Bitcoin halving event may lead to price decline, analysts say
The Bitcoin halving event, scheduled for April, is expected to cut the reward for mining a block on the Bitcoin blockchain from 6.25 BTC to 3.125 BTC, potentially leading to a significant decline in the cryptocurrency’s price. JPMorgan analysts have suggested that the production cost of Bitcoin could rise to around $42,000 post-halving, which may result in a price drop as the “halving-induced euphoria” fades. The halving is a mechanism built into Bitcoin’s protocol to reduce the rate at which new coins are created, effectively halving the block reward approximately every four years to control inflation.
Despite the current bullish trend that has seen Bitcoin’s price soar to $61,323, up 43% from the previous month and nearing its all-time high of $69,044, the halving event could disrupt the market. Miners are already responding to the anticipated changes; on-chain analytics firm Glassnode reports that Bitcoin miners’ reserves have dropped to their lowest level since July 2021, with an 8,426 BTC decrease since the start of the year. This sell-off, totaling $530 million, indicates that miners are looking to capitalize on the recent price increase before the halving reduces their rewards.
The halving is generally seen as a bullish event due to the reduced supply of new coins entering the market, which has historically led to price increases. However, the upcoming reduction in block rewards is expected to put pressure on miners, particularly those with high production costs. Analysts predict that only miners with below-average electricity costs and more efficient equipment will remain profitable, potentially leading to increased industry concentration and horizontal integration through mergers and acquisitions.
The market has also been influenced by institutional interest, as evidenced by the inflow of over $5.2 billion into Bitcoin ETFs and the positive market response to the approval of a spot Bitcoin ETF in the United States. Despite these factors, the looming halving event and its impact on miners’ profitability remain a concern for the future of Bitcoin’s price trajectory.