JPMorgan Expects Retail Demand for Bitcoin to Remain Strong as Reward Halving Approaches


By Landon Manning

In anticipation of the next halving event for Bitcoin, researchers from JPMorgan have declared their belief that the underlying asset will remain strong.

An integral component of Bitcoin’s long-term viability is the cap on the volume of coins that can be mined. There will only ever be 21 million bitcoin and there is a gradual taper from the early days of extremely easy mining to a tiny crawl by the very end of bitcoin mining’s lifespan. The mechanism for this gradual taper takes the form of the “halving” event, when certain passed milestones in bitcoin mined will automatically cut all mining rewards in half. In other words, the same amount of equipment and electricity will create half as many assets as it had a day before. The next halving is about a year away.

This event has happened three times in Bitcoin’s past, and according to research published in June by JPMorgan, the last two halvings led to a rally in bitcoin’s price. The 2024 halving seems well on track to continue this trend, as the report claims that a halving “would mechanically double bitcoin production cost to around $40,000, creating a positive psychological effect.”

Specifically, the increase in production cost would help raise the floor for bitcoin’s valuation, and lead to an increase in demand for coins in circulation. Institutional investment has diminished somewhat, the report claims, but Ordinals and the BRC-20 protocol have been attracting lots of attention from retail investors. This endorsement of future performance is particularly interesting from JPMorgan, as the firm has historically displayed a skeptical attitude for Bitcoin.

One of the main effects the halving will have on the Bitcoin community is its radical impact on miners. With such a sheer drop in productivity, mining firms will surely struggle to maintain market viability for the sheer output of equipment and electricity. Instead, only the firms that are the most well configured to run efficiently will be able to weather the storm. When less efficient miners are pushed out of the pool, this will leave these miners able to take home a bigger proportion of the pie. In the end, the halving will be a mechanism that forces the whole industry’s hardware to optimize.

Indeed, to an untrained observer, it might be quite surprising that the community is full of predictions that the halving will only spell good things for Bitcoin. How could increased costs of production be good for business? The simple answer is that, because Bitcoin has already been halved many times before and “trimming the fat” of mining operations has historically led to more buzz from investment, Bitcoiners are assuming the same will take place again. The difficulty in acquiring fresh bitcoin will lead to increased interest in purchasing old ones, and the mining industry will be disrupted in a way that ultimately benefits it.

The halving is expected to take place in about a year, according to current industry estimates, and there is still plenty of time to observe the trends in the market and adjust these predictions accordingly. With years of experience behind it, however, the Bitcoin community is resolute.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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