JPMorgan expects retail demand for Bitcoin to remain strong as reward halving approaches

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By Landon Manning

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

An integral part 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 bitcoins and there is a gradual decrease from the early days of extremely easy mining to a little exploration at the very end of bitcoin mining’s lifespan. The mechanism for this gradual reduction takes the form of the halving event, when certain milestones reached in bitcoin mining will automatically halve all mining rewards. In other words, the same amount of equipment and electricity will create half as many assets as the day before. The next halving is about a year away.

This event has happened twice in Bitcoin’s past, and according to a study published in June by JPMorgan, the last two halvings have led to a rise in the price of Bitcoin. The 2024 halving looks set to continue this trend, as the report claims that a halving would mechanically double the cost of producing bitcoin to around $40,000, creating a positive psychological effect.

Specifically, the increase in production costs would help raise the valuation floor of bitcoins and lead to an increase in demand for the coins in circulation. Institutional investment has declined somewhat, according to the report, but ordinals and the BRC-20 protocol have attracted a lot of attention from retail investors. This endorsement of future performance is particularly interesting from JPMorgan, as the company has always displayed a skeptical attitude towards Bitcoin.

One of the main effects the halving will have on the Bitcoin community is its drastic impact on miners. With such a drop in productivity, mining companies will surely find it difficult to maintain the viability of the market for the simple production of equipment and electricity. Instead, only the companies best configured to operate effectively will be able to weather the storm. When less efficient miners are kicked out of the pool, it will leave those miners able to take a bigger slice of the pie. Ultimately, the halving will be a mechanism that forces all hardware in the industry to optimize.

Indeed, to an untrained observer, it may be quite surprising that the community is full of predictions that the halving will only be good things for Bitcoin. How could rising production costs benefit business? The simple answer is that because Bitcoin has already halved several times before and the halving of mining operations has historically led to more investment buzz, Bitcoiners are assuming the same thing will happen again. The difficulty of acquiring new bitcoins will lead to increased interest in buying old ones, and the mining industry will be disrupted in ways that will ultimately benefit 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 market trends and adjust these forecasts accordingly. With years of experience behind it, however, the Bitcoin community is resolute.

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