According to JP Morgan strategists, the current sell-off in Bitcoin miners is putting pressure on the price of the flagship digital asset.
Despite the decrease in mining difficulty, Bitcoin (BTC) miners are facing harsher market conditions due to rising energy and hardware costs, according to Coin Metrics’ special State of the Network report.
The computational power required to create new blocks on the Bitcoin network and mine new ones is referred to as the hash rate. The 30-day moving average has dropped to around 215 EH/s since peaking at 220 EH/s in May.
Mining difficulty has decreased
Another important metric, mining difficulty, has decreased significantly. Mining difficulty is changed every two weeks to maintain a 10-minute interval between blocks.
The average time between each block is determined by difficulty, which has a direct impact on profitability. It recently dropped by 2.3 percent, the second-largest drop of the year.
The cost of energy is affecting miners
While the mining difficulty has decreased, the energy cost for Bitcoin mining has significantly increased.
Because of the global energy crisis, inflation, and supply chain issues, miners are forced to pay more for less energy, resulting in lower revenue.
Only Texas and Nebraska have seen a decrease in their industrial electric rates among the top ten states in the United States. Oklahoma and Georgia have seen annual increases of more than 20%.
However, not all miners are affected by this increase because some have established relationships with their energy providers, allowing them to hedge against the rise.
The sell-off of Bitcoin miners may keep the price low
All of these issues have prompted many miners to sell their Bitcoin holdings, a move that JP Morgan believes will only keep the asset’s price low.
According to bank strategists, miners accounted for 20% of all reported BTC sales in May and June. If this trend continues, the price of Bitcoin will fall in the third quarter.
Which miner will make it through this crypto winter?
According to Arcane analyst Jaran Mellerud’s analysis, many miners will struggle to survive the current market situation.
https://twitter.com/JMellerud/status/1541444212444614656
However, he believes that Argo is the best-positioned miner in terms of financial survival in the market. Marathon is the most vulnerable due to an upcoming machine payment, which he believes will deplete its liquidity.
To read our blog on “Bitcoin experiences record outflows, while Ethereum defies the trend,” click here
