The cost of mining a bitcoin (BTC) has fallen to ten-month lows as mining hardware has become more efficientand the difficulty is down 6.7% from its May high.
On Wednesday, JPMorgan strategists led by Nikolaos Panigirtzoglou told investors that bitcoin production costs have fallen to about $13,000 from $24,000 in early June.
This is the lowest it has been since September 2021according to analysts citing a chart from Bitinfocharts, and it arrives when the mining difficulty has fallen from its May highs of 31.25T to 29.15T.
Lower bitcoin production costs can potentially ease selling pressure on miners and improve profitability. However, strategists remain bearishstating that “the decline in the cost of production could be perceived as negative for the outlook for the price of bitcoin going forward,” according to Bloomberg.
They added that the cost of production is perceived by some analysts as the lower bound of the BTC price range in a bear market. Several analysts have predicted that BTC prices will drop to around $13,000, which would line up with the more than 80% declines in the previous two bear markets. Bitcoin is currently trading 70% below its November all-time high.
Bitcoin’s cost of production peaked just after the April and November 2021 price spikes and has retreated in tandem with marketsso it is correlated to but lags behind price movements.
The fall in the cost of production has been linked to a decrease in electricity consumption.
Cambridge University’s bitcoin energy consumption index currently reports the network’s estimated daily energy demand at 9.59 gigawatts. This represents a decrease of 33% in the last month and 40% less than the peak of demand of 2022, of almost 16 GW, in February.
Also, a significant number of miners have disabled older and inefficient mining rigs as they are unprofitable to operate due to rising energy prices and crashing BTC prices.
According to Asicminervalue, The Bitmain Antminer E9, which just went on sale this month, is one of the most efficient units on the market, with a maximum hash rate of 2.4Gh/s for a power consumption of 1,920 watts..
Secondly, miners have been hit by the double whammy of rising energy prices globally and falling BTC prices. This has caused the profitability of mining to plummet 63% since the beginning of the year. Bitinfocharts reports that mining profitability is currently at its lowest levels since October 2020, at $0.095 per day per terahashes per second.
Nevertheless, the fall in the cost of production may prevent a further drop in profitability and could even reverse this trend in the coming months.
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