The cost of mining one Bitcoin (BTC) has fallen to ten-month lows as mining hardware becomes more efficient, and difficulty has dropped 6.7% since its May peak. could help to reverse the falling profitability trend while lowering power demands on the network.
Strategists from JPMorgan led by Nikolaos Panigirtzoglou told investors on Wednesday, that Bitcoin production costs have fallen to around $13,000 from $24,000 at the beginning of June.
This is the lowest it has been since September 2021, according to the analysts referring to a chart from Bitinfocharts, and comes as mining difficulty has fallen from its May highs of 31.25T to 29.15T.
Bloomberg reported that the production cost is supposed by some analysts as the lower bound for the BTC price range in a bear market. Several analysts have predicted BTC prices to fall to around $13,000, which would align with the 80%+ drawdowns in the previous two bear markets. Bitcoin is presently trading down 70% from its November all-time high.
Bitcoin production cost emaciated just after the price peaks in April and November 2021 and has fallen back as markets did, so it is correlated but lags price movements. The droplet in production cost has been linked to a decline in electricity consumption.
Cambridge University’s Bitcoin energy consumption index presently reports that the network’s assessed daily power demand is 9.59 Gigawatts. This is a decline of 33% over the past month and is down 40% from the 2022 peak demand of almost 16 GW in February.
Furthermore, a significant number of miners have powered down older and more incompetent mining rigs as they have become unprofitable to operate due to surging energy prices and a collapse in BTC prices.
On the flip side, miners have been hit with the double whammy of increasing global energy prices and tanking BTC prices. This has caused mining profitability to slump by 63% since the beginning of the year. Bitinfocharts reports that mining effectiveness is presently at its lowest levels since October 2020 at $0.095 per day per terahashes per second.
However, the fall in production cost may stop an extra fall in effectiveness and could even reverse that trend in the coming months.
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