Last Saturday, the long-awaited Bitcoin "halving" was finally completed! Historically, the Bitcoin "halving" event is often seen as a catalyst for driving Bitcoin prices up, as the reduction in the supply of new Bitcoins may increase its value.
However, it may be difficult for Bitcoin to rise further during this "halving" - JPMorgan Chase even predicted that the price of Bitcoin may plummet after this round of "halving" is completed.
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“Halving” does not necessarily mean
Bringing further rise
Bitcoin "halving" refers to the halving of the amount of new bitcoins that miners receive as rewards by solving complex mathematical puzzles to verify transactions, thereby reducing the number of new bitcoins entering circulation.
This is a mechanism designed into the Bitcoin protocol to control the rate at which new Bitcoins are issued. The "halving" usually occurs at a specific time point set by the Bitcoin protocol, which occurs approximately every four years.
Data shows that at 8:09 am Beijing time on April 20, 2024, Bitcoin successfully completed its fourth halving at block height 840,000. The mining reward of the Bitcoin network was halved from 6.25 BTC to 3.125 BTC. The last halving occurred on May 11, 2020.
In the months leading up to this, the market had widely expected this event to be a bullish catalyst for Bitcoin, helping the token to hit a new all-time high in 2024.
However, if we look back at past history, we will find that although the "halving" event is usually accompanied by large fluctuations in the price of Bitcoin, the price does not rise immediately after every halving. Sometimes the price will adjust within a period of time after the halving.
This time, a team of analysts including Nikolaos Panigirtzoglou of JPMorgan said: "We do not expect Bitcoin prices to rise after the halving because the positive news has been digested. In fact, we believe that Bitcoin prices will fall after the halving for several reasons."
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Several reasons led to the sharp drop in Bitcoin
First, JPMorgan said that the Bitcoin market remains in overbought territory after surging to record highs in March. Panijitzoglou pointed out several indicators that confirm this.
He previously said in another report at the end of March: "The market remains quite optimistic about the prospect of a significant increase in Bitcoin prices before the end of the year, and a large part of this optimism comes from the view that even if the supply of Bitcoin decreases after the halving event, the demand for Bitcoin through spot ETFs will continue to grow at the same rate."
JPMorgan also observed that despite the recent crypto market recovery, venture capital funding remains low, which is another negative factor for Bitcoin prices.
"We have previously argued that a recovery in crypto venture capital inflows is necessary for a sustained recovery in crypto markets, so the lackluster venture capital inflows so far this year pose a downside risk in our view," JPMorgan wrote in the report.
Analysts say Bitcoin mining companies will be hit after the "halving": some companies may choose to relocate to improve efficiency due to reduced mining rewards, while others may merge with large listed miners.
“After the halving event, some bitcoin mining companies may also seek to diversify into lower energy cost regions such as Latin America or Africa and deploy less efficient mining equipment to generate return value from these idle mining equipment,” the analysts wrote.
