[2019-01-26] JPMorgan Claims Bitcoin Isn’t Worth Mining Anymore

[Moreira]

JPMorgan analysts are taking jabs at Bitcoin once more. The executives at this major US bank have never been fond of digital currency and blockchain technology. Jamie Dimon, JPMorgan’s CEO, temporarily pulled back on his comments when BTC hit its all-time highs. Shortly after, the coin began to crash, and his skepticism picked up again.

According to a Bloomberg report, the bank’s analysts say that it costs more to create one Bitcoin than it’s worth. In Q4 2018, it cost around $4,060 to mine one BTC and currently, the price of the digital currency is $3,584.07.

Bitcoin Falling
Not all miners are paying that top dollar to mine though. Low-cost Chinese miners can pay much less, mining at around $2,400. Natasha Keneva was one of the JPMorgan analysts that released their cryptocurrency report to major news outlets. She claims that these low-cost miners leverage direct purchasing agreements with electricity generators that are looking to sell excess power.

The cryptocurrency market has been steadily awaiting the flood of Wall Street investments that haven’t occurred on a large-scale like some would have hoped. Bitcoin futures, OTC trading desks, and the hope of Bitcoin ETFs were made to entice pension funds and asset managers, but none have budged.

The prices of digital currencies rose towards the end of December but have quickly corrected, and all gains are almost lost once more. The JPMorgan analysts say that marketplaces, where individuals and small businesses have control over payment methods, would be the most useful for the spread of digital currencies. However, these analysts feel its volatility, propensity for illicit use, and security flaws should all be considered.

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[squatter]

If it's not worth mining, I suppose difficulty will probably drop, eh?

According to a Bloomberg report, the bank’s analysts say that it costs more to create one Bitcoin than it’s worth. In Q4 2018, it cost around $4,060 to mine one BTC and currently, the price of the digital currency is $3,584.07.

That's about what I'd expect. Downward difficulty adjustment should lag behind price drops. Miners won't necessarily shut down immediately if price dips below their costs. They can also hedge their mining operations by shorting. There's also always going to be miners with access to free/cheap electricity or more efficient mining hardware than average, and also those with load balancing agreements with power generators. This is even acknowledged by one of their analysts, so their initial conclusion -- and the headline -- are really dumb:

Not all miners are paying that top dollar to mine though. Low-cost Chinese miners can pay much less, mining at around $2,400. Natasha Keneva was one of the JPMorgan analysts that released their cryptocurrency report to major news outlets. She claims that these low-cost miners leverage direct purchasing agreements with electricity generators that are looking to sell excess power.

[gentlemand]

If it's not worth mining, I suppose difficulty will probably drop, eh?

Stop that. They are fully qualified in this area. We are not.

Right now miners are mining for purely sentimental reasons. Once that runs out this whole thing is like, soooo, over.

[buwaytress]

Almost cut from the same cloth as some guys from the Bank of International Settlements who several days ago concluded that Bitcoin would never work unless it dropped its PoW algorithm. All these analysts and banking guys are only just coming to grips with Bitcoin and are probably still enthralled by how it seems to work against their known logic.

If I recall, they even think that once block rewards are 0, transactions will take months to confirm cause miners just won't be confirming anything.

Agree with gentlemand that many miners are now only doing it for sentimental reasons (or was tongue firmly in cheek?) but there's still a lot of profit happening, and a lot of profit that was hoarded, plenty are able to sit this out for plenty of time.

[squatter]

If I recall, they even think that once block rewards are 0, transactions will take months to confirm cause miners just won't be confirming anything.

If the big blockers had their way, that might have been true. Scarcity of block space is the only thing that guarantees any revenue for miners once inflation winds down. As long as a robust fee market exists, I think we should be okay though.

[1Referee]

Another ridiculous statement by JPMorgan, guess he don't know about difficulty and difficulty adjustment every 2 weeks. Few miners will shutdown, but Chinese miners (or any miners with low-cost) will continue mine on profit.

It's meant to sound ridiculous, but they obviously know how things work here, and more so than most of the people here. Bitcoin is one of the most profitable assets they are dealing with in terms of future potential, no way they haven't done all the research necessary to understand why Bitcoin has value, and why it will continue to grow, and the mining aspect is a very important part of that.

It's nothing more than an attempt to shake off weak hands, but it seems that people aren't impressed with what JPMorgan comes up with anymore. They have to find other ways to affect the market.

[GymClassHeroes]

J P morgan is not an authority when it comes to bitcoins- he is a businessman and is highly incentivised when bitcoin suffers loses.Bitcoin is not so much profitable in terms of mining at the moment because of the price dip,Things will improve when bitcoin prices improve