JP Morgan predicts a bleak future for Bitcoin miners

JP Morgan, one of the largest banks in the world, is concerned about the future of Bitcoin miners. This is because the reward was halved after the halving, from 6.25 to 3.125 BTC per block.

According to JP Morgan analysts, the average cost of producing 1 bitcoin is around $45,000. At the time of writing, Bitcoin is trading at 66,800, which still leaves several miners with a good profit margin.

However, the bank warns that a simple price fluctuation could evaporate this margin, leaving the sector vulnerable.

JP Morgan comments on the Bitcoin mining sector

Jamie Dimon, CEO of JP Morgan, is a major critic of Bitcoin. However, his bank bought cryptocurrency ETFs in the first quarter of this year. In addition, they also employ analysts who visit the cryptocurrency industry to look for opportunities.

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As for the mining sector, JP Morgan is not so enthusiastic. This is because miners lost half of their revenue due to the halving and furthermore, the bank does not believe Bitcoin has the strength to continue its price rise.

“The current hash rate and energy consumption place our central estimate of the cost of producing bitcoin at around $45,000, which is well below current prices.”said JP Morgan, noting that there is still a good profit margin for miners.

“However, we do not see any upside potential for bitcoin prices at this time and we see at least short-term headwinds.”

Reasons cited include recent exits from Bitcoin ETFs in the US and tepid demand for the same products in Hong Kong.

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According to analysts, several mining companies that stopped showing profits after the halving have already closed and this could happen to those still in the market if the price of BTC falls.

“This highlights the ongoing challenge bitcoin miners face in maintaining a sustainable source of income, especially in the post-halving environment.”

“There is a natural feedback loop with bitcoin prices”That’s what JP Morgan analysts say. “The more bitcoin prices fall, the more unprofitable miners are under pressure to leave the network.”

Bitcoin’s hash rate reaches its lowest level since February

According to data from YCharts, Bitcoin’s hash rate is 586 PH/s (petahashes per second), which shows a decline from the historical peak of 721 PH/s in April.

Although the graph is full of noise, it is possible that this decline is related to the shutdown of inefficient machines or machines in regions with high energy costs.

Bitcoin's hash rate drops after halving.  Source: YCharts.Bitcoin's hash rate drops after halving.  Source: YCharts.
Bitcoin’s hash rate drops after halving. Source: YCharts.

Although mining costs skyrocketed with the arrival of Runes shortly after the halving, today they represent less than 0.5% of block rewards. Therefore, miners can currently only rely on the basic reward.

Source: Live Coins