Topic: [2022-07-14] JPMorgan Says Bitcoin Cost of Production May Be Down to $13,000 (Read 274 times)
July 18, 2022, 09:45:10 PM
@SFR10. I reckon much of the people get this wrong about bitcoin's pricing. They assume that because the cost of mining a bitcoin is the backing for the price of bitcoin on the market. This is incorrect. The price is dictated by how much demand and leverage is in the market. It is not dictated by how much electricity is used to mine a bitcoin. This is something similar to a stock that has been pumping but the company has a negative book value.
July 16, 2022, 04:10:53 AM
"Bitcoin’s cost of production has dropped from about $24,000 at the start of June to around $13,000 now, which may be seen as a negative for pricing, according to JPMorgan Chase & Co.
Not sure if I'm missing something, but assuming that their calculations are correct, why having a lower production cost than its current value in the market is "seen as a negative for pricing" while there's still enough room for profits?They also say it could be seen as an obstacle to price gains."
Can someone explain to me how it could "directly" have a negative impact on price gains? July 15, 2022, 10:42:25 PM
It also might be because difficulty might be starting to go down again, similar to what happened on May to July 2021. There is no other explanation except some of the less competitive miners who cannot maintain a positive cash flow will decide to stop operating. This does not last for a long time, however. Cost of mining will rise again after a few months.
July 14, 2022, 01:10:52 PM
I'm not sure how they came with the statistic and how much more efficient are the new mining rigs, but I doubt that the efficiency grew so much that it beats the heavily inflated energy costs. Even if new, more productive rigs entered the market, it would result in all the operators having access to them --> more competition --> more miners bought --> difficulty increases --> Bitcoin production cost should remain the same or increase.
However the cut in production cost could be temporarily caused by the miners who cease operations due to the inability to cover expenses. Capital managemet is key in mining Bitcoin, if you sell the generated BTC below production cost you are in loss. Firms with good capital management can afford to keep BTC for a time to sell at more profitable price levels.
However the cut in production cost could be temporarily caused by the miners who cease operations due to the inability to cover expenses. Capital managemet is key in mining Bitcoin, if you sell the generated BTC below production cost you are in loss. Firms with good capital management can afford to keep BTC for a time to sell at more profitable price levels.
July 14, 2022, 05:40:34 AM
They posit that the change is consistent with efforts by miners to protect profitability by deploying more efficient mining rigs, as opposed to a mass exodus by less efficient miners. They also say it could be seen as an obstacle to price gains."
... is it me or these guys' math tend to forget that more efficient mining rigs, if any, did cost money which has to be counted in for ROI in the rather near future (before the halving)?
Also, didn't the electricity prices go up pretty much everywhere?
I think that both the 24k and the 13k figures may be wrong.
July 14, 2022, 05:35:47 AM
https://www.bloomberg.com/news/articles/2022-07-14/jpmorgan-says-bitcoin-cost-of-production-may-be-down-to-13-000
"Bitcoin’s cost of production has dropped from about $24,000 at the start of June to around $13,000 now, which may be seen as a negative for pricing, according to JPMorgan Chase & Co.
The drop in the production cost estimate is almost entirely due to a decline in electricity use as proxied by the Cambridge Bitcoin Electricity Consumption Index, strategists led by Nikolaos Panigirtzoglou wrote in a note Wednesday. They posit that the change is consistent with efforts by miners to protect profitability by deploying more efficient mining rigs, as opposed to a mass exodus by less efficient miners. They also say it could be seen as an obstacle to price gains."
"Bitcoin’s cost of production has dropped from about $24,000 at the start of June to around $13,000 now, which may be seen as a negative for pricing, according to JPMorgan Chase & Co.
The drop in the production cost estimate is almost entirely due to a decline in electricity use as proxied by the Cambridge Bitcoin Electricity Consumption Index, strategists led by Nikolaos Panigirtzoglou wrote in a note Wednesday. They posit that the change is consistent with efforts by miners to protect profitability by deploying more efficient mining rigs, as opposed to a mass exodus by less efficient miners. They also say it could be seen as an obstacle to price gains."
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