Morgan Stanley analysts issued a new research report on Thursday, warning that Bitcoin is still in the “overbought zone” and may further decline. Previously, Morgan Stanley also predicted that after the halving, due to the reduction of mining rewards and the increase in mining production costs, Bitcoin may fall to $42,000.
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After reaching a historical high of $73,777 on the 14th, Bitcoin continued to experience a significant decline this week, falling below $61,000 on the 20th before rebounding to around $65,000 at the time of writing.
Against this backdrop, Morgan Stanley analysts issued a new research report on Thursday, warning that Bitcoin is still in the “overbought zone” and may further decline.
In the report led by Nikolaos Panigirtzoglou, a Morgan Stanley analyst, it is pointed out that based on Morgan Stanley’s futures position indicator and the premium of Bitcoin futures prices over spot prices, Bitcoin is still in an overbought state, with only a few positions being closed so far.
Basically, the market remains optimistic about Bitcoin’s rise by the end of the year for two main reasons: the expectation that Bitcoin spot ETFs will continue to bring incremental funds and the reduction of new Bitcoin supply after the halving. However, Morgan Stanley analysts stated that the latest data shows a slowdown in net inflows of funds into Bitcoin spot ETFs, challenging the view of funds continuously flowing into spot ETFs.
Morgan Stanley wrote:
After the halving, it may fall to $42,000
Bitcoin will undergo a halving in April, when the block reward will be reduced from 6.25 Bitcoin to 3.125 Bitcoin. Morgan Stanley analysts previously predicted that due to the reduction in mining rewards and the increase in production costs, Bitcoin may fall to around $42,000 after the halving.
According to Morgan Stanley, after the halving, the overall network hash rate of Bitcoin may decrease by 20%. This is because as the profitability of miners decreases, less efficient miners will decide to exit the mining business. Based on an average electricity cost of $0.05/kWh, the median estimate of production costs will decrease to $42,000.
Relationship between Bitcoin mining costs and price
However, according to recent historical data, the last time the Bitcoin price was “close to or lower than” the mining cost was during the bear market bottom in 2022, which led to the closure of many mining companies. But during a bull market cycle, the BTC price usually exceeds the mining cost by a significant margin.
Although historically there is usually a small pullback after the halving is completed, it is still difficult to say whether it will come down to $42,000.
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