JPMorgan revised its central estimate of the cost of producing Bitcoin to $45,000 from its previous estimate of $42,000 in response to changes in Bitcoin mining hash rate.
“We expect the hashrate to decline significantly following the halving as unprofitable Bitcoin miners leave the Bitcoin network,” JPMorgan analysts led by Nikolaos Panigirtzoglou said in a report Thursday. “There are some delays, but this appears to be happening.” “With current hashrate and power consumption, our central estimate for the cost of producing Bitcoin is around $45,000, or well below current prices,” the analysts added.
Last February, analysts estimated the cost of producing one Bitcoin at $42,000. As a result, they estimated Bitcoin’s target price to be $42,000 once the halving euphoria subsides after April.
When asked if the updated Bitcoin production cost estimate of $45,000 means JPMorgan expects the Bitcoin price to rise to that level, Panigirtzoglou told The Block that the current Bitcoin production cost estimate is $45,000. However, he said that it will still remain at the $42,000 level in the medium term. .
“Production cost estimates are a function of hash rate and mining rig efficiency, which are in a state of flux following the halving,” Panigirtzoglou told The Block. “The current estimate is $45,000 (slightly different from the $42,000 expected over time). However, this current estimate of $45,000 will change as hash rates and mining equipment efficiency evolve.”
“$42,000 is the mid-term production cost target we expect once hashrate and mining efficiency stabilize. It will take some time for things to stabilize,” Panigirtzoglou added.
Temporary boost from Rune Protocol
release of Bitcoin BTC
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The Runes protocol temporarily spiked Bitcoin transaction fees, giving miners a boost in revenue following the halving event.
“Rune’s increase was short-lived, but user activity and fees have fallen sharply over the past week or two,” analysts said in the report. “This highlights the ongoing challenges facing Bitcoin miners to maintain sustainable revenue streams, especially in a post-halving environment.”
As enthusiasm for the Runes protocol waned and the temporary boost to Bitcoin miners diminished, the network’s power consumption declined more than its hash rate, analysts noted. This indicates that unprofitable miners are leaving due to inefficient setups.
According to analysts, these outflows are part of a natural feedback loop linked to the price of Bitcoin. As prices fall, more unprofitable miners are driven out, further reducing hashrate and production costs.
Overall, analysts believe the upside for the Bitcoin price will be limited due to a number of headwinds previously mentioned, including limited inflows into U.S. spot Bitcoin ETFs and weak demand for Hong Kong spot Bitcoin and Ethereum ETFs. This was emphasized again and again.
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