JPMorgan says bitcoin price could drop toward $42,000 after April halving

The upcoming Bitcoin  halving event scheduled for April could trigger a sharp decline in the price of bitcoin, according to JPMorgan analysts.

The halving event will reduce Bitcoin miners' rewards from the current 6.25 BTC per block to 3.125 BTC and this reduction will negatively impact miners' profitability and lead to a higher bitcoin production cost, JPMorgan analysts led by Nikolaos Panigirtzoglou wrote in a report on Wednesday. The bitcoin production cost influences its price, with the analysts predicting it to be around $42,000 post halving.

"The bitcoin production cost has empirically acted as a lower bound for bitcoin prices," the analysts said. "The central point of our estimated production cost range stands at $26,500 currently, which would mechanically double post halving event to $53,000."

However, the analysts said there is a possibility of a 20% decline in the Bitcoin network's hashrate post halving, primarily due to less efficient rigs exiting mining operations due to reduced profitability. This would consequently lower the central point of the estimated production cost range to $42,000, based on an average electricity cost of 0.05 $/kWh, they added.

"This $42,000 estimate is also the level we envisage bitcoin prices drifting towards once bitcoin-halving-induced euphoria subsides after April," the analysts said.

The current price of bitcoin is trading at around $62,730, according to The Block's prices pages.

Bitcoin mining concentration

Post the halving, Bitcoin miners with below-average electricity costs and more efficient equipment are likely to survive, while those with high production costs would struggle, according to the analysts.

Therefore, the concentration of the Bitcoin mining industry is expected to increase post-halving, they said, with a higher share held by publicly listed Bitcoin miners as they would reduce overall costs to protect profitability.

"There could be also some horizontal integration via mergers and acquisitions among bitcoin miners across regions to take advantage of synergies in their businesses," the analysts concluded.