Minering a single Bitcoin now costs less, which could reverse the declining profitability trend and lower the demand for power on the network.
As mining hardware improves, the cost of mining 1 Bitcoin ( Bitcoin ) has fallen to ten months lows. The difficulty has also dropped 6.7% from its May peak.
Nikolaos Panigirtzoglou, JPMorgan’s strategist, told investors on Wednesday that Bitcoin production costs had fallen to $13,000 from $24,000 at June’s beginning.
According to analysts, this is the lowest it’s been since September 2021. This comes as mining difficulty has fallen from its May highs at 31.25T down to 29.15T.
Lower production costs for Bitcoin can help miner profitability and ease selling pressure. The strategists remain bearish and state that “the decline of the production cost might not be perceived as positive for the Bitcoin price outlook going ahead,” according to Bloomberg.
Some analysts consider the production cost to be the lower limit for BTC’s price range in a bearish market. Many analysts believe that BTC prices will fall to $13,000. This would be similar to the 80%+ drawdowns experienced in the previous bear markets. Bitcoin prices are currently down 70% from their November high.
The Bitcoin production cost reached its peak just after the price peaks of April and November 2021. It has since fallen back to market prices.
A drop in production costs has been linked with a decrease in electricity consumption.
The current report from Cambridge University on Bitcoin energy consumption shows that the network’s daily power demand is 9.59 Gigawatts. This is a decrease of 33% in the last month, and 40% lower than the February 2022 peak demand of nearly 16 GW.
A significant number of miners also shut down older, less efficient mining rigs due to rising energy prices and a fall in BTC prices.
Asicminervalue states that the Bitmain Antminer E9 was just released and is one of the most efficient units available. It has a maximum hashrate of 2.4Gh/s, which translates to a power consumption rate of 1,920 W.
Miners have also been affected by the double whammy that is increasing global energy prices and plummeting BTC prices. Since the start of the year, mining profitability has dropped by 63%. Bitinfocharts reports mining profitability at $0.095 per terahash per second, its lowest level since October 2020.
The fall in production costs may stop a further decline in profitability, and could even reverse it in the next months.