According to JPMorgan Chase, the cost of Bitcoin mining in recent times has almost halved.
JPMorgan: mining costs dropped significantly
According to Bloomberg, a group of JPMorgan strategists, led by Nikolaos Panigirtzoglou, said in a recent company memo that the cost of mining 1 BTC has dropped from about $24,000 in early June to about $13,000 today.
After all, at the beginning of June the market value of 1 BTC was over $31,000, while now it has dropped below $20,000. Moreover, it had already dropped since the beginning of May, when it was worth about $40,000.
Therefore, in two and a half months, the market value has halved, so much so that miners have been forced to shut down the least efficient machines, or those powered by higher-cost energy, ending up cutting mining costs.
Indeed, hashrate has also shrunk, because after hitting new all-time highs in early June, it has fallen 32% since then.
The note goes on to say that the drop in the estimate of average mining costs is almost entirely due to the decline in electricity consumption, as indicated by the cv Electricity Consumption Index.
It is worth mentioning that Bitcoin‘s energy consumption is not due to its protocol, but to arbitrary decisions by the miners. The Bitcoin protocol could operate with much lower consumption than it does today.
JPMorgan strategists assume that the reduction of electricity consumption by Bitcoin miners is consistent with their efforts to protect the profitability of their business. This would not be the result of a mass exodus by less efficient miners, but the use of more efficient machines.
They also add that the cost of mining BTC is perceived by some players in the crypto markets as the lower limit of the price range that Bitcoin could hit during the bear market, so this reduction could be perceived as negative for the future prospects of the price of BTC.
However, they also point out that the drop in mining costs actually potentially reduces selling pressures on miners to increase liquidity or reduce debt.
As early as last month, JPMorgan‘s own strategists speculated that BTC sales by miners could negatively affect the price of Bitcoin in the third quarter, but the data released yesterday would seem to weaken that assumption.
Other sources also confirm that Bitcoin mining profitability has dropped very low since mid-June, suggesting that they have been forced to shut down their most inefficient machines. The estimated reduction in Bitcoin mining profitability since the peak in early June is more than 40%.
As power consumption declines, it is possible that profitability will rebound in the coming weeks.