News - Will Bitcoin now drop to USD 42,000?

By Luc Vesters

Will Bitcoin now drop to USD 42,000?

Analysts at JPMorgan expect the price of Bitcoin to fall to $42,000 after the halving. Declining returns from mining companies are the reason for this. According to senior analyst Nikolaos Panigirtzoglou of JPMorgan, the halving will affect miners' production costs and ultimately the companies' returns.

"Bitcoin production costs have acted as a floor for Bitcoin prices in the past," the U.S. Bank report states. Production costs are currently USD 26,500, but would double to USD 53,000 with the halving.

The cost of production for one Bitcoin is constantly rising I Source: JPMorgan

The cost of production for one Bitcoin is constantly rising I Source: JPMorgan

Since about 20 percent of the hashrate disappears with the halving, according to JPMorgan, unprofitable miners would have to shut down their devices. The average production cost would then be USD 42,000, based on electricity costs of USD 0.05 per kilowatt hour.

Will the Bitcoin Halving be a zero for the price?

The BTC price is also expected to move toward this price level after the halving, according to the report. According to JPMorgan's forecast, the halving is a so-called "sell the news" event.

A "sell the news" event occurs when the price of an asset falls following the release of positive news as market participants realize their gains and sell.

This could mean a new crisis for miners. In addition to JPMorgan, crypto securities issuer CoinShares also sees the halving as a stress test for the industry. Of the 14 companies analyzed, only five would be profitable.

Investors make gains in February: is a sell-off imminent?

At the time of writing, Bitcoin is trading at $62,216 USD, with a total price increase of 44 percent over the past 30 days. Thanks to this significant price explosion, both long-term and new investors are booking gains in their portfolios.

BTC: Global SOPR

In addition to long-term investors (blue), short-term investors (red) are also in the profit zone (above value: 1) with their investment I Source: Glassnode

As Glassnode's data show, the average profit of all Bitcoin investors is about 13 percent. So it is quite possible that some investors are selling their BTC at a profit. Is this a threat to the Bitcoin price?

Bitcoin spot ETFs with huge demand

However, it remains to be seen whether this potential selling pressure will be enough to push Bitcoin further down in the long run. At least with the spot ETFs launched in January, the Bitcoin market is benefiting from immense buyer pressure.

The ETF sponsors have collected more than 300,000 BTC for their investors since its launch on Jan. 11 - a total of 37 trading days. Meanwhile, only 900 new BTC per day are being added to the system, and after the halving, only 450 BTC.

If institutional interest remains at current levels, the rules of economics apply: if supply is limited but demand is extremely high, the price will rise.

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