- The Bitcoin halving takes place on Friday or Saturday, but JPMorgan says it could be followed by a collapse.
- The bank’s analysis of Bitcoin futures shows the cryptocurrency is in overbought territory.
- Mining companies will feel the effects of the halving and the sector could see consolidation.
Bitcoin’s long-awaited halving bell is here, but don’t bet on faster gains just yet – JPMorgan says the price of the world’s largest cryptocurrency could fall soon after the event.
The quadrennial halving – scheduled around April 19-20 – halves the amount of new bitcoin entering circulation by halving the amount rewarded to miners. The market widely anticipated this event as a bullish catalyst, helping to propel the token to record highs in 2024.
“We do not expect the bitcoin price to rise after the halving because it has already been priced in. In fact, we see a downside for the bitcoin price after the halving for several reasons.” “, wrote analysts led by Nikolaos Panigirtzoglou in a note this week.
First, JPMorgan says the Bitcoin market is still in overbought territory after hitting record highs in March. Panigirtzoglou previously highlighted several indicators that confirm this.
“There remains considerable optimism in the market about the prospect of a significant price rise by the end of the year, with a significant component of this optimism coming from the idea that demand for bitcoin via ETFs at cash would continue at the same pace even if bitcoin supply declines after the halving,” he said in a separate note in late March.
JPMorgan also observes that venture capital funding remains weak despite the crypto market’s recent rally, another headwind for the price.
“We had previously argued that a resumption of cryptocurrency venture capital flows was a necessary condition for a sustainable recovery of cryptocurrency markets. Therefore, in our view, the weakness of venture capital flows since the start of the year presents downside risk,” the bank said in a note earlier this month.
Mining companies will be hit after the halving, analysts said, while some may relocate to improve efficiency amid the prospect of lower rewards. Others may consolidate and partner with larger publicly traded mining companies.
“After the halving event, it is also likely that some bitcoin mining companies will seek to diversify into low energy cost regions such as Latin America or Africa to deploy their inefficient mining rigs in order to to obtain recovery values from these platforms that would otherwise remain unused,” the report said. »wrote the analysts.
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