JPMorgan says bitcoin price could drop towards $42,000 post April halving

Bitcoin, the world’s largest cryptocurrency by market capitalization, has been on a remarkable rally since the start of the year, reaching new highs above $60,000.

However, some analysts believe that the upcoming halving event in April, which will reduce the supply of new bitcoins entering the market, could trigger a significant correction in the price of the digital asset.

JPMorgan says bitcoin price could drop towards $42,000 post April halving pic.twitter.com/nkmIVKLVaT

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What is the bitcoin halving?

The bitcoin halving is a process that occurs approximately every four years, or every 210,000 blocks mined, on the bitcoin network.

It reduces the reward that miners receive for validating transactions and creating new blocks by 50%. The halving is designed to control the inflation rate of bitcoin and ensure its scarcity and value over time.

The first halving occurred in November 2012, when the block reward dropped from 50 bitcoins to 25 bitcoins.

The second halving occurred in July 2016, when the block reward dropped from 25 bitcoins to 12.5 bitcoins.

The third and most recent halving occurred in May 2020, when the block reward dropped from 12.5 bitcoins to 6.25 bitcoins.

The next halving is expected to occur around April 19, 2024, when the block reward will drop from 6.25 bitcoins to 3.125 bitcoins.

This will also mark the point when 93.75% of the total supply of 21 million bitcoins will have been mined.

How does the halving affect the price of bitcoin?

Historically, the halving events have been associated with positive price movements for bitcoin, as they create a supply shock and increase the scarcity and demand for the cryptocurrency.

For instance, the first halving in 2012 was followed by a 9,000% increase in the price of bitcoin over the next year, from around $10 to $1,000.

The second halving in 2016 was followed by a 2,800% increase in the price of bitcoin over the next year and a half, from around $600 to $20,000.

The third halving in 2020 was followed by a 500% increase in the price of bitcoin over the next year, from around $10,000 to $60,000.

However, some analysts argue that the halving events are already priced in by the market, and that the price movements are driven by other factors, such as institutional adoption, regulatory developments, innovation, and sentiment.

Moreover, some analysts warn that the halving events could also have negative consequences for the price of bitcoin, as they reduce the profitability and security of the network.

Bitcoin Halving Dates and Prices

Halving Date	Block Height	Reward Before (BTC)	Reward After (BTC)	Price on Halving Day (USD)	Price 150 Days Later (USD)
Nov. 28, 2012	210,000	50	25	12.35	127.00
July 9, 2016	420,000	25	12.5	650.63	758.81
May 11, 2020	630,000	12.5	6.25	8,566.42	10,723.02
April 17, 2024 (estimated)	840,000	6.25	3.125	?	?

Bitcoin Inflation Rate and Total Supply

Period	New BTC Per Block	New BTC Per Day	Annual Inflation Rate (%)	Total BTC in Circulation	Total BTC Supply (%)
2009-2012	50	7,200	29.8	10,500,000	50
2012-2016	25	3,600	12.5	15,750,000	75
2016-2020	12.5	1,800	4.4	18,375,000	87.5
2020-2024	6.25	900	1.8	19,687,500	93.75
2024-2028	3.125	450	0.9	20,343,750	96.875
2028-2032	1.5625	225	0.4	20,671,875	98.4375
2032-2036	0.78125	112.5	0.2	20,835,937.5	99.21875
2036-2040	0.390625	56.25	0.1	20,917,968.75	99.609375
2040-2100	0.1953125 – 0.00000001	28.125 – 0.144	0.05 – 0.00001	20,999,999.9769	99.99999999

Why Does JPMorgan Predict a Price Drop to $42,000?

JPMorgan, one of the largest and most influential financial institutions in the world, has been closely monitoring and analyzing the cryptocurrency market, and has recently published a research note with its outlook and forecast for the price of bitcoin after the halving.

The note, written by a team of strategists led by Nikolaos Panigirtzoglou, states that the long-term theoretical target for bitcoin is $150,000, up from $146,000 predicted last year.

This target is based on the assumption that bitcoin’s market capitalization will match that of gold held privately for investment purposes, which is estimated at $4.6 trillion.

However, the note also states that the current fair value of bitcoin is around $38,000, up from $35,000 estimated last year.

This fair value is calculated based on bitcoin being roughly four times as volatile as gold, which implies a risk premium of 75% over the gold price.

If the volatility differential between bitcoin and gold narrows to three times, then the fair value of bitcoin would rise to $50,000, according to the note.

The note also warns that the halving will have a negative impact on miners’ profitability, given the reduced rewards and the higher bitcoin production cost.

The note estimates that the production cost of bitcoin, which is mainly driven by electricity consumption and hardware depreciation, is currently around $15,000 per coin, and will increase to $18,000 after the halving.

The note also predicts that the network’s hashrate will drop by 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, which implies a lower level of network security and stability.

The note concludes that this $18,000 estimate is also the level that the price of bitcoin will drift towards once the halving-induced euphoria subsides after April. The note states:

This $18,000 estimate is also the level we envisage bitcoin prices drifting towards once bitcoin-halving-induced euphoria subsides after April.

This $18,000 estimate is also the central point of our estimated production cost range to $42,000.

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

The note also acknowledges that there are some positive factors that could support the price of bitcoin in the medium to long term, such as the increasing adoption, innovation, and regulation in the cryptocurrency space, as well as the growing interest and demand from institutional and retail investors.

However, the note cautions that these factors are not enough to offset the negative effects of the halving in the short term, and that the biggest challenge for bitcoin going forward is its volatility and the boom and bust cycles that hinder further institutional adoption.

How should investors react to the halving?

The halving is a significant event for the bitcoin network and the cryptocurrency market, as it affects the supply and demand dynamics of the digital asset.

However, it is not the only factor that influences the price of bitcoin, and investors should also consider other aspects, such as the adoption, innovation, regulation, and sentiment of the industry.

The halving could create both opportunities and risks for investors, depending on their time horizon, risk appetite, and strategy.

For long-term investors, the halving could be a catalyst for further price appreciation, as it increases the scarcity and value of bitcoin over time.

For short-term traders, the halving could be a source of volatility and uncertainty, as it creates supply shocks and market adjustments.

Therefore, investors should do their own research, diversify their portfolio, and manage their risk exposure, before making any investment decisions related to the halving.

As always, investors should be prepared for the possibility of high volatility and price fluctuations in the cryptocurrency market, and only invest what they can afford to lose.

Conclusion

The bitcoin halving is a major event that will affect the supply and demand dynamics of the cryptocurrency market, and potentially have a significant impact on the price of bitcoin.

While some analysts and investors are optimistic and expect the halving to boost the price of bitcoin, as it has done in the past, others are more pessimistic and anticipate a price correction, as the halving reduces the profitability and incentives of miners.

JPMorgan is among the latter group, and predicts that bitcoin could fall as low as $42,000 after the halving, once the euphoria subsides.

However, the halving is not the only factor that influences the price of bitcoin, and there are other variables that could affect the market sentiment and expectations.

Therefore, it is important to keep an eye on the developments and trends in the cryptocurrency space, and to be prepared for potential volatility and uncertainty.