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Bitcoin’s halving will take place on Friday or Saturday, but JPMorgan says it could be followed by a downturn.
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The bank’s analysis of Bitcoin futures shows that the cryptocurrency is in overbought territory.
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Mining companies will feel the pressure after 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 plummet shortly after the event.
The quadrennial halving – scheduled around April 19-20 – reduces the amount of new bitcoin entering circulation by halving the amount rewarded to miners. The market has widely anticipated the event as a bullish catalyst, helping to propel the token to record highs in 2024.
“We don’t expect any price increases for Bitcoin after the halving as these are already priced in. In fact, we see downsides for the price of Bitcoin after the halving for several reasons.” Analysts led by Nikolaos Panigirtzoglou wrote in a note this week.
First, JPMorgan says the bitcoin market is still high in overbought territory after surging to record highs in March. Panigirtzoglou previously pointed to several indicators that confirm this.
“There remains significant optimism in the market over the prospect of prices rising significantly by the end of the year, with a significant portion of that optimism coming from the view that demand for bitcoin through spot ETFs would continue at the same pace , even if the supply of bitcoin decreases. after the halving,” he said in a separate note at the end of March.
JPMorgan also notes that venture capital funding remains low despite the recent uptick in the crypto market, which is another headwind for the price.
“We had previously argued that a recovery in crypto VC flows is a necessary condition for a sustainable recovery in the crypto markets, so in our view the subdued VC flows YTD represent a downside risk,” the bank said earlier this month in a note.
Mining companies will take a hit after the halving, analysts say, while some could move to improve efficiency as they face the prospect of lower pay. Others may consolidate and partner with larger publicly traded miners.
“After the halving, it is also likely that some bitcoin mining companies will want to diversify into regions with low energy costs, such as Latin America or Africa, to deploy their inefficient mining rigs to extract residual value from those drilling rigs that would otherwise remain idle,” the spokesperson said. analysts wrote.
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