Bitcoin Mining Costs Fall as Inefficient Miners Exit Network

JPMorgan estimates the current cost to mine one bitcoin sits around $45,000, down from previous estimates exceeding $50,000. This decrease coincides with the departure of inefficient miners from the network following the recent bitcoin halving.

Impact of the Bitcoin Halving on Mining Costs

The halving, which cuts miner rewards in half every four years, typically leads to a rise in mining costs as less profitable operations become unsustainable. However, the launch of the Runes protocol, a new token creation system, provided a temporary boost to transaction fees, offsetting the impact of the halving for miners.

"This provided a temporary boost to miner revenue in the immediate aftermath of bitcoin halving," noted JPMorgan analysts led by Nikolaos Panigirtzoglou. However, they added, "the boost from Runes proves short-lived," with user activity and fees dropping significantly recently.

Network Power Consumption and Future Outlook

As the Runes hype faded, power consumption on the network fell at a faster rate than the hashrate (total computing power), indicating the exit of inefficient miners. This trend is expected to continue, with JPMorgan predicting a feedback loop where declining bitcoin prices lead to further miner departures, ultimately lowering the network's hashrate and mining cost.

Despite the decrease in mining costs, JPMorgan remains cautious about the near-term outlook for bitcoin, citing a lack of positive catalysts and waning retail investor interest.