Bitcoin has surpassed the $85,000 mark, matching the average mining cost and potentially easing financial pressures on miners.
Bitcoin has surged past the $85,000 threshold for the first time in 280 days, according to a report from JPMorgan. This price point aligns with the average cost of mining one Bitcoin, indicating potential relief for miners who have been under financial strain.
Currently trading around $84,000, Bitcoin’s recent rally could mitigate the risk of forced sales from miners, who may have been operating at a loss when prices dipped below their mining costs. JPMorgan refers to this mining cost as a "soft bottom" for Bitcoin's value. If Bitcoin remains above this level, it could stabilize the market for miners who face significant energy and equipment expenses.
The last time Bitcoin traded below its estimated mining cost for an extended period was in 2018 when it lasted approximately 224 days. In such scenarios, higher-cost miners often cease operations, leading to a decrease in mining difficulty and hash rate.
Earlier this year, JPMorgan assessed the average mining cost at around $78,000, while Bitcoin's price was roughly $62,500, with about 20% of miners reportedly operating at a loss. The recent price surge thus represents a significant shift in the financial landscape for these miners.
Transition to AI Infrastructure
Additionally, many miners are transitioning to artificial intelligence (AI) infrastructure. JPMorgan highlights a 19% decline in the Bitcoin hash rate since its peak last October, alongside a 15% drop in mining difficulty. This shift is partially due to long-term contracts in the AI sector, which offer more stable revenue streams compared to Bitcoin mining, especially during periods of low profitability.
As public miners adjust their operations, the growth of the Bitcoin network's hash rate may slow, leading to a gradual increase in the estimated mining cost outside of halving events. In the first half of this year, public miners reported a 15% reduction in their realized hash rate, redirecting much of this capacity towards AI development. Moreover, CoinShares noted that in the second quarter, mining companies collectively fell below the breakeven point for the first time.
