JPMorgan Drops Bitcoin Mining Cost Estimate, Halving Event Could Impact Miners' Profits

After the Cambridge Bitcoin Electricity Consumption Index (CBECI) methodology was revised last week, JPMorgan JPM lowered its Bitcoin (BTC-USD) production cost estimate to $18,000 from $21,000. JPMorgan analysts led by Nikolaos Panigirtzoglou added that electricity price changes will now have a smaller effect on Bitcoin mining costs.

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The new CBECI methodology calculates the production cost assuming that not all mining equipment contributing to Bitcoin's hash rate should be treated equally. This is mainly because all miners frequently upgrade to newer, more efficient equipment or operate a mix of various machines with differing efficiencies.

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Analysts state, “We had previously calculated that each one cent per kilowatt hour change in the electricity cost induces a $4,300 change in the bitcoin production cost. After the revised CBECI methodology, we see this sensitivity declining, but only modestly to around $3,800.”

Following the 2024 Bitcoin halving event, the sensitivity is expected to double, which will cut the rewards miners receive in half. Also, any changes in electricity costs will have a larger impact on overall expenses, making cost management even more critical for miners.

Bitcoin Halving

Bitcoin halving is a major event in the crypto world with an occurrence every four years (or after every 210,000 blocks are mined) and impacts supply-demand levels significantly. The halving event could be like a stress test for Bitcoin miners amid the high sensitivity of the Bitcoin production cost to electricity costs.

During a halving, the number of Bitcoins that enter circulation around every 10 minutes, known as block rewards, is reduced by half.

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