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Strategists at banking giant JPMorgan claim that a drop in Bitcoin (BTC) mining costs has a negative effect on the price of the flagship cryptocurrency.
Noting that Bitcoin’s production costs have decreased to $13,000 from $24,000 a month ago, JPMorgan analysts, led by Nikaloas Panigirtzoglou, acknowledge that this might result in prolonging the bearish sentiment.
The team of strategists note that the lowered production costs, results from a decline in electricity use, with BTC miners operating more efficient mining rigs.
“While clearly helping miners’ profitability and potentially reducing pressures on miners to sell Bitcoin holdings to raise liquidity or for deleveraging, the decline in the production cost might be perceived as negative for the Bitcoin price outlook going forward.
The production cost is perceived by some market participants as the lower bound of the Bitcoin’s price range in a bear market.”
Bitcoin has struggled since hitting its all-time high of just under $69,000 in November. Year to date, it has been down 60% amidst market insecurity, global inflation, with risk assets struggling. The top cryptocurrency has been trading around $20,000 for a month now.
At the time of writing, Bitcoin is moving hands at $20,670, according to CoinMarketCap data.