JPMorgan Adjusts Bitcoin’s Production Cost Lower
By Laxmikant Khanvilkar
Bitcoin, the largest cryptocurrency by market capitalization, has repeatedly failed to break above $26,000 mark as systematic overhang continue to pressure the price lower while blurring the future outlook.
One of the biggest systemic concern being the cost of production….if the term sounds Greek to you, stay tuned as we try and explain you what does that mean…
JPMorgan, the US based financial services provider, has recently adjusted its estimation of Bitcoin’s production costs, which has garnered attention.
The New York headquartered company revised Bitcoin production cost at $18,000 from previously standing $21,000.
This move is closely tied to the Cambridge Bitcoin Electricity Consumption Index’s (CBECI) decision to update its methodology, highlighting the interconnectedness of financial analyses and industry metrics. Notably, the CBECI is known for its critical role in tracking and estimating the electricity consumption of the Bitcoin network.
JPMorgan analysts, under the guidance of Nikolaos Panigirtzoglou, noted in a recent report that the new methodology changes the landscape of Bitcoin’s production cost estimations.
According to the analyst, this shift implies that future changes in electricity prices will have a comparatively lesser effect on mining costs.
There’s a broader impact of CBECI’s adjustments than simply changing estimates. Analysts discovered, the changes in electricity costs can significantly reduce the cost of producing 1 Bitcoin.
With the new CBECI methodology, this sensitivity has decreased slightly to approximately $3,800, compared to the previous $4,300 change for every one cent per kWh (kilowatt hour)
According to the analyst, this sensitivity is expected to double after the 2024 halving event, which will decrease miners’ rewards by half.
This change will amplify the importance of cost management due to the higher impact of electricity costs on the overall mining expenses.
Well!..JPMorgan adjusting Bitcoin production cost lower will have its implication on prices, for now the markets are more keen to know Federal Reserve’s stance post inflation data later this week….
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