Prepare for bitcoin to fall after the long-awaited halving, JPMorgan says

• Bitcoin's halving is taking place Friday or Saturday, but JPMorgan says it could be followed by a slump.

• The bank's analysis of bitcoin futures shows that the cryptocurrency is in overbought territory.

• Mining companies will feel the pinch post-halving, and the sector could see consolidation.

The long-awaited bitcoin halving bell is here, but don't bet on more rapid gains just yet —  JPMorgan says the price of the world's largest crypto could tumble shortly after the event.

The quadrennial halving — scheduled around April 19-20 — slashes the amount of new bitcoin entering circulation by reducing the amount rewarded to miners by half. The market has widely been anticipating the event as a bullish catalyst, helping to send the token to record highs in 2024.

"We do not expect bitcoin price increases post halving as it has been already priced in. In fact we see downside for the bitcoin price post halving for several reasons." analysts led by Nikolaos Panigirtzoglou wrote in a note this week.

First, JPMorgan says that the bitcoin market is still riding high in overbought territory after surging to record highs in March. Panigirtzoglou previously pointed out several indicators that confirm this.

"There remains considerable optimism in the market over the prospect for prices rising significantly by year-end, with a significant component of that optimism arising from a view that bitcoin demand via spot ETFs would continue at the same pace even as the supply of bitcoin diminishes after the halving event," he said in a separate note at the end of March.

JPMorgan also observes that venture capital funding remains low despite the recent revival in the crypto market, another headwind for the price.

"We had previously argued that a recovery in crypto VC flows is a necessary condition for a sustained recovery in crypto markets so in our mind the subdued VC flows YTD pose a downside risk," the bank said in a note earlier this month.

Mining companies will take a hit after the halving, the analysts said, while some could relocate to improve efficiency as they face the prospect of lower rewards. Others may consolidate and combine with larger publicly listed miners.

"Post halving event, it is also likely that some bitcoin mining firms may look to diversify into low energy cost regions such as Latin America or Africa to deploy their inefficient mining rigs to gain salvage values from those rigs which would otherwise sit idle," the analysts wrote.

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