Retail demand for bitcoin (BTC) is likely to remain strong over the coming year ahead of the next halving event for the world’s largest cryptocurrency, JPMorgan (JPM) said in a research report Thursday.
Bitcoin halving, when mining rewards are cut by 50%, “would mechanically double bitcoin production cost to around $40,000, creating a positive psychological effect,” analysts led by Nikolaos Panigirtzoglou wrote.
This is because historically the production cost has acted as an effective lower boundary to the cryptocurrency’s price, the report added.
Previous halving events in 2016 and 2020 “were accompanied by a bullish trajectory for bitcoin prices” that accelerated after they occurred, the bank noted.
In contrast, institutional demand for bitcoin has been falling, with investors discouraged by “fraud, heightened volatility and a year-to-date U.S. regulatory assault” that has led to increased uncertainty.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.