In the crypto winter the cost to mine a Bitcoin is higher than its current market value. The decline in Nvidia’s stock price is a recent epic testament to this new crypto reality.
I’m a bit nervous (or scared) to check the price of Bitcoin these days and I’m noticing I’m doing it a lot less often. We aren’t seeing much regulation in the U.S. concerning crypto but we are seeing an apparent ‘market correction’ in how we view ICOs as compared to for instance their supposed heir apparent called STOs.
Crypto Winter means Gold is Hot
The new baseline for BTC appears to be around $3,500 for early 2019. That’s not terrible considering Bitcoin’s volatile history but it basically means investors that were getting more into crypto are now going back to Gold. This could however easily change when Bakkt and others go live and Bitcoin finds wider adoption in places like Japan where it appears we are on the cusp of cryptocurrencies getting more popular for actual retail transactions.
If China brought us mobile payments via apps, Japan will likely bring us digital currencies that enable a cashless society, where in the U.S. they are behind with a reliance on plastic.
Crypto Hype to Bitcoin Bites
In any case JP Morgan analysts are telling us what we already have known for quite a few months, it’s now too expensive to mine Bitcoin and possibly even Ethereum. That is, analysts with JPMorgan Chase & Co. found that the cost of mining a single Bitcoin outweighed the actual value of the Bitcoin itself.
If NVIDIA has been hammered due to the crypto winter, with Bitmain and the Chinese machine, low-cost Chinese operations may still have positive margins. The majority of the costs involved in mining Bitcoin (on a larger scale) come from paying for the power required to run massive power-hungry computer rigs. Bitcoin miners in China have found ways to reduce those costs significantly by setting up shop in the vicinity of power generators and cutting deals with them. Bitmain type rigs could still show a profit for Mining Bitcoin with a price above a $2,400 set-point.
Electricity tends to be the biggest cost for miners, needed to run the high-powered computer rigs used to process data blocks to earn Bitcoin. According to Bloomberg, Bitcoin may have failed to go mainstream in such an equation where as per the JPMorgan Chase analysts, the miners whose expenses exceed the cost of bitcoin, are in 2019 expected to exit the space (or have already). This capitulation would benefit the remaining miners as it would lower the hash rate(computing power required to mine bitcoin), or moreover companies like Bitmain that favors Asia being at the forefront of crypto innovation.
Bitcoin No longer Digital Gold in 2019
A Chinese report still ranks Bitcoin as the 15th most innovative altcoin. Recently, Reuters has reported that JPMorgan analysts expected the value of Bitcoin to tank even further, down to as low as $1,260. With trust in the ICO process under threat, and a bearish market for altcoins, Bitcoin’s future remains somewhat in doubt in 2019 so far.
While production shares of miners based in the Czech Republic, U.S. and Iceland have actually grown slightly over the past year or so, if Bitcoin’s price continues to decline more miners will be forced to leave the market making it a Chinese domain. If Bitcoin’s price were to spike again this would be a massive windfall for companies such as Bitmain.
source; https://medium.com/digital-asset-news/bitcoin-costs-more-to-mine-than-its-value-e73b508ded14
