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In a research report released on Thursday, JPMorgan (JPM) stated that Bitcoin (BTC) miners who benefit from low electricity costs and have a substantial share of sustainable energy are the most probable to endure in an increasingly competitive landscape.
The report highlights electricity as the foremost expenditure in the mining process, exerting a significant influence on the overall cost of bitcoin production. In response, miners are actively exploring cost-effective and environmentally sustainable energy sources to uphold their profitability.
The bank highlighted that electricity prices have experienced a significant decline, particularly in the United States, which serves as the primary location for numerous bitcoin mining companies. Additionally, the bank pointed out that the United States holds the leading position in terms of contributing to the overall bitcoin hashrate. Hashrate denotes the aggregate computational power utilized for mining and facilitating transactions on proof-of-work blockchains like Bitcoin.
“Lower electricity costs should help contain the rise in the bitcoin production cost in the current phase of rising hashrate,” analysts led by Nikolaos Panigirtzoglou wrote.
The bank highlighted the significant impact of power costs on the bear market over the past year, as miners battled to stay afloat amidst mounting financial challenges.
The note revealed that the average electricity cost for bitcoin miners worldwide stands at around $0.05 per kilowatt hour (kWh). Remarkably, certain large-scale mining enterprises have successfully negotiated rates as low as $0.03/kWh.
Lower electricity costs help the large bitcoin miners keep bitcoin production costs down and “maintain their profitability even in the current highly competitive environment, where the hashrate has risen steeply making new record highs,” the note added.
“Vulnerable” miners, including Core Scientific (CORZQ), Argo Blockchain (ARB) and Iris Energy (IREN) have struggled to survive due to a “combination of falling bitcoin prices, rising debt servicing costs and rising electricity costs,” the analysts wrote. Miners with higher electricity costs have been facing losses due to falling bitcoin prices over the past year.
JPMorgan predicts that in the long run, the bitcoin mining sector will witness consolidation and intensify competition, as only miners with lower production costs will be able to thrive and endure.
The report highlights that miners are actively exploring avenues to enhance their environmental stewardship by integrating renewable energy sources into their power portfolio.
