By Billy Bambrough
Bitcoin also came under pressure last week as fears of a possible recession rage, weighing on markets. The price of the most popular cryptocurrency climbed back above $20,000, but failed to maintain its momentum, while some investors are wary of saying that Bitcoin has already hit a “bottom”, while others argue that they see a ” huge opportunity”.
For their part, JPMorgan analysts have warned that the cost to “mine” a Bitcoin has fallen by more than $10,000 within a month. They believe that this development can erase $160 billion from Bitcoin’s capitalization of $400 billion.
“Production costs are interpreted by some market players as the lower end of Bitcoin’s price range in a bear market,” JPMorgan analysts led by Nikolaos Panigirtzoglou noted in a note.
The cost to “mine” a bitcoin has fallen from $24,000 in early June to around $13,000, JPMorgan estimates, “driven by reduced electricity use, according to the Cambridge Bitcoin Electricity Consumption Index (CBECI )”. The cost reduction to $13,000 may mark a deeper price “plunge” – by 35% – from today’s $20,000 levels.
Since early June, when Bitcoin missed the $30,000 support level, its price has hovered around $20,000, putting pressure on liquidity-strapped cryptocurrency platforms. The psychological level of $20,000 is significant as it marked the peak of Bitcoin’s rally in late 2017.
“Decreasing production costs – while offering greater profits to miners while easing the pressure on them to sell Bitcoin portfolios and increase their liquidity – could have a negative impact on the cryptocurrency’s outlook,” the analysts commented.
This latest warning from JPMorgan comes a month after the bank estimated that Bitcoin miners – who use high-powered computers to secure the network by paying in cash – might be forced to sell their Bitcoins to cover costs, a move that likely it would compress prices.
After last November’s all-time high, when the price of Bitcoin touched $70,000, the world’s most popular cryptocurrency has plunged 70%, following stock markets down as the US Federal Reserve and other central banks around the world are trying to tame the inflationary rally in the wake of the pandemic, lockdowns to limit the spread of the virus, and unprecedented government measures taken to stimulate economies.
“Based on June data that showed the US consumer price index climbed to a beastly 9.1% year-on-year, Bitcoin’s decline reflects the negative trends seen in recent months, with the crypto adjusting its pace with traditional financial markets,” Matt Senter of Lolli pointed out in an e-mailed comment.
“We will only see Bitcoin’s price decouple from traditional financial markets when the digital currency is accepted and adopted – by larger masses – not simply as a store of value, but as a means of payment and as an enabler of our traditional monetary systems,” he added. the same.
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Source: Capital
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