In a recent report I saw decryptinvestment bank JPMorgan estimates that the production cost of mining one bitcoin It has dropped from $24,000 in early June to just $13,000.
The production cost of Bitcoin is an estimate of the average cost of mining one Bitcoin per day. This cost is mainly determined by the cost of electricity generated by the miners to run the machines, but there are other variables.
As long as the price of Bitcoin remains above this cost, the mining business will remain profitablemany market watchers believe that production costs can also “serve as a lower bound on Bitcoin’s price range in a bear market.”
According to the New York-based bank, Bitcoin’s bottom is likely to be $13,000, a 45% drop from today’s price.
“While clearly helping miners’ profitability and potentially reducing pressure on miners to sell their bitcoin assets to increase liquidity or deleverage, a reduction in production costs could be seen as detrimental to future bitcoin price prospects,” according to Nicholas Led by JPMorgan strategist Panigirtzoglou, wrote.
Their estimates are largely based on reduced electricity usage as miners deploy more energy-efficient mining rigs.
Still, other indicators paint a slightly different picture for the leading cryptocurrency.
According to the extracted data Macro MicroProduction costs, for example, are still hovering at just over $17,700. “When the mining cost is lower than the market value of Bitcoin, more miners join. When the mining cost is higher than the miner’s income, the number of miners decreases,” explains the data provider’s website.
Both entities use the Cambridge Bitcoin Electricity Consumption Index to calculate the production cost of Bitcoin (ICBC) data. However, the data provided by CBECI depends on the average electricity cost of miners, which can be highly skewed and affect calculations.
Other costs, including infrastructure, hardware and hiring staff to maintain the mine, may also vary.
Zach Bradford, CEO of bitcoin mining firm CleanSpark, confirmed: “Production costs vary widely by rig type, electricity costs, as well as labor costs and facility maintenance.” decrypt.
Bradford added that his team’s analysis showed that production costs were even lower than JPMorgan.
“As most public miners run the latest [generation] Rigs and strategic power management contracts are in place, and our internal research puts the figure for public miners closer to $12,000,” he said. “But even within companies, it varies by facility. For example, CleanSpark’s facilities are lower than that. “
This means that as long as Bitcoin stays above $12,000, public miners will still be profitable.
Bitcoin miners surrender
Despite differences in production costs, nearly all miners are under pressure after Bitcoin’s catastrophic plunge since November.
Glassnode uses a method called Puerdo.
This mathematical model measures the overall income of Bitcoin miners; when this metric is particularly low, the average miner earns less and is more likely to sell bitcoin assets or shut down some machines. They must be earning a lot less these days than they used to be.
“Bitcoin miners earn only 49% of their 12-month average. This means miner revenue pressure could be a factor,” Glassnode wrote in a post recent report.
events like this COVID collapseChinese cryptocurrency prohibitand recent price action All of this has to do with low Puell multiples and broader miner capitulation.
Recent headlines also confirm this.
Last month, publicly traded bitcoin miner Core Scientific Inc. Sell Nearly 7,000 bitcoins, with an average price of $23,000. Likewise, Algo Blockchain also sold around $15.6 million of the leading cryptocurrency to cover costs.
Taking a quick look at their stock prices, public mining companies have also been hugely affected by the brutal cryptocurrency bear market.
Marathon Digital Holdings is down 73% year to date, Riot Blockchain Inc. is down 73% and Core Scientific Inc. is down 81%. If Bitcoin continues to fall, so will these numbers.
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