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On March 1st, according to the Financial Times, the price of Bitcoin hit a new record high against many currencies. The news of the approval of a Bitcoin spot ETF in the United States fueled market enthusiasm. Expectations that the halving of Bitcoin mining output at the end of April would intensify market fervor. The anticipation of increased demand from buyers for the next halving explains why the cryptocurrency bull market is now happily predicting that the price of Bitcoin will soon exceed $100,000.
However, upon closer observation, this bullish target seems somewhat dubious. According to estimates by JPMorgan Chase, the current production cost—primarily the electricity cost for mining calculations—is around $27,000. This sets a price floor for Bitcoin. After the halving, this price is expected to jump to around $50,000 in the short term.
Nevertheless, the recent surge has pushed the price of Bitcoin far above production costs. This situation is unsustainable for Bitcoin. Additionally, these costs should start to decrease shortly after the halving, as inefficient miners will exit the market, unable to keep up. With old machines being phased out, the hash rate should decline, and production costs should decrease accordingly.
At some point, the upward momentum in prices will weaken. Assuming a one-fifth decrease in mining processing power, production costs would correspondingly drop to around $43,000. This provides a useful guide for where prices might find support after the current frenzy subsides. |
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Post time 10-3-2024 09:31:16
