Bitcoin Retail Demand to Remain Strong Ahead of Halving Event: JPMorgan

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.

Recent increase in retail demand can be partly attributed to the advent of Bitcoin Ordinals and BRC-20 tokens, the report said, but more importantly “retail investor demand for bitcoin is likely to strengthen as we approach the April 2024 halving event.”

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.

JPMorgan previously argued that gold and bitcoin both rallied strongly following the collapse of Silicon Valley Bank as investors regarded these asset classes as “hedges to a catastrophic scenario,” with institutional investors buying gold and retail buying bitcoin.