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How Much Does It Cost to Mine 1 Bitcoin? – Decrypt

In a recent report seen by decrypt, investment bank jpmorgan estimates that the cost of production to mine one bitcoin dropped from $24,000 in early June to just $13,000.

Bitcoin cost of production is an estimate of the average cost of mining one bitcoin per day. this cost depends primarily on the electricity costs miners incur to run their machines, but there are other variables.

Reading: How much does it cost to mine bitcoin

As long as the price of bitcoin remains above this cost, a mining operation will remain profitable, with many market watchers suggesting that production costs may also serve “as the lower bound of the bitcoin price range in a given time.” bear market”.

According to the New York-based bank, bitcoin’s bottom could very well be a modest $13,000, which represents a 45% drop from current prices.

“While it clearly helps miner profitability and potentially reduces pressures on miners to sell their bitcoin holdings to increase liquidity or deleverage, the decrease in the cost of production could be perceived as negative for the outlook bitcoin price going forward,” strategists at jpmorgan, led by nikolaos panigirtzoglou, wrote.

based their estimates primarily on declining electricity use as miners implement more energy efficient mining rigs.

Still, other metrics paint a slightly different picture for the leading cryptocurrency.

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according to data pulled from macromicro, for example, the cost of production is still around a little over $17,700. “When mining costs are lower than the market value of bitcoin, more miners will join. when mining costs are higher than miners’ income, the number of miners will decrease,” explains the data provider’s site.

Both entities calculate the cost of producing bitcoin using data from the cambridge bitcoin electricity consumption index (cbeci). however, the data provided by cbeci depends on the miner’s average electricity costs, which can deviate greatly and affect calculations.

Other costs, including infrastructure, hardware, and hiring employees to maintain mining farms, can also vary.

“the cost of production varies a lot depending on the type of platforms and the cost of energy, but also the costs of labor and maintenance of the facilities”, zach bradford confirmed to decrypt CEO of cleanspark bitcoin mining company. me>.

bradford added that his team’s analysis puts the cost of production even lower than jpmorgan’s.

“With most public miners using state-of-the-art rigs and strategic power management contracts in place, our internal research puts the figure closer to $12,000 for public miners,” he said. “but even within a company, it will vary by facility. cleanspark, for example, has installs that are lower than that.”

That means as long as bitcoin stays above $12,000, public miners will continue to make a profit.

bitcoin miners capitulate

regardless of differences in production costs, nearly all miners have been pressured following bitcoin’s catastrophic decline since November.

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glassnode has delineated this stress using something called a puell multiple.

This mathematical model measures the overall income of bitcoin miners; when the metric is especially low, miners earn less on average and are more likely to sell their bitcoin holdings or shut down some machines. these days, they are certainly earning much less than in the past.

“Bitcoin miners are earning just 49% of the 12-month average. this implies that miner income stress is a likely factor,” glassnode wrote in a recent report.

events such as the covid crash, china’s crypto ban, and recent price action correlate with a low puell multiple, as well as broader mining capitulation.

Recent headlines also bear this out.

last month, publicly traded bitcoin miner core scientific inc. he sold nearly 7,000 bitcoins at an average price of $23,000. similarly, algo blockchain also sold approximately $15.6 million worth of the leading cryptocurrency to cover costs.

At a quick glance at their share prices, public mining companies have also been hit hard by the brutal bear market in cryptocurrencies.

marathon digital stocks down 73% year to date, riot blockchain inc. is down 73% year to date, and core scientific inc. shed 81% year to date. And if bitcoin continues to fall, so could these figures.

See also: How to Earn Interest on Bitcoin • Best Rates • Benzinga Crypto

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