Declining production costs could be seen as a negative for bitcoin prices, the Wall Street bank said in a report.Read MoreFeedzy
The cost to produce bitcoin (BTC) has fallen to about $13,000 from around $20,000 at the start of June as miners battle the bear market and efficiency in mining rises, according to investment bank JPMorgan.
The drop in bitcoin’s production cost stems from the “decline in electricity use as proxied by the Cambridge Bitcoin Electricity Consumption Index, while the hash rate has been fluctuating in recent months with no clear downtrend,” according to JPMorgan strategists led by Nikolaos Panigirtzoglou.
While improved profitability means there may be less pressure for miners to sell their bitcoin holdings for liquidity purposes, the drop in production costs could be viewed as a negative for overall bitcoin price, JPMorgan added in its note to clients.
“The decline in the production cost might be perceived as negative for the bitcoin price outlook going forward to the extent that the production cost is perceived by some market participants as the lower bound of the bitcoin’s price range in a bear market.”
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.