According to an estimate by JP Morgan, the cost of producing a Bitcoin has dropped to $13,000. It was estimated to be $24,000 in June. However, JP Morgan states that this downtrend might prove to be a negative phenomenon for the price of the crypto token. The strategists of the Cambridge Bitcoin Electricity Consumption Index stated the decrease in the use of electricity is a major reason for the fall in production costs.
The team of strategists was led by Nikolaos Panigirtzoglou. They further added that Bitcoin miners are opting for efficient mining rigs to increase their profit margins. However, it could pose a threat to the price increase of Bitcoin in the longer run.
Furthermore, strategists added, “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.”
What is Next for Bitcoin?
Bitcoin has struggled to make a mark this year. After touching an all-time high of $69,000 in November last year, the coin has dropped over 60% of its value. One of the most critical reasons for the sharp decline of Bitcoin was the increase of interest rates by the US Federal Reserve to deal with sky-rocketing inflation.
In addition to this, the crypto market also dealt with major crashes. The downfall of the Terra ecosystem and the bankruptcy of Three Arrows Capital frustrated the crypto community. Moreover, many investors remained on the sidelines to deal with the inconsistent and uncertain crypto market. These factors limited the growth of Bitcoin over the $20K mark.
Previously, JP Morgan strategists also stated that the selling of BTC by miners could adversely impact the price of the leading token in the third quarter of the year. However, a similar trend is observed among miners lately. Popular Bitcoin mining firm, Core Scientific also revealed that it dumped a large chunk of its BTC holdings in June.
Many public mining firms have suffered in the market along with digital assets. The likes of Core Scientific, Marathon Digital Holdings, and Riot Blockchain have recorded a sharp drop lately. All three of them went down by around 80% year-to-date. Nonetheless, the report of JP Morgan strategists is a concerning development for BTC enthusiasts. Many investors were expecting that the market has bottomed out. But it can be a long night for BTC holders.
