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avidanbanks@gmail.com JPMorgan analysts believe that retail investors resolve to accumulate Bitcoins will only go stronger as we approach close to the next halving in mid-2024.
After a strong start to the year 2023, Bitcoin (BTC) has been facing some selling pressure over the last few weeks. Over the last 24 hours, the BTC price has tanked by 2% slipping under $27,000. However, banking giant JPMorgan is confident that Bitcoin will continue to see retail demand until the next halving event of mid-2024. In a research report published last Thursday, JPMorgan strategists noted that Bitcoin retail demand will remain strong over the next year.
The report also notes that the recent retail demand for Bitcoin can be attributed partly to Bitcoin Ordinals and the BRC20 tokens. But it further adds:
“Retail investor demand for Bitcoin is likely to strengthen as we approach the April 2024 halving event.”
The Bitcoin halving event happens once every four years and cuts the Bitcoin mining rewards in half by 50%. This “would mechanically double bitcoin production cost to around $40,000, creating a positive psychological effect”, JPMorgan analysts led by Nikolaos Panigirtzoglou wrote.
The report added that historically, the production cost has served as an effective lower boundary to Bitcoin’s price. The banking giant noted that previous halving events of 2016 and 2020 “were accompanied by a bullish trajectory for bitcoin prices” that accelerated after they occurred.
On the other hand, the institutional demand for Bitcoin has been falling with investors being discouraged by “fraud, heightened volatility, and a year-to-date US regulatory assault” leading to growing uncertainty in the market.
JPMorgan noted that following the banking crisis earlier this year in the US, both gold and Bitcoin had rallied. This is because institutional investors preferred buying Gold while retail bought Bitcoin as “hedges to a catastrophic scenario”.
While the BTC price showed little volatility and consolidated around $27,000 last month in May, the Bitcoin network saw a major boost in activity driven by Bitcoin Ordinals and other Bitcoin-based memecoins such as Pepecoin (PEPE).
This led to a massive surge in the Bitcoin gas fee forcing crypto exchange Binance forced to temporarily halt Bitcoin withdrawals. Now, Bitcoin coders are contemplating whether to stop supporting Bitcoin-based memecoins that lead to a massive frenzy and disrupt Bitcoin’s use for payments and as a store of value.
Bitcoin developer Ali Sherief said:
“I do think the system is being abused. Bitcoin was never intended to serve as a base layer for meme tokens.”
He added that “worthless tokens threaten the smooth and normal use of the Bitcoin network as a peer-to-peer digital currency”.
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Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.