The economics of Bitcoin mining have worsened this year. Bitcoin has been trading below production costs for five consecutive months, according to The Block, citing JPMorgan.
The bank's experts estimate the average cost to mine a single Bitcoin at $78,000. With the current asset price, about 20% of miners are operating at a loss.
Source: The Block/JPMorgan.The hash rate and network difficulty have become more sensitive to price fluctuations. Over the past six months, the correlation between difficulty and price has risen to 0.62. This indicates that miners are more likely to shut down their equipment during market downturns. In early June, mining difficulty dropped by 10%.
Public mining companies have started to actively sell off reserves. In the first quarter, they sold over 32,000 BTC to cover operational expenses, surpassing the total sales for the entire previous year.
Pressure on the industry will persist as long as Bitcoin trades below $78,000. However, JPMorgan analysts believe the current market pessimism could signal potential future growth.
It’s worth noting that on-chain data indicated miner capitulation in June.