JPMorgan Predicts Drop in Bitcoin Mining Hash Rate
A recent research report from JPMorgan suggests that the Bitcoin mining industry is about to experience a significant change. According to CoinDesk, the report forecasts a 20% drop in the hash rate of Bitcoin mining. JPMorgan also highlights other factors that could impact the crypto sector, including the potential approval of a Bitcoin spot ETF.
The report emphasizes that not all miners are equal, with variations in scale, operating efficiency, access to capital, and growth prospects. JPMorgan identifies CLSK as its top pick due to its balance of scale, growth potential, power costs, and relative value. It also mentions MARA as the largest operator but with higher costs.
JPMorgan Expects Hash Rate to Drop as Inefficient Mining Hardware Is Removed
JPMorgan views the removal of inefficient mining hardware as a threat to the crypto industry’s revenues and profitability. The bank favors mining operators that offer the best relative value considering factors such as hashrate, operational efficiency, and power contracts.
Additionally, JPMorgan estimates that around 20% of the network hashrate (equivalent to 80 EH/s) could be removed at the next halving in April 2024 when less-efficient hardware is decommissioned.
High Cost of Mining Might Also Impact the Hash Rate
The halving event has historically had a significant impact on the crypto industry. It is often considered one of the main catalysts for Bitcoin bull runs occurring six to twelve months later. Halvings occur approximately every four years after solving 210,000 blocks.
Once the halving happens, Bitcoin mining rewards will be halved. JPMorgan’s report states that on average, there is a four-year block reward opportunity totaling $20 billion. However, this prediction is based on the current price of Bitcoin, which is still 72% lower than its peak two years ago.
While inefficient hardware removal is expected to be the main cause of the hash rate drop, other factors could contribute. The BTC price tends to drop when halving occurs, and with reduced mining rewards and lower prices, some miners may find it unaffordable to continue mining initially. However, many miners tend to return during the next bullish cycle when Bitcoin’s price reaches new highs.
Hot Take: The Future of Bitcoin Mining
JPMorgan’s research report highlights the potential challenges and changes ahead for the Bitcoin mining industry. The projected hash rate drop due to inefficient hardware removal and the upcoming halving event are expected to have a significant impact.
While these changes may pose temporary difficulties for some miners, they also present opportunities for those with efficient operations and access to capital. As the industry adapts and evolves, it will be interesting to see how mining operators navigate these challenges and capitalize on the future growth potential of Bitcoin.
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