Bitcoin Mining Cost Estimate Drops to $45K as Inefficient Miners Exit: JPMorgan

Previously, the bank anticipated a substantial decrease in Bitcoin’s hashrate following the halving due to unprofitable miners leaving the network. This reduction is now taking place, but it’s happening later than expected. The bitcoin supply growth rate was recently reduced by half during the quadrennial halving event that occurred last month.

Hasrate signifies the total computational power harnessed across a proof-of-work blockchain network for mining and processing transactions. The recent delay could be attributed to the introduction of the Runes protocol, a novel methodology for token generation within the system, leading to an interim surge in transaction fees as indicated in the report.

Analysts headed by Nikolaos Panigirtzoglou stated that “the bitcoin halving led to a short-term increase in miner income. Miners effectively compensated for the reduction in reward from the halving event through heightened transaction fees, resulting in minimal change to their overall block rewards.”

The benefit derived from Runes was temporary, as reported by the authors, with significant decreases observed in user engagement and transaction fees during the previous week or two. This observation underscores the persistent issue for Bitcoin miners to secure a consistent income source, especially in the aftermath of a halving event.

After the excitement surrounding Runes waned and the short-term gain for miners decreased, the electricity usage on the network dropped more significantly than the hashrate. This indicates that less profitable miners with less efficient mining equipment have departed from the network, according to the bank’s analysis.

In simpler terms, when bitcoin prices drop, an increasing number of unprofitable miners are compelled to exit the Bitcoin network. Consequently, the overall hashrate decreases, leading to a reduction in the cost of mining new bitcoins.

JPMorgan predicts that Bitcoin’s growth potential is restricted in the short term because of various challenges it faces. Among these challenges are the absence of significant positive factors and the waning interest from retail investors.