Strategists at the American multinational investment bank JP Morgan Chase & Co recently revealed that bitcoin’s cost of production has dropped by nearly 50% over the last month.
BTC Production Cost Plunges to $13,000
According to a note released Wednesday by the bank’s strategists led by Nikolaos Panigirtzoglou, Bitcoin’s cost of production currently sits at $13,000, down from $24,000 in early June 2022. The report points out that the massive drop could hurt the price of Bitcoin. the digital asset.
The strategists further noted that the drop in the production cost estimate is almost entirely due to a decrease in electricity use as per data from the Cambridge Bitcoin Electricity Consumption Index.
The banking giant argued that the move was an effort by miners to maintain profitability by deploying more efficient mining rigs rather than a mass exodus of less efficient miners. However, this decision could be a significant obstacle to any increase in the price of Bitcoin.
“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. The production cost is perceived by some market participants as the lower bound of the Bitcoin’s price range in a bear market,” the strategists wrote.
Bitcoin Miners Surrender
Since hitting an all-time high (ATH) of around $69,000 in November 2021, bitcoin and the entire crypto industry have faced many woes, ushering in a new bearish cycle.
Some of these negative events include the aftermath of high-profile blowups like the Terra/LUNA collapse, Three Arrows Capital (3AC) insolvency, and news about the Federal Reserve hiking interest rates to combat inflation.
Currently, the bitcoin price is down about 70% since the start of the year. Over the past month, the leading crypto asset has been trading around the $20,000 mark.
With heightened volatility, BTC miners went on a selling spree during the second quarter of 2022. Recent research revealed that miners sold 100% of their May outputs last month as the dump worsened.
