Despite the fact that the bitcoin price is currently not showing any fireworks, the upcoming Bitcoin halving offers a lot of hope on the horizon for many within the crypto industry. The event, which is scheduled roughly every four years, should bring the demand for bitcoin (BTC) and the crypto market as a whole to new heights. At least, that’s what many crypto investors expect based on previous cycles. US banking giant JPMorgan also has its expectations regarding share price developments and has shared them in a recent analysis.
Effect Bitcoin halving on price
JPMorgan suggested that retail demand for bitcoin is likely to remain strong in the coming year thanks to the halving. It wrote that Ordinals has sparked a new wave of interest in the Bitcoin network, but the soaring demand will only really be amplified as the halving gets closer and closer. With Ordinals it is possible to create and trade non-fungible tokens (NFTs) and BRC-20 tokens on the Bitcoin blockchain, which has expanded the network’s applications considerably.
The Bitcoin halving, which cuts block rewards for adding a new transaction block to the blockchain by 50%, “would mechanically double the cost of production of Bitcoin to about $40,000, creating a psychological effect,” analyst Nikolaos Panigirtzoglou said.
The so-called production costs refer to the average cost of mining one BTC per day. Since the miners will then earn 3,125 BTC instead of 6,25 BTC from their work, these production costs will be 2 times as high.
The report argues that historically, the cost of production has served as an effective lower bound for bitcoin’s price. Previous halvings in 2016 and 2020 “involved a bullish trajectory for the bitcoin price” that accelerated after they happened.
Big Bitcoin Rise Coming?
A while ago you could also read in the Bitcoin news that the Hamburg financial institution Berenberg expects the largest crypto in terms of market capitalization to skyrocket when the block rewards are halved.
These ‘predictions’ are all largely based on the past and are substantiated by the fact that the issuance of new bitcoins will be halved. This supply shock is theoretically very bullish for the price, but at the bottom of the line, demand is just as important. In that respect, it will be interesting to see to what extent the next cycle ‘rhymes’ with the previous one.
