Bitcoin Mining Becomes More Affordable at $45K: Inefficient Miners Bow Out, Says JPMorgan

JPMorgan has recently quantified the current cost to mine Bitcoin (BTC), estimating it to be around $45,000, according to a Thursday research report.

Historically, the bank had predicted a substantial decline in the network’s hashrate following the halving event, which was expected to drive less profitable miners out. The halving, a quadrennial event that reduces miner rewards by 50%, took place last month and normally signals a significant decrease in new Bitcoin supply growth. Although the anticipated hashrate drop is now occurring, it has been delayed.

The concept of hashrate pertains to the total computational power utilized for both mining and processing transactions on a proof-of-work blockchain. This delay was attributed to the introduction of the Runes protocol, a novel token creation system that temporarily spiked transaction fees and consequently boosted miner revenue, according to the report.

Analysts led by Nikolaos Panigirtzoglou indicated that the surge in transaction fees post-halving allowed miners to mitigate the revenue loss from the reduced issuance reward, resulting in relatively stable block rewards for miners.

Nevertheless, the report also acknowledged that this revenue surge was short-lived, as user activity and transaction fees have dropped markedly over the past fortnight. This reflects the ongoing struggle for Bitcoin miners to secure a sustainable income, especially under the reduced block reward scenario post-halving.

As the excitement surrounding Runes dissipates and the temporary benefits for miners fade, power consumption on the network has diminished more significantly than the hashrate itself. This indicates that particularly inefficient and unprofitable miners have ceased operations, JPMorgan noted.

The relationship between Bitcoin prices and mining activity forms a feedback loop. When Bitcoin prices decline, more miners find themselves unprofitable, leading them to exit the network, which in turn reduces the hashrate and the overall cost of mining Bitcoin. This dynamic has a pronounced effect on the network’s stability and the economics of mining.

Furthermore, JPMorgan expresses a cautious outlook for Bitcoin’s price trajectory in the short term, citing several headwinds such as the absence of positive catalysts and a waning interest from retail investors.