One of the main concerns of crypto miners is how much it costs to mine a Bitcoin, since the viability and profitability of the operations depends on this cost.
Recently, JP Morgan reported that the cost of Bitcoin production (what it costs to mine each cryptocurrency) could have reached a historic low, going from costing $24.000 to $13.000 in just one month.
In the informative note published by JP Morgan strategists, The cost of mining a Bitcoin fell by almost 50% in June, which could have negatively affected the price of the currency. In turn, analysts pointed out that the estimate of the production cost is due, almost entirely, to a decrease in the use of electricity, according to data from Bitcoin Electricity Consumption Index from the University of Cambridge.
Reducing electricity consumption is a measure that miners have taken to Maintain profitability by deploying more efficient mining equipment, avoiding miners' escape less efficient. However, the higher cost of such equipment could be a barrier if the price of Bitcoin falls.
Although the fall in costs improves the profitability of miners, it is generally seen as a negative thing, since the cost of production is appreciated by some market participants such as the Bitcoin price lower limit during a bear market.
What is the average cost of mining a Bitcoin?
The average cost of mining a Bitcoin is nothing other than the Bitcoin production costThe main factor is the cost of the electricity that miners use to run their machines.
Beyond electricity, Bitcoin miners have other costs to deal with such as the price of infrastructure, own machines and the employees in charge of managing the mining farms.
In this sense, as long as the price of Bitcoin remains above this cost, the Mining operations are profitableThis is why many users believe that production costs serve as a “lower limit of Bitcoin’s price range” during bearish periods.
Thus, as long as mining costs are lower than the price of Bitcoin, more miners will join the work. However, when production costs are higher than the price of the cryptocurrency, miners will stop working.
For example, Zach Bradford, CEO of Bitcoin mining company CleanSpark, points out that the price of mining a Bitcoin depends on the price of electricity (something that varies depending on the location of the facilities), the equipment used and the labor costs, which are also variable.
Bradford explains that, in his case, The cost of mining a Bitcoin is $12.000 lower than that indicated by JP Morgan.
This means that even though the major Bitcoin mining companies are under slight stress from the cryptocurrency prices, Mining Bitcoin is still profitable and that as the market recovers, miners will see their profitability increase and will stop the current capitulation, adding new machines to their operations.
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