JPMorgan Chase's analysts think Bitcoin's recent surge above the bank's estimated production cost of $85,000 could give miners some relief if it sustains the momentum, The Block reported. Aft
JPMorgan Chase's analysts think Bitcoin's recent surge above the bank's estimated production cost of $85,000 could give miners some relief if it sustains the momentum, The Block reported.
After spending 280 days below its production cost, Bitcoin surpassed that price point this week, the bank's analysts led by Nikolaos Panigirtzoglou said.
Related: What is Bitcoin mining? Explained
The leading cryptocurrency's production cost has historically acted as its "soft floor." Miners with high power and machine costs can suffer losses when BTC trades below this floor, they said. In such a situation, the miners can sell BTC, shut down operations, or even leave the markets, they observed.
An extended period of low profits has forced Bitcoin miners to move equipment to areas with cheaper power, sell, scrap, or recycle old equipment, and even put machines on standby, the analysts highlighted.
Such a long period of low profits was last seen in 2018 when Bitcoin traded below its estimated production cost for 224 days, they added.
Though the Bitcoin mining industry is significantly larger now, the same pressures exist even today as higher-cost miners withdraw, they noted.
The bank's analysts said the current Bitcoin surge above the production cost could offer some succor to miners.
"To the extent it is sustained, this new backdrop should provide relief to bitcoin miners, thus reducing the risk of forced selling by them."
Several miners have turned to AI operations, they added. AI has turned out to be more predictably profitable and stable for these miners as AI companies are paying them significant premiums for a ready infrastructure, they highlighted.
Bitcoin miners allocating a growing portion of their facilities to AI operations has led to the Bitcoin network's hash rate slowing, JPMorgan analysts led by Panigirtzoglou said.
In fact, they highlighted that hash rate has slipped 19% from its top last October when Bitcoin hit its peak above $126,000, and mining difficulty has declined 15%.
Privately owned and sovereign miners are gaining more share of the operations now as publicly listed miners pivot to AI, the analysts noted.
Such a situation can help the Bitcoin network avoid concentration risk and realize a slow rise in production cost in the future, outside halving events, they concluded.
BTC/USD, Source: DecibelBitcoin was trading at $83,790 at the time of writing, as per Decibel.
Related: Fidelity analyst predicts new 4-year Bitcoin bull market
