Key Points
- JPMorgan has increased its estimate of bitcoin production cost to $45,000, up from $42,000.
- The change comes amid a shift in bitcoin mining hashrate and the exit of unprofitable miners.
JPMorgan has updated its central estimate for the cost of producing bitcoin (BTC). The new estimate is $45,000, marking an increase from the previous projection of $42,000. This revision comes as a result of changes in the bitcoin mining hashrate.
Shift in Bitcoin Mining Hashrate
Previously, a significant drop in the hashrate was expected after halving as unprofitable bitcoin miners left the network. This seems to be happening, albeit with some delay, according to JPMorgan analysts led by Nikolaos Panigirtzoglou. They also noted that the current hashrate and power consumption put the central estimate of bitcoin production cost at around $45,000, which is well below the current prices of about $65,000.
In February, the cost of producing one bitcoin was estimated at $42,000 by the analysts. Therefore, they also projected $42,000 as bitcoin’s price target once the halving-induced euphoria subsides after April.
Medium Term Estimate Maintained
Despite the current bitcoin production cost estimate standing at $45,000, the $42,000 level is still maintained for the medium term. The production cost estimate is influenced by the hashrate and mining equipment efficiency, which are in a state of flux post-halving.
The launch of the Bitcoin Runes protocol led to a temporary increase in Bitcoin transaction fees, providing miners with a revenue boost following the halving event. However, this boost was short-lived, with user activity and fees dropping dramatically in the past week or two.
As interest in the Runes protocol decreased and the temporary boost for Bitcoin miners lessened, power consumption on the network declined more than the hashrate. This indicates the exit of unprofitable miners with inefficient setups.
The analysts reiterated that bitcoin prices will have limited upside in the future due to several previously stated headwinds, including limited inflow into U.S. spot bitcoin ETFs and lackluster demand for Hong Kong spot bitcoin and ether ETFs.
