Some time ago, it could seem that almost everyone went crazy about crypto mining. People were actively building their private farms investing quite impressive sums in powerful equipment but it could really bear fruit.
But is there any sense to enter the sphere of Bitcoin mining now? According to analysts from JPMorgan Chase & Co., the American multinational investment bank and financial services company, it is not feasible at all.
After having conducted a throughout research, the experts found out that the production-weighted cost to create one Bitcoin in the fourth quarter was approximately $4,060 worldwide.
It means that if at the moment Bitcoin (BTC) is trading at $3,473.70 per coin, you will spend more to generate one Bitcoin than you will get as a reward. So, looking at the current price, we can see that Bitcoin mining is not a very good idea for the majority of people living on the Earth.
Low-cost Mining in China
But there is a clear group of miners who still have a chance to win in this situation. In China to generate one Bitcoin you will need to pay practically twice less. The estimated sum is around $2,400 per one unit.
Expenses on electricity are one of the biggest for miners as their the high-powered computer needs a lot of power to process data blocks to earn Bitcoin. Given the prices for electricity worldwide, it is rather clear why the costs for mining are so high.
Nevertheless, direct power purchasing agreements with electricity generators who are trying to sell excess power generation help Chinese miners to reduce their expenses.
“The drop in Bitcoin prices from around $6,500 throughout much of October to below $4,000 now has increasingly pushed margins further and further negative for just about every region except low-cost Chinese miners,” explained JPMorgan analysts led by Natasha Kaneva.
Future of Mining
It is expected that if the situation remains the same, a great number of miners will be forced to quit the game. But it is still only a potential variant. According to JPMorgan, production shares of miners that are based in the Czech Republic, U.S. and Iceland have been expanding over the past year or even a little bit more.
But if the number of miners decreases, the production costs will fall. For example, if only Chinese miners remain, it will cost less than $1,260 to get one Bitcoin.
No Real Value
Moreover, analysts have stated that Bitcoin, as well as other cryptocurrencies, have no real value.
In general, JP Morgan Chase doesn’t have a very optimistic opinion on the future of crypto. According to the company’s analysts, cryptocurrencies will have a chance to succeed acting as money only if a majority of the people lose their faith in traditional financial concepts including banking and the value of gold.