“Cost of production is perceived by some market participants as the lower bound of the bitcoin price range in a bear market “JPMorgan strategists led by Nikolaos Panigirtzoglou wrote in a note this week that was first reported by Bloomberg.
Bitcoin mining in trouble
The cost of “mining” a Bitcoin has plummeted by more than $10,000. From $24,000 in early June to around $13,000 today, according to JPMorgan estimates. “Driven almost entirely by declines in electricity use as approximated by the Cambridge Bitcoin Electricity Consumption Index (CBECI),” they add.
For experts, a drop to $13,000 would represent a further 35% price drop from the current level of $20,000. This bitcoin price held as average since breaking down from previous support level of $30,000 begining of June. That increased the pressure on crypto companies facing a liquidity crisis. Bitcoin’s closely watched $20,000 price level is psychologically important as it was the peak of the late 2017 bitcoin bull run.
“While it clearly helps miner profitability and potentially reduces pressures on miners to sell their bitcoin holdings to increase liquidity or deleverage, decrease in cost of production could be perceived as negative for bitcoin price outlook going forwardthe analysts wrote.
Bitcoin follows the trend of all markets
JPMorgan’s latest warning comes after the bank said last month that so-called bitcoin miners, who use high-powered computers to secure the bitcoin network in exchange for newly minted coins, they could be forced to sell their bitcoin to cover the costswhich could increase the lower price.
Bitcoin price plummeted by around 70% after hitting an all-time high of nearly $70,000 in November of last year. Thus, it fell along with stock markets as the US Federal Reserve and other central banks around the world grapple with skyrocketing post-Covid-19 inflation, lockdowns and historic stimulus measures.
“With US Consumer Price Index data for June showing a 9.1% increase from last year, the corresponding drop in bitcoin price reflects a trend we have seen in recent months in which bitcoin price largely moves along with traditional financial markets “said Matt Senter, chief technology officer at bitcoin rewards app Lolli.
“We will only see a decoupling of the bitcoin price from traditional financial markets once there is more widespread adoption and understanding of bitcoin not only as a store of value, but also as a means of payment and a way to strengthen our legacy monetary systems,” Senter concluded.
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Source: Ambito
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