Crypto investors are about to witness the halving of Bitcoin. Global banks believe that the quadrennial event has been priced in with limited to no upside thereafter. 

Once every four years, Bitcoin undergoes an event called halving which is effectively a reduction in the cryptocurrency’s mining reward by half. The first reward for mining each block was 50 Bitcoins in 2008 and after the next halving, which is expected to occur around April 19 or 20, this will shrink to 3.125 Bitcoins.

The decrease in new supply has led some investors to believe in potential upside afterward. What say the banks? 

Limited Impact

According to a Goldman Sachs note, the halving event will have limited impact on Bitcoin’s (BTC) medium-term outlook. The bank noted that previous post-halving rallies were accompanied by other macro factors, such as low interest rates and stable inflation, unlike the current environment.  

«BTC price performance will likely continue to be driven by the said supply-demand dynamic and continued demand for BTC ETFs, which combined with the self-reflexive nature of crypto markets is the primary determinant for spot price action,» the note said.  

Continued High Prices

Deutsche Bank does not predict a large rally after the halving but expects price levels to remain high.

«Looking ahead, we continue to expect prices to stay high due to expectations of future spot ether ETF approvals; future central bank rate cuts; and regulatory changes,» the bank said in a note by analysts Marion Laboure and Cassidy Ainsworth-Grace.

«Adding to that, a surge in layer 2 solutions and decentralized finance activity, which augment the network’s practical utility, and the setup begins to look remarkably favorable for the Bitcoin ecosystem and the wider crypto space.»

Potential Downside

Elsewhere, some are even expecting potential downside. 

«We do not expect bitcoin price increases post-halving as it has already been priced in,» said J.P. Morgan analysts led by Nikolaos Panigirtzoglou in a report. «In fact, we see a downside for the bitcoin price post-halving for several reasons [including] overbought conditions.»

Miner Outlook

Instead of markets, banks believe that the biggest impact from halving will be felt by mining companies. J.P. Morgan anticipates an exit from unprofitable Bitcoin miners, a significant drop in hash rate and consolidation in the industry.  

«Latin America, Asia, Africa and the Middle East have caught the attention of crypto miners due to their lower energy costs,» Deutsche Bank added.