Bitcoin is experiencing a good 2023 despite its bad month of may. So far this year, the leading cryptocurrency has appreciated more than 50%, although the recent advance of the Securities and Exchange Commission (SEC) on Binance and Coinbase cooled market sentiment. However, for JPMorgan, a key piece of information that will not be given this year, but will be in 2024, will boost BTC.
For the largest bank in the US, demand for Bitcoin will remain strong until the halving scheduled for 2024 takes place. That fact will drive the price strongly.
According to the firm, the recent increase in retail demand can be attributed, in part, to the arrival of Bitcoin Ordinals and BRC-20 tokensBut more importantly, “retail investor demand for bitcoin is likely to strengthen” as we approach the halving.
What is the halving
The “halving” is an event that occurs about every four years and what causes the rewards that miners get for solving the next block on the Bitcoin blockchain are halved. The rate of creation of new bitcoins decreases every time about 210,000 blocks are mined until the 21 million bitcoins that will exist have been mined.
The first time this event took place was in 2012 and caused the reward for mining a block to be reduced from 50 to 25 BTC. In 2016, this prize was reduced to 12.5 million, while, since May 2020, each new block mined generates about 6.25 new bitcoins.
But because it is important? Because historically the halving influenced the price of bitcoin. One year after the first halving, bitcoin went from $12 to almost $1,000. After the second, it rebounded to $2,550. With the third, bitcoin was trading at $8,700 and peaked at $19,700 in December 2020.
This halving, they explain from JP Morgan, “it would mechanically double the production cost of bitcoin to around $40,000, creating a positive psychological effect”.
Cryptocurrencies as a hedge
At the same time, JPMorgan has stressed that both gold and bitcoin rallied strongly after the Silicon Valley Bank collapse, as investors viewed these asset classes as “hedging against a catastrophic scenario”, with institutional investors buying gold and retailers leaning towards cryptocurrency.
Source: Ambito
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