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JPMorgan warns that Bitcoin will collapse after halving

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JPMorgan warns that Bitcoin will collapse after halving

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The Bitcoin halving could happen this Saturday, April 20, but it could be followed by a slump, according to JPMorgan.

Bank’s analysis of Bitcoin futures shows that the cryptocurrency is in overbought territory.

Mining companies will feel the pressure after the halving and the sector could see consolidation.

This is a machine translation of an article from our US colleagues at Business Insider. It was automatically translated and checked by a real editor.

The quadrennial halving, scheduled for April 19 and 20, will reduce the amount of new Bitcoin put into circulation by reducing the amount miners receive by half. The market has widely anticipated the event as a bullish catalyst that will help propel the token to record highs in 2024.

“We do not expect Bitcoin price increases after the halving as it has already been priced in. Rather, we see a downward trend for Bitcoin price after the halving for several reasons,” analysts led by Nikolaos Panigirtzoglou wrote in a note this week.

Why the Bitcoin price is likely to fall

First, JPMorgan says the Bitcoin market is still in overbought territory after hitting record highs in March. Panigirtzoglou previously pointed to several indicators that confirm this.

“The market remains very optimistic about the prospect of a significant price increase by the end of the year, with a significant part of this optimism coming from the view that Bitcoin demand via spot ETFs will continue at the same pace, even if Bitcoin supply decreases after the price halving,” Panigirtzoglou said in a separate note at the end of March.

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JPMorgan is also observing that venture capital funding remains low despite the recent crypto market revival, another headwind for the price.

“We had previously argued that a recovery in crypto VC flows is a necessary condition for a sustained recovery in crypto markets, so in our view the subdued YTD VC flows pose a downside risk,” the bank said in a note earlier this month.

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Mining companies will take a hit after the halving, analysts said, while some may relocate to improve efficiency as they face the prospect of lower profits. Others could consolidate and merge with larger publicly traded mining companies.

“Following the halving event, it is also likely that some Bitcoin mining firms will diversify into low energy cost regions such as Latin America or Africa to deploy their inefficient mining assets to capture the residual value of these assets that would otherwise remain idle,” write the analysts.

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