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As per JP Morgan analysts, the upcoming Bitcoin <a href="https://ultramining.com/news/en/upcoming-bitcoin-halving-threatens-mining-profitability-analysts-warn/" rel="noopener noreferrer nofollow">halving</a> event in 2024 could increase the production cost of Bitcoin, putting miners to the test. The reward for Bitcoin mining will drop from 6.25 to 3.125 BTC. This drop will raise Bitcoin’s production cost while simultaneously reducing miners' revenue, according to <a href="https://decrypt.co/148736/bitcoin-miners-face-stress-test-in-next-halving-jp-morgan" rel="noopener noreferrer nofollow">decrypt</a>.&nbsp;
Bitcoin’s current market price is around $30,000, while the cost to mine it, based on an average global electricity cost of $0.05/kWh, is roughly $20,000. However, fluctuations in the hash rate indicate that miners utilize diverse energy sources. Miners with access to cheaper power sources have an edge. If electricity cost rises by a cent per kilowatt hour, Bitcoin's production cost will increase by $4,300. This sensitivity is expected to double post-halving.
Despite these challenges, institutional interest from firms like Galaxy Digital and Grayscale Investments has given a boost to struggling miners. Moreover, Tether, the largest stablecoin issuer, plans to invest in a Bitcoin mining site in El Salvador.
Nevertheless, for the lower block reward to be offset, Bitcoin's price and transaction fees must surge significantly. Besides, declining hype around cryptocurrencies and Bitcoin not keeping up with record-high daily Ordinals inscriptions pose added challenges.
JP Morgan suggests that without a significant increase in Bitcoin's price above production cost or transaction fees, the Bitcoin hash rate may not maintain its pace post the 2024 halving event.
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Bitcoin Miners Set for a Tough Ride as 2024 Halving Nears: JP Morgan

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Other articles published on Jul 17, 2023

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