(Kitco News) – Pre-halving weakness isn’t the only headwind the crypto market is navigating, as last night's flare-up in the conflict between Israel and Iran saw Bitcoin (BTC) flash crash 6.3% over three hours, falling from $63,540 to a low of $59,570.
The top crypto has since recovered from the pullback and is trending higher as the final countdown to the halving has begun. At the time of writing, BTC is trading at $64,430, an increase of 0.9% on the 24-hour chart.
BTC/USD Chart by TradingView
Data provided by Nicehash shows that the having is roughly ten hours away at the time of writing and is predicted to occur at 00:56 UTC on April 20. The halving will see the block reward for Bitcoin reduced from 6.25 BTC to 3.125 BTC, effectively cutting miners' revenue in half.
According to analysts at JPMorgan led by Nikolaos Panigirtzoglou, the halving is likely to be followed by price weakness for Bitcoin as miners move to sell their holdings to remain in operation while many will have to shutter due to unprofitable equipment.
“As unprofitable Bitcoin miners exit the Bitcoin network, we anticipate a significant drop in the hashrate and consolidation among Bitcoin miners with a highest share for publicly-listed Bitcoin miners,” the analysts said in a research report published Wednesday.
They said that many miners will need to relocate to regions with lower energy costs.
“Post halving event, it is also likely that some Bitcoin mining firms may look to diversify into low energy cost regions such as Latin America or Africa to deploy their inefficient mining rigs to gain salvage values from those rigs which would otherwise sit idle,” the analysts said.
Analysts at Deutsche Bank expressed a similar view and noted that after Bitcoin’s first three halvings, the hashrate plummeted by 25%, 11%, and 25%. “Participating in the process of guessing the hash and adding a block to the blockchain becomes less profitable as the reward to mining decreases,” they said.
Addressing Bitcoin’s price, JPMorgan analysts said that the top crypto remains in overbought territory based on Bitcoin futures data, suggesting another liquidity flush-out is likely to clear out excess speculation.
Based on the bank’s volatility-adjusted comparison with gold, the analysts said Bitcoin has a fair value of $45,000, a price 29% lower than where it currently trades, and its projected production cost after the halving will be $42,000. The Bitcoin production cost has historically acted as a lower boundary for BTC prices, they noted.
The analysts from Deutsche Bank said that while they think the halving has largely been priced into the market, they still expect Bitcoin’s price to remain high post-halving due to other factors, including expectations that a spot Ethereum (ETH) ETF will be approved shortly, the prospect of central bank rate cuts, and regulatory changes.
“Adding to that, a surge in layer-2 solutions and DeFi activity, which augment the network’s practical utility, and the setup begins to look remarkably favorable for the Bitcoin ecosystem and the wider crypto space,” they wrote.
Bernstein analysts offered a more optimistic post-halving outlook in a note sent to clients on Wednesday.
“Historically, Bitcoin price breakout has always followed the halving event and sometimes a few months after halving,” they said. “However, in the current 2024 cycle, the exchange-traded fund (ETF) approvals in January led to a strong price appreciation pre-halving,” they added, noting that Bitcoin has dropped as much as 15% only in the last 10 days, following slower ETF inflows.
They said they expect Bitcoin’s bullish trajectory to resume after the halving once miners have had a chance to adjust to the lower emission rate, the hashrate stabilizes, and ETF inflows resume.
The analysts pointed to the rollout of access to spot BTC ETFs by wirehouses and registered investment advisors (RIAs) as the next catalyst that “will continue to provide structural demand for Bitcoin.”
Bernstein previously said they see BTC hitting $90,000 by the end of 2024, and this most recent update said they “continue to expect Bitcoin to touch a cycle high of $150K by 2025.”
