July 12, 2024
Bitcoin JPMorgan

In a recent research report from JPMorgan, the financial firm has predicted a harsh drop for one Bitcoin metric, forecasting a potential decline of the Bitcoin Network Hash Rate by 20% leading up to the Bitcoin halving in April 2024.

JPMorgan Expects Bitcoin Hash Rate To Drop

In the report, JPMorgan stated that the Bitcoin mining industry is at a crucible stage leading all the way to the Bitcoin halving in April 2024 and beyond. This is because the approval of a Spot BTC exchange-traded fund (ETF) could spark a rally against the backdrop of record hash rates and the impending block reward halving that threatens the industry’s revenues and profitability.

The report highlighted that the total four-year block reward opportunity is estimated at $20 billion, due to the current price of Bitcoin (BTC), which is 72% lower than its all-time high in 2021. This figure represents a significant drop from its peak of $73 billion in April 2021 and has fluctuated around $14 billion and $25 billion since the past year.

As such, the financial firm expects the Bitcoin mining sector to see the predicted 20% hash rate drop at the next Bitcoin halving in April 2024.

“We estimate as much as 80 EH/s (or 20% of the network hash rate) could be removed at the next halving (April ‘24) as less-efficient hardware is decommissioned,” the report reads.

Bitcoin halving is an event that aims to control inflation and it involves the reduction of Bitcoin miners’ rewards by half, and it takes place roughly every four years after miners solve 210,000 blocks. 

Bitcoin price chart from Tradingview.com (JP Morgan BTC hash rate)

BTC price still holding $26,800 | Source: BTCUSD on Tradingview.com

Analysts Reginald Smith and Charles Pearce noted in the report that the bank favors mining operators that can offer the best relative value in light of the existing hash rate, operational efficiency, power contracts, and more.

JPMorgan chose Bitcoin mining company CleanSpark (CLSK) as its top pick among several companies listed by the firm, highlighting that the mining company offers the best balance of scale, growth potential, power costs, and relative value.

In addition, the firm highlighted the significance of other mining firms it listed. These include Marathon Digital (MARA), Riot platforms (RIOT), and Cipher mining (CIFR).

According to the firm, Marathon Digital is the largest mining operator, with the highest energy costs and lowest margins. Meanwhile, Riot has lower energy costs and liquidity, but Cipher has the lowest power costs with limited growth.

The firm also included an outweight rating table and price targets of the mining operators in the report.

The high cost of mining and the removal of inefficient hardware have been seen as some of the factors that tend to affect the Bitcoin mining industry.

Large amounts of electricity are needed for mining, and at first, this makes it too expensive for miners to continue their operation. Nevertheless, many also tend to come back whenever the next bullish cycle drives Bitcoin’s price to unprecedented levels.

Featured image from Shutterstock, chart from Tradingview.com

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