JPMorgan Raises Bitcoin Mining Cost Estimate to $45,000 Amid Reduced Block Rewards, Expects Asset Price to Drop to $42,000 in the Medium Term

JPMorgan analysts have recently revised their forecast on the cost of mining Bitcoin following a halving event that reduced block rewards. In their updated report, they now estimate the cost to mine the cryptocurrency at $45,000. This adjustment is a response to ongoing changes in the mining sector and contrasts with their previous estimate of $42,000 made prior to the halving.

The report, highlighted by The Block, indicates that the increase in mining costs does not necessarily herald a rise in Bitcoin prices. Instead, JPMorgan experts believe that, despite the higher cost of mining, Bitcoin's price will likely face downward pressure in the near future. They project a potential decline to $42,000, aligning with earlier predictions they had slated for the end of April 2024.

"Previously, we anticipated a significant drop in hash rate post-halving as unprofitable miners exited the network. It appears that this is occurring, albeit with some delay. Given the current hash rate and energy consumption, our cost estimate for mining one Bitcoin is around $45,000, considerably below the current market price," the report states.

The analysts at JPMorgan also addressed the initial spike in mining fees following the halving, attributing it to the deployment of the Runes protocol which temporarily eased the situation for Bitcoin miners. However, this effect was short-lived. They emphasized that while there might be minor fluctuations, the overarching trend suggests a stabilization in mining efficiency and a consequent reduction in the asset's price.

Furthermore, the report discusses broader factors influencing Bitcoin's market outlook. These include not only mining-related issues but also limited inflow into American spot Bitcoin ETFs and a lukewarm response to newly launched crypto funds in Hong Kong in late April 2024.

In conclusion, despite the rising operational costs in Bitcoin mining, JPMorgan maintains a cautious stance on the future growth potential of Bitcoin's price. The firm underscores a combination of industry dynamics and market responses that could keep the price of the leading cryptocurrency under check in the medium term.