JPMorgan strategists may have just called Bitcoin’s bottom price. Others suggest there’s still more pain ahead.
In a recent report by Decrypt, investment bank JPMorgan estimates that the production cost to mine one Bitcoin has dropped from $24,000 at the start of June to just $13,000.
Bitcoin’s production cost estimates the average cost for mining one Bitcoin daily. This cost depends primarily on the electricity costs incurred by miners for running their machines, but there are other variables.
So long as the price of Bitcoin holds above this cost, a mining operation remains profitable. Many market observers suggest that production costs also can serve “as the lower bound of Bitcoin’s price range in a bear market.”
According to the New York-based bank, Bitcoin’s bottom could be a lowly $13,000, marking a 45% drop from today’s prices.
“While clearly helping miners’ profitability and potentially reducing pressures on miners to sell Bitcoin holdings to raise liquidity or for deleveraging, the decline in the production cost might be perceived as negative for the Bitcoin price outlook going forward,” JPMorgan strategists, led by Nikolaos Panigirtzoglou, wrote.
Recent headlines also confirm as much.
Last month, publicly traded Bitcoin miner Core Scientific Inc. sold nearly 7,000 Bitcoin at an average price of $23,000. Similarly, Algo Blockchain sold roughly $15.6 million in the leading cryptocurrency to cover costs.
From a glance 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% year-to-date, and Core Scientific Inc. shed 81% year to date. And if Bitcoin continues to tumble, so too could these figures.