JPMorgan, a Wall Street firm, recently produced research claiming that the cost of producing Bitcoin had reduced by 50% in the last month. The current cost of BTC production is R223K, down from R412K at the start of June 2022.
According to data from the Cambridge Bitcoin Electricity Consumption Index, JPMorgan strategists led by Nikolaos Panigirtzoglou, this decline coincides with a drop in electricity use.
The banking giant observes that the miners are attempting to protect profitability and deploy efficient rigs. However, it might also act as a big impediment to any Bitcoin price gains. The strategists at JPMorgan wrote
“While clearly helping miners’ profitability and potentially reducing pressures on miners to sell Bitcoin holdings to raise liquidity or for deleveraging, the decline in the production cost might be perceived as negative for the Bitcoin price outlook going forward. The production cost is perceived by some market participants as the lower bound of the Bitcoin’s price range in a bear market.”
Bitcoin miners went on a selling binge in the second quarter of 2022. As the Bitcoin price fell by 70% from its all-time highs in November 2021, miners were forced to sell more coins in order to fund their operating costs.
JPMorgan strategists predicted last month that Bitcoin would see additional selling pressure in the third quarter. Miners are expected to liquidate their holdings further in the future. Furthermore, if BTC production has indeed increased to R223K as reported by JPMorgan, miners may be able to profit from the increased output.
Glassnode, an on-chain data provider, has released its observations, including long-term holder (LTH) capitulation. According to the report:
“There is an increased likelihood of long-term holder (LTH) capitulation.” Bitcoin investors are still not out of the woods.”
To resume the uptrend, Bitcoin (BTC) must surpass its 200-day EMA at about R386K and remain above that level.