Bitcoin Mining Cost Drops to $45K as Inefficient Miners Exit: JPMorgan

JPMorgan estimates the current mining cost for bitcoin miners is around $45,000.

The report noted that the launch of the Runes protocol meant that the hashrate did not drop immediately after the halving.

The bank does not see any rise in Bitcoin price in the near term due to various negativities.

JPMorgan (JPM) said in a research report on Thursday that current hashrate and power consumption on the Bitcoin {{BTC}} network indicate that the estimated mining cost has fallen from over $50,000 to around $45,000.

The bank said that it expects a significant decrease in the hash rate as miners who cannot make a profit after the halving leave the network. This is happening now but with some delay. The four-year halving occurred last month, which slowed the growth rate of bitcoin supply by cutting miner rewards by 50%.

Hash rate refers to the total combined computing power used to mine and process transactions on the proof-of-work blockchain. The report stated that the reason for the delay was likely the launch of the Runes protocol, a new form of tokenization on the network, which caused a temporary increase in transaction fees.

“This provided a temporary increase in miner revenue immediately after the Bitcoin halving,” wrote analysts led by Nikolaos Panigirtzoglou, adding: “Bitcoin miners were able to offset the loss of issuance reward due to the halving with an increase in transaction fees, while block rewards for miners remained virtually unchanged.”

“The surge from Runes has been short-lived, but users’ activity and fees have fallen significantly over the last week or two,” the authors wrote, noting: “This underscores the ongoing challenge Bitcoin miners face to maintain a sustainable resource.” “We generated revenue, especially in the post-halving environment.”

Read more: Bitcoin (BTC) Fee Collapse Could Encourage Miners Selling, Analysts Say

As Runes excitement faded and temporary support for miners disappeared, power consumption on the network dropped more than hashrate, indicating an exit of unprofitable miners with inefficient hardware, the bank said.

There is also a feedback loop regarding Bitcoin prices. “The further Bitcoin prices fall, the greater the number of unprofitable miners who are under pressure to leave the Bitcoin network, and the greater the resulting decline in hashrate and bitcoin production.” [mining] cost,” the report added.

JPMorgan sees limited upside for Bitcoin in the near term due to some previously identified headwinds, including a lack of positive catalysts and a fading retail impulse.

Read more: JPMorgan Says Crypto Market Sell-Off Driven by Retail Investors