According to Bloomberg, JPMorgan Chase & Co and Deutsche Bank AG have stated that the Bitcoin software update known as the 'halving', which occurs every four years, is largely factored into the cryptocurrency's current value. The analysts from these banks believe that the main impact of this event will be on Bitcoin mining rather than its price.
As unprofitable miners leave the Bitcoin network, the sector is expected to consolidate, with publicly-traded companies best positioned to gain market share. JPMorgan analysts noted that publicly-listed Bitcoin miners are well equipped to benefit from the new environment, primarily due to their greater access to funding and equity financing. This allows them to expand their operations and invest in more efficient equipment.
Deutsche Bank analysts also do not anticipate a significant increase in Bitcoin prices following the halving. They explained that the Bitcoin algorithm has already accounted for the halving, and this event has been factored into the market. The halving reduces the mining reward, a fixed amount of Bitcoin released from the network to compensate miners for validating its transactions, by half every four years.
In the past, the total mining capacity of the industry, measured by the hashrate, generally falls after a Bitcoin halving as some miners are priced out of the market. Deutsche Bank noted that after the first three Bitcoin halvings, the hashrate dropped by 25%, 11%, and 25% respectively.
Despite not expecting drastic price fluctuations, Deutsche Bank still expects Bitcoin prices to remain high due to expectations of spot Ethereum ETF approvals, central bank rate cuts, and regulatory changes. They also mentioned a surge in layer-2 solutions and DeFi activity, which enhance the network's practical utility, making the setup look remarkably favorable for the Bitcoin ecosystem and the wider crypto space.
Currently, the US accounts for 40% of Bitcoin mining. However, both JPMorgan and Deutsche Bank agree that it is likely that some Bitcoin mining firms would look to diversify into 'low energy cost regions' such as Latin America or Africa post-halving to locate their inefficient mining supply and gain salvage values from those rigs which would otherwise sit idle.