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By CCN.com: A JPMorgan report suggests that for more than four weeks in the fourth quarter, Bitcoin's market price was lower than its average mining costs.
According to JPMorgan badysts, the cost of operating bitcoin in Q4 averaged $ 4,060 worldwide, reports Bloomberg. According to them, from the end of November, when the price of bitcoin fell below $ 4,000, it became unprofitable to exploit bitcoin.
The price of bitcoin remains lower than the average cost of mining activities in the world.
Currently, bitcoin is trading at around $ 3,650, following a drop in the $ 3,700 level it had previously reached.
Chinese miners were however the exception, as they incurred lower mining costs. On average, Chinese miners spent about $ 2,400 to extract a bitcoin:
The drop in bitcoin prices from about $ 6,500 for most of October to less than $ 4,000 has led to increasingly negative margins for just about every regions, with the exception of low-cost Chinese miners.
Bitcoin miners in the world's second-largest economy achieved this goal by buying electricity directly from producers generating excess output. Some of these generators include aluminum smelters.
In addition, badysts have estimated that the marginal mining cost of Bitcoin would be less than $ 1,260 if there were only Chinese miners left.
Bitcoin miners should go out, reducing the hash rate
According to JPMorgan Chase badysts, miners spending more than the cost of bitcoins should leave space. Such capitulation would be beneficial for the remaining miners as it would reduce the hash rate (computing power needed to exploit bitcoin). Once the hash rate has decreased, the remaining miners will be able to extract more bitcoins without increasing energy consumption.
This level of capitulation has not yet been reached, according to badysts. However, the number of miners in low-cost regions such as the Czech Republic, Iceland and the United States has increased.
Earlier this week, JPMorgan also released another report stating that the price of bitcoin could fall below $ 2,000 if the downturn persists. In particular, JPMorgan badysts expect the price of bitcoin to drop to $ 1,260 if the bear market does not fade.
Bitcoins could fall below $ 1,260 if the bear market continues: JP Morgan badysts https://t.co/r8wUkHJ7UK
– CCN.com (@CryptoCoinsNews) January 25, 2019
Bitcoin is no longer the Digital Gold Anymore?
At the same time, badysts said that bitcoins have no real value. Analysts have argued that bitcoin would only make sense if the investor's confidence in gold and the US dollar was eroded:
Even in extreme scenarios such as a recession or a financial crisis, there are more liquid and less complex instruments for transactions, investments and hedging.
In December, JPMorgan also released a research note indicating that the crypto bear market deters institutional investors.
Bitcoin Bear Market Drives Institutional Investors, says JPMorgan https://t.co/HHmEKe49kV
– CCN.com (@CryptoCoinsNews) December 18, 2018
At the time, Nikolaos Panigirtzoglou, global markets strategist at JPMorgan, said interest in bitcoins futures was decreasing as cryptocrypted transaction volumes dropped.
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