Bitcoin halving – a process in which the production rate of the cryptocurrency is reduced – is expected to see the coin “flirt with new highs” and pass $80,000 in value, according to a new report by Julius Baer.

The report by Manuel Villegas, a digital assets analyst at Swiss bank Julius Baer, said the halving, scheduled for Friday, will trigger a new cycle for cryptocurrencies as Bitcoin supply decreases and demand remains the same, which he described as “textbook economic theory”.

In a section titled: “Bitcoin should soon break above 80,000 USD” he wrote: “While unchanged demand is a big assumption, we still see potential of investors shifting from bitcoin-proxies into the token itself. 

“The demand for these proxies, which tend to be publicly traded companies that accumulate Bitcoin in their treasuries, has been so large, that if these were ETFs, they would be trading at a mammoth premium against the net-asset value.”

Bitcoin investors are set to benefit from the upcoming halving and its effects on the ongoing supply squeeze, which is only like to exacerbate, Villegas said. 

“Even though the positive fundamentals are mostly priced in, we believe there is further upside, and Bitcoin should soon start flirting with new highs.”

Binance CEO Richard Teng has already tipped Bitcoin to pass the $80,000 threshold by year end according to a Bloomberg report. The cryptocurrency’s all time high arrived at the end of March, nudging close to $70,000, following a prolonged rally in 2023 from a trough of $16,500.

Recent value increases, following the previous peak in 2021, have ‘attracted institutional interest, particularly with the approval of physically-backed ETFs in the United States’, Villegas said.

Cryptocurrency mining companies face challenges as block rewards – a financial incentive for miners who validate blocks of transactions on the blockchain - decrease post-halving, he added. 

“Only the most efficient operations are likely to thrive in this environment,” he said.

The bank’s report was published as Hong Kong, which is establishing itself as a cryptocurrency hub in the same way as Singapore and the UAE, approved its first Bitcoin and Ethereum spot exchange traded funds (ETFs), following the USA’s Securities and Exchange Commission’s (SEC) move in January.

(Reporting by Imogen Lillywhite; editing by Seban Scaria)