JPMorgan (NYSE:JPM) estimates that the current cost of mining Bitcoin has fallen from over $50,000 to around $45,000. The decline follows last month’s quadrennial halving event, which saw miner rewards reduced by 50%.
The hash rate, which measures the total computational power used to mine and process transactions on the Bitcoin network, did not fall immediately after the halving, as expected. According to JPMorgan, the delay is due to the launch of the Runes protocol, a new form of token creation that temporarily spikes transaction fees, increasing miner revenue and offsetting halving minting rewards.
“This provided a temporary boost to miners’ profits immediately after the Bitcoin halving,” analysts led by Nikolaos Panigirtzoglou wrote. However, the report noted that the fee increase was temporary, with user activity and fees declining significantly in recent weeks. This decline highlights the ongoing challenge for Bitcoin miners to maintain sustainable returns, especially in a post-halving environment.
As the hype around Rune died down, network power consumption decreased more than hashrate. This indicates that unprofitable miners with inefficient equipment have been kicked out of the network. The report explains that there is a feedback loop in Bitcoin price. As prices fall, less profitable miners are pressured to leave the network, causing hashrate and mining costs to fall further.
JPMorgan does not expect Bitcoin prices to rise in the near term due to several headwinds, including a lack of positive catalysts and declining retail interest.
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