520 million of inflows in a single day — the second-biggest inflow in history for a US fund — as investors chased bitcoin's gains above the $60,000 threshold.
In a further sign the bitcoin ETF craze could still have legs, Merrill and Wells Fargo started offering their own versions to clients this week as adoption and legitimacy spread further.