• JPMorgan said in a report Thursday that the upcoming Bitcoin halving event could be a stress test for miners.
• The event will reduce issuance rewards from 6.25 BTC to 3.125 BTC, reducing miners’ revenues and increasing bitcoin production costs at the same time.
• Miners with lower electricity costs will find it easier to survive the halving, while those with higher power costs may struggle after it occurs.
JPMorgan Predicts Bitcoin Halving Event Could Stress Test Miners
JPMorgan (JPM) said in a research report Thursday that the upcoming bitcoin (BTC) halving event could be a stress test for miners, as competition between them escalates ahead of the event. The halving is expected to occur second-quarter 2024 and would reduce issuance rewards from 6.25 BTC to 3.125 BTC, effectively reducing miners’ revenues and increasing bitcoin production costs at the same time.
Hashrate Hits New All-Time Highs
The report noted that hashrate continues to hit new all-time highs due to heightened competition among miners before the halving occurs. It is unlikely that hashrate will continue rising steadily following the halving without any sustained rise in bitcoin price above its production cost or an increase in transaction fees that could offset reduced issuance rewards.
Miners With Lower Electricity Costs Will Fare Better
JPMorgan estimates that a 1 cent per kilowatt hour (kWh) change in electricity cost could cause a $4,300 change in bitcoin production cost after the halving occurs; this sensitivity would double to $8,600, making higher cost producers more vulnerable. Thus, miners with lower electricity costs are likely to fare better during and after the halving than those with higher power costs who may struggle post-halving.
Positive Effect on Bitcoin Price
Halvings generally have had positive effects on bitcoin prices as production costs act as floors historically for price movement; however, they pose challenges for miners whose profits and operations may be largely affected by such events.
The next Bitcoin Halvening Event is expected sometime around mid-2024 and it poses both risks and opportunities for miners depending on their energy usage costs and sustainability mix of energy sources used for mining activities . Overall , JPMorgan sees this event as having potentially positive implications on Bitcoin’s price given its historical role of acting as flooring support , but also acknowledges it will create additional stress tests for many miners .