JPMorgan says bitcoin price could fall as low as $42,000 after April halving

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The planned April halving event could trigger a sharp drop in bitcoin’s price, according to JPMorgan analysts.

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

“The cost of producing bitcoin has empirically acted as a lower bound for bitcoin prices,” the analysts said. “The midpoint of our estimated production cost range currently stands at $26,500, which would mechanically double the event’s halving to $53,000.”

However, analysts said that there is a possibility of a 20% drop in the Bitcoin network hashrate after the halving, mainly due to less efficient rigs exiting mining operations due to a reduced profitability. This would therefore lower the midpoint of the estimated generation 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 to which we envision bitcoin prices drifting once the 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 price pages.

Bitcoin mining concentration

After the halving, Bitcoin miners with lower-than-average electricity costs and more efficient equipment will likely survive, while those with high production costs will struggle, analysts say.

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

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

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