The mining industry under pressure: JPMorgan records worsening economics of bitcoin mining
The economics of mining the first cryptocurrency have noticeably deteriorated this year. For five months, Bitcoin has been trading below the cost of production, putting significant pressure on the entire industry. I estimate the average cost of mining one coin at $78,000, and at the current market price, approximately 20% of miners are operating at a loss.
Hashrate and Correlation with Price
Hashrate and network difficulty have become much more sensitive to price fluctuations. Over the past six months, the correlation between difficulty and price has risen to 0.62. This means miners are increasingly shutting down equipment during market downturns. In early June, mining difficulty dropped by 10% — one of the sharpest declines in recent years.
Reserve Sell-Off
Public mining companies have begun actively selling off their reserves. In the first quarter, they sold over 32,000 BTC to cover operating expenses. This volume exceeds total sales for all of last year, indicating a critical state of liquidity.
Pressure on the industry will persist as long as Bitcoin trades below the $78,000 mark. However, I believe the current market pessimism could be not only a threat but also a signal for future growth. In June, on-chain data pointed to miner capitulation, which historically often precedes a trend reversal.
Expert Commentary: The current situation resembles the cycles of 2018 and 2022, when mass miner capitulation created a bottom for new bull rallies. However, it is important to consider that rising difficulty and mining costs require higher prices to restore profitability. Investors should monitor hashrate and reserve sales — these are key indicators of market health in the coming months.