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Bitcoin has recently seen a soaring trend: it has accumulated about a 45% increase since the beginning of this year, and this Thursday it even briefly surpassed $64,000, approaching the previous all-time high of $69,000 on November 8, 2021.
Apart from the surge in demand due to the Bitcoin ETF approved by the U.S. Securities and Exchange Commission in January, another reason driving Bitcoin's rise is the upcoming "halving" scheduled for April this year.
Historically, "halving" has often led to a bullish trend in Bitcoin, as this event theoretically results in a scarcity of Bitcoin supply. However, analysts at JPMorgan predict that after this year's "halving," the Bitcoin mining industry is expected to undergo further consolidation, leading to a roughly 20% decrease in the network's hash rate. This could potentially result in a lowering of Bitcoin's price.
Rising Mining Costs After "Halving"
Throughout history, the price of Bitcoin tends to rise with each "halving" because it increases the production cost for miners, which is generally considered the lower limit for Bitcoin prices. JPMorgan strategists state that the current average production cost of Bitcoin is $26,500, and theoretically, after the "halving," the production cost will mechanically double to $53,000.
Analysts at JPMorgan suggest that with increasing mining difficulty, small miners are expected to be forced to cease operations. For the remaining miners, this could lead to a decrease in mining difficulty, potentially lowering production costs by about 20% from the initial estimates.
JPMorgan strategists wrote in their report that, as the lower support level for Bitcoin decreases, investors may see the price fall to around $42,000 after the April "halving," representing a drop of over 30% compared to the current Bitcoin price (around $62,000).
Could JPMorgan's Scenario be Unrealistic?
JPMorgan strategists' predictions are based on two key assumptions: first, after the "halving," the estimated average electricity cost for miners is around $0.05 per kilowatt-hour, which may vary by location and scale. Secondly, as Bitcoin mining becomes more energy-intensive after the "halving," some less efficient private miners with less capital will exit the market as their production costs exceed the market price, leading to a 20% decrease in hash rate (a measure of the mining industry's mining capacity).
"This 20% decrease will bring the hash rate closer to historical trends," the strategists wrote, "effectively shifting the center point of our estimated production cost range to $42,000. This $42,000 estimate is also what we envision once the optimism triggered by Bitcoin's 'halving' fades in April, determining the direction of Bitcoin prices."
However, if Bitcoin's price remains high, the decrease in hash rate may not become a reality. As more people purchase Bitcoin through new spot Bitcoin ETFs, the rise in Bitcoin prices may allow smaller miners to remain profitable even after the April "halving," and JPMorgan's envisioned scenario may not materialize. |
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Post time 13-3-2024 09:29:34
