Bitcoin
Bitcoin faces headwinds challenging miners in the near term, says JPMorgan
Unprofitable bitcoin miners are starting to exit the network after the halving, as expected. This is a relief for the remaining miners because it makes producing a single bitcoin cheaper. But much of its performance depends on the price of bitcoin, which still faces several hurdles in the near term, according to JPMorgan. “Current hashrate and energy consumption place our central estimate of bitcoin’s production cost at around $45,000, which is well below current prices,” JPMorgan’s Nikolaos Panigirtzoglou said in a note on Thursday. . Bitcoin is currently trading at around $66,000 after rising 7% earlier this week. However, “we see no upside for bitcoin prices at the current juncture, and at the very least we see headwinds in the short term,” he added. Specifically, the global market strategist pointed out that: JPMorgan’s CME bitcoin futures position proxy still suggests it is overbought. Bitcoin prices are still above JPMorgan’s volatility-adjusted comparison to gold of $45,000. Venture capital funding for crypto companies has been moderate this year despite the “resurgence in cryptocurrency prices.” There has been limited inflow into bitcoin ETFs this month after significant outflow in April. There is “weak demand” following the approval of bitcoin and ether spot ETFs in Hong Kong. As a result of some miners leaving the Bitcoin network, there has been a reduction in Bitcoin’s hash rate – or the combined computing power required by miners to mine bitcoin and process network transactions. This was expected to happen after the halving in April, which reduced an important source of revenue for bitcoin miners. This drop was delayed due to a short-lived increase in another source of mining revenue, transaction fees. However, as that income disappeared, unprofitable miners were forced out. “This highlights the ongoing challenge faced by bitcoin miners in maintaining a sustainable source of revenue, particularly in the post-halving environment,” said Panigirtzoglou. This is especially true with the price of bitcoin in crisis, having mostly traded between $60,000 and $70,000 since March. Miners have two incentives to mine: transaction fees that are voluntarily paid by senders for faster settlement and mining rewards, which have been halved to 3.125 newly created bitcoins from 6.25. The incentive initially started with 50 bitcoins. “There is a natural feedback loop with bitcoin prices,” said Panigirtzoglou. “The more bitcoin prices fall, the greater the number of unprofitable miners who come under pressure to leave the bitcoin network and the greater the result.[ing] decline in the hash rate and cost of producing bitcoin.”