JPMorgan Warns of Bitcoin Halving Stress Test for Miners

JPMorgan analysts say that, the Bitcoin halving could lead to a shakeout among miners, with those with higher costs being forced to exit the market.

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The upcoming Bitcoin halving will be a test for miners, as it will reduce rewards and increase costs. Miners with lower electricity costs will be more likely to survive, while those with higher costs may struggle.

The Bitcoin halving is an event that happens about every four years, cutting the reward for mining new Bitcoin blocks in half. This helps regulate inflation and preserve Bitcoin’s scarcity.

Bitcoin’s halving is typically viewed as a positive factor for Bitcoin’s price, but it presents challenges for miners due to the cost of production serving as a price floor, as per JPMorgan analysts.

Electricity Cost Impact on Bitcoin Production Cost Doubles Post-Halving:

According to the analysts, a historical change of one cent per kWh in electricity cost has affected Bitcoin production cost by $4,300. However, after the halving event, this sensitivity doubles to $8,600, rendering higher-cost producers more susceptible, as per the analysts’ findings.

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The analysts note that competition among Bitcoin miners is growing as the Bitcoin hash rate, which represents the overall computational power for mining the cryptocurrency, continues to increase before the halving event.

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However, they anticipate that after the halving, the hash rate may not rise as rapidly unless the Bitcoin price surpasses its production cost or transaction fees substantially increase to offset the reduced issuance rewards.

The analysts concluded that the decrease in hype surrounding Bitcoin presents an additional challenge for miners’ revenues.

Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.

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