JPMorgan: Bitcoin Above $85,000 May Ease Miner Selling Pressure

JPMorgan analysts said bitcoin moving above the bank’s estimated production cost of around $85,000 could ease miners’ selling pressure if sustained. Bitcoin had remained below its estimated average production cost for 280 days before rising above it during this week’s rally. Bitcoin later declined slightly and traded around $84,100. The analysts said bitcoin’s production cost has historically acted as a soft floor for its price. Higher-cost miners may sell bitcoin when operations become unprofitable. They may also shut down machines or leave the market. Miners managed the extended period of weak profitability by moving machines to regions with cheaper electricity. Some miners sold older rigs. Some equipment was placed on standby. Less efficient machines were scrapped or recycled. Bitcoin last remained below its estimated production cost for a similar period in 2018, when it stayed below that level for about 224 days. Falling prices pushed higher-cost miners to shut down during that period. This reduced the Bitcoin network’s hash rate and mining difficulty. The analysts said bitcoin’s rally continued despite the U.S. Senate’s failure to advance the Clarity Act. They linked the rally to investors closing bearish positions. Miners are shifting some or all of their operations toward artificial intelligence computing. Bitcoin’s hash rate has fallen about 19% from its peak last October. Mining difficulty has declined roughly 15%. Many publicly traded miners have reduced their hash rate growth forecasts as long-term artificial intelligence contracts accelerate the shift away from bitcoin mining. Artificial intelligence companies are paying significant premiums for access to electricity and data centers equipped for intensive computing. Miners have been attracted to artificial intelligence revenue because it is more predictable, more stable, and higher per megawatt than mining income. Publicly listed miners are losing share of bitcoin mining activity to privately owned and sovereign miners. The analysts said the shift could reduce excess hash rate growth and limit the risk of the network becoming too crowded. They also said the shift could make bitcoin’s production cost rise more slowly outside halving events.