JPMorgan Expects Bitcoin Hash Rate to Drop by 20% After Next Year's Halving

JPMorgan Expects Bitcoin Hash Rate to Drop by 20% After Next Year’s Halving

Updated: 12 October 2023

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JPMorgan released a research report this Wednesday, October 11, which forecasts a significant change for the Bitcoin mining industry.

After the report, CoinDesk wrote that JPMorgan expects the Bitcoin mining sector to see a hash rate drop of 20%. The report noted that this is only one of the factors affecting the crypto sector, with another being the potential approval of a Bitcoin spot ETF.

“Not all miners created equal. Miners vary by scale, operating efficiency, access to capital and growth prospects. We believe CLSK, our top pick, offers the best balance of scale, growth potential, power costs, and relative value. MARA is the largest operator but has the highest… pic.twitter.com/Jj3CseRI6M

— S Matthew Schultz (@smatthewschultz) October 11, 2023

JPMorgan Expects Hash Rate to Drop as Inefficient Mining Hardware Is Removed

JPMorgan still sees this as a threat to the crypto industry’s revenues and profitability, as CoinDesk wrote.

The report also cited analysts Reginald Smith and Charles Pearce, who said the bank favors mining operators that can offer the best relative value in light of the existing hashrate, operational efficiency, power contracts, and more.

Another report published a quote from the bank’s statement, which reads:

We estimate as much as 80 EH/s (or 20% of the network hashrate) could be removed at the next halving (April ‘24) as less-efficient hardware is decommissioned.

The impact of the halving is always significant on the crypto industry, as historical data shows. Typically, halving is believed to be one of the leading causes of Bitcoin bull runs, which tend to come six to twelve months after the event.

Halvings happen roughly every four years after the miners “solve” 210,000 blocks. So far, there have been three block reward halvings, the most recent in mid-2020.

High Cost of Mining Might Also Impact the Hash Rate

Once it happens, Bitcoin mining rewards will be cut in half; JPMorgan’s report stated that the four-year block reward opportunity totals $20 billion on average.

However, it is essential to note that the prediction is based on the coin’s current price, which is still 72% lower than two years ago when it peaked at $69k.

While the bank anticipates that removing inefficient hardware will be the leading cause of the drop, other contributing factors could exist.

For example, when the halving happens, the BTC price tends to drop. With the mining rewards cut in half and the price dropping, some miners cannot afford to continue mining.

Mining requires large amounts of electricity, which ends up being too expensive for miners to continue operations initially. However, many also tend to return after the next bullish cycle takes Bitcoin’s price to new heights.

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