JP Morgan Chase’s financial and statistical experts recently made a statement concerning Bitcoin mining. The experts of the investment bank claimed that the cost of mining bitcoin is currently higher than the price of a single bitcoin itself, hovering around the $3,500 mark.
Comparing Mining Costs and Gains
The analysts at America’s largest and biggest bank made a research on the expenses involved in bitcoin mining including electricity costs and found out that the cost of mining a single bitcoin on the average is just above $4,000. Compared to the profits that bitcoin’s price gives, which has been unable to break out at the $4,000 price, miners are losing $500 while mining bitcoin.
The energy costs involved in mining bitcoin is more than twice the costs involved in mining precious metals like gold and copper. In some countries like Venezuela, however, it has been divulged that the expenses involved in mining a single bitcoin are as low as $531.
It has been discovered that the lower the cost of mining bitcoin, the more the profit, even with the numerous price swings in the bitcoin market. According to Bloomberg, Chinese miners spend $2,400, a relatively low price globally, to mine bitcoin. The miners based in the world’s second largest national economy are able to achieve this based on contracts with electricity generators. When the miners make these deals with the electricity generators, they can mine bitcoin at greatly reduced costs, maximizing their profits.
The Looming Effect of Bitcoin’s Dipping Price on Mining
JP Morgan’s financial experts then indicated that in the nearest future, bitcoin miners that have costs on the high side would be forced to close shop soon. It has been found out that even with the increasing volatility and drop in bitcoin price, mining has significantly increased in some parts of the globe.
The hash rate of mining bitcoin (the measure of a miner’s performance) has been on the rise since last year’s dip in December. During the dip, the dominant cryptocurrency’s price fell from $6,000 to about $3,500. That period in December also experienced the lowest decrease in the difficulty of mining bitcoin as it fell by more than 20 EH/s. The analysts at JP Morgan further expatiated that;
“The drop in Bitcoin prices from around $6,500 throughout much of October to below $4,000 now has increasingly pushed margins further and further negative for just about every region except low-cost Chinese miners.”
Due to the reduced electricity costs in mining Bitcoin in China, Chinese miners have become on the average, the most profitable miners in the world. In fact, it has even been predicted that the costs of mining bitcoin in the communist nation could drop to as low as $1,260 per coin provided that other miners in the world drop mining. That is, however, unlikely to happen as several bulls are willing to pick up mining as others at getting out of the mining business. Bitcoin mining farms are also seemingly prepared for losses and should be able to weather the storm in the case of a further bitcoin price drop.