The crypto market is doing great and Bitcoin (BTC) seems unstoppable. But anyone who has been around crypto for a while knows that everything can change in an instant. Where Bitcoin’s current rise ends is of course unclear. But the American bank JPMorgan expects significantly lower interest rates within a few months than we are currently seeing.
The Bitcoin halving is just around the corner
The long-awaited Bitcoin halving will take place in April. At this point, the rewards for Bitcoin miners will be halved. It seems that the current Bitcoin boom is largely related to this expectation. After the halving, Bitcoin becomes more scarce and historically prices increase after the halving.
According to JPMorgan, after the halving the hype could calm down a bit and with it the Bitcoin price. This seems like a logical scenario. The fact that the Bitcoin price is currently above $60,000 is unprecedented and almost no one expected it. A significant correction can therefore certainly not be ruled out.
Bitcoin to $42,000?
JPMorgan sets the price target for this correction at $42,000. The bank’s analysts base this level on the production cost per Bitcoin after the halving. These production costs serve as a minimum limit for the price. Miners will never sell Bitcoin at a loss.
“Bitcoin production costs empirically act as a floor price. The median of our estimated production costs is currently $26,500. After the halving, this value will double to $53,000.”
However, analysts expect a 20 percent decline in the Bitcoin hash rate, the total mining computing power of the Bitcoin network. This decline will be due to less efficient mining equipment being decommissioned. This drop in hash power will, in turn, reduce production costs. This calculation brings the minimum production cost per BTC to $42,000.
This 20 percent drop in hashrate after the halving is consistent with the results of a recent study by Galaxy Digital. Read more about this in this article.
The $42,000 level also corresponds to the main liquidity zone between around $41,000 and $44,000. Bitcoin price traded in this zone for two months; from early December to early February.
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