JPMorgan JPM on Friday revealed that Bitcoin BTC/USD miners who can access inexpensive electricity from sustainable sources are more likely to thrive amidst intensifying competition.
In a research report, the bank emphasized that the primary expenditure in Bitcoin mining is electricity, which significantly influences the total production costs of the cryptocurrency.
Consequently, miners are on a quest to secure more affordable and renewable energy solutions to safeguard their profit margins, Coindesk reported.
JPMorgan's report highlighted that electricity prices have been dipping, particularly in the United States, which is home to the majority of Bitcoin mining firms and the leading contributor to the global Bitcoin hashrate. Hashrate denotes the aggregate computational capacity deployed for mining and handling transactions on proof-of-work blockchains such as Bitcoin.
“Lower electricity costs should help contain the rise in the bitcoin production cost in the current phase of rising hashrate,” the team of analysts, spearheaded by Nikolaos Panigirtzoglou, stated in the report.
JPMorgan also pointed out that the expense of electricity has been a critical factor during the recent bear market as miners grappled to stay afloat.
The report stated that the global average electricity price for Bitcoin miners is approximately $0.05 per kilowatt-hour (kWh). In contrast, major mining firms have managed to secure electricity at rates as low as $0.03/kWh.
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The report emphasized that reduced electricity costs enable prominent Bitcoin miners to suppress production expenses and “maintain their profitability even in the current highly competitive environment, where the hashrate has risen steeply making new record highs.”
JPMorgan analysts observed that certain “vulnerable” miners, including Core Scientific CORZQ, Argo Blockchain ARBK, and Iris Energy IREN, have found it challenging to survive due to a trifecta of declining Bitcoin prices, escalating debt service costs and rising electricity expenses.
They noted that miners burdened with elevated electricity costs have incurred losses as Bitcoin prices plummeted over the previous year.
The banking giant anticipates that the Bitcoin mining sector will undergo consolidation and intensification of competition in the long haul, as only those miners with reduced production costs will be viable.
Moreover, the report indicated that miners are endeavoring to diversify their energy portfolios by incorporating renewable sources to become more ecologically responsible.
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