Title: BTC mining costs reach 10-month lows as miners use more efficient rigs
Jul 15, 2022 01:40AM ET
As mining hardware becomes more efficient, the cost of mining a single bitcoin has dropped to a ten-month low, and the difficulty has dropped 6.7 percent since the peak in May.
On Wednesday, strategists at JPMorgan, led by Nikolaos Panigirtsoglou, told investors that the cost of producing a bitcoin had fallen to about US $13,000 from US $24,000 in early June.
That's the lowest since September 2021, according to analysts citing a chart from Bitinfocharts, and it comes at a time when the difficulty of mining has fallen from its May high of T31.25 to T29.15.
Lower production costs for Bitcoin could potentially ease sales pressure on miners and improve profitability.
However, strategists are still bearish, stating that "the decline in production costs could be seen as negative for the outlook for the price of Bitcoin going forward," according to Bloomberg.
They added that production costs are perceived by some analysts as the lower bound of BTC's price range in a bear market.
Several analysts have predicted that BTC prices will fall to around US $13,000, which would match the declines of more than 80% in the previous two bear markets. Bitcoin is currently trading down 70% from its all-time high in November.
The drop in production costs is related to a reduction in electricity consumption.
On the other hand, miners have been hit by the double whammy of rising global energy prices and falling BTC prices. This has led to a 63% drop in mining profitability since the beginning of the year.
Bitinfocharts reports that mining profitability is currently at its lowest level since October 2020 at $0.095 per day per terahertz per second.
However, the drop in production costs could prevent a further decline in profitability and even reverse this trend in the coming months.