JPMorgan Analyst: Demand for Bitcoin Expected to Increase Over the Next 10 Years

On 17 September, analysts at JPMorgan Chase issued a report stating that ‘as Bitcoin continues to become more mainstream, the demand for electricity will increase. Bitcoin is not the only cryptocurrency that requires a mining process, but it is the largest.

Bitcoin is the largest proof-of-work (PoW) protocol to date. From a fundamental perspective, we believe that demand and participation in Bitcoin will increase, not decrease, over the next 10 years; as a result, Bitcoin mining will become increasingly competitive, and with that comes a higher demand for electricity as miners essentially work harder for rewards. In addition, the supply of bitcoins is fixed (21 million), further increasing competition among miners as we approach the maximum mining opportunity (all bitcoins have been mined and are in circulation). Finally, we believe that the normalisation of asset allocation towards Bitcoin and widespread participation in the US spot Bitcoin ETF will drive much of the incremental demand in the near term.

Similar to our point above, we believe that natural gas is a reasonable source of electricity for miners to meet this incremental energy consumption. Many miners are directly connected to the grid, which natural gas can easily serve. Similarly, due to natural gas's advantages of relatively better environmental impact, lower price, and higher reliability, we believe that natural gas is a reasonable source of power supply for bitcoin mining equipment (i.e., computers) that prioritise sustained uptime.

In the case of Texas, for example, as it is one of the most popular large-scale Bitcoin mining states in the U.S., natural gas is the primary source of energy in the state, accounting for approximately 43% of all energy consumption in 2022, according to Texas. We see these figures as complementary to our view that natural gas is the natural choice for power supply for Bitcoin miners.’