Bitcoin Production Costs Drop to $13,000, JPMorgan Says

The big picture: As the crypto crash continues to keep Bitcoin prices low compared to their position a year ago, there are still knock-on effects in several areas. One is the cost of production, and miners’ efforts to contain it can be a double-edged sword for the crypto market.

JPMorgan Chase & Co. reports that the cost of mining Bitcoin has fallen to around $13,000, from $24,000, since early June. Bloomberg notes that the drop is likely an effect of the crypto winter, but it’s unclear whether it could help or hinder any recovery in the cryptocurrency’s price.

It’s easy to pin the drop on an exodus of miners after Bitcoin’s price crashed from last November’s high, which could lower the amount of electricity and processing power needed for mining. Summer heat waves may also encourage some mining breaks. However, JPMorgan strategists led by Nikolaos Panigirtzoglou argue that it is actually due to miners protecting profitability through more efficient installations.

On the one hand, cutting mining costs to make Bitcoin more profitable could stabilize the market. On the other hand, some see those production costs as the floor for Bitcoin’s price during recessions. Lowering that floor could allow the crypto winter to get even worse.

Bitcoin peaked at nearly $70,000 last November before starting to tank this spring. The downturn has sent shockwaves through various entities such as crypto firms, the government of El Salvador, North Korea’s weapons program and ransomware gangs.