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JPMorgan published a research report this Wednesday, October 11, predicting a significant change for the bitcoin mining industry.
Following the report, CoinDesk bitcoin-mining-industry-is-at-a-crucible-moment-jpmorgan-says/”>wrote that JPMorgan expects the bitcoin mining sector to experience a 20% hash rate drop. The report noted that this is just one of the factors affecting the crypto sector, with another being the possible approval of a bitcoin spot ETF.
“Not all miners were created equal. Miners vary in scale, operational efficiency, access to capital and growth prospects. We believe CLSK, our top pick, offers the best balance of scale, growth potential, energy 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 decline as inefficient mining hardware is phased out
JPMorgan still sees this as a threat to the revenue and profitability of the crypto industry, 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 existing hashrate, operational efficiency, power contracts, and more.
Another report published a quote from the bank statement, which reads:
We estimate that up to 80 EH/s (or 20% of the network hash rate) could be removed in the next halving (April 24), as less efficient hardware is decommissioned.
The impact of the halving is always significant in the crypto industry, as historical data shows. The halving is generally believed to be one of the main causes of bitcoin bull runs, which tend to occur six to twelve months after the event.
Halvings occur approximately every four years after miners “solve” 210,000 blocks. So far, there have been three block reward halvings, the most recent in mid-2020.
High mining cost could also affect hash rate
Once this happens, bitcoin mining rewards will be halved; The JPMorgan report indicated that the four-year block reward opportunity averages $20 billion.
However, it is essential to note that the prediction is based on the current price of the coin, which is still 72% lower than two years ago when it peaked at $69,000.
While the bank anticipates that the elimination of inefficient hardware will be the main cause of the decline, there could be other contributing factors.
For example, when it is halved, the price of btc tends to go down. With mining rewards halved and the price falling, some miners cannot afford to continue mining.
Mining requires large amounts of electricity, which is too expensive for miners to continue operations initially. However, many also tend to return after the next bull cycle takes the price of bitcoin to new heights.
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