Bitcoin Miner Sell-Offs Could Keep Prices Low, Says JP Morgan

Strategists at JPMorgan Chase & Co. believe the current Bitcoin sell-off by miners could make it difficult for the price of the asset to bounce back, especially if the trend continues.

In a note released yesterday, they pointed out that publicly listed Bitcoin miners account for 20% of all reported Bitcoin sales in May and June. It’s likely that private miners are also selling at the same rate or even higher, given that they have limited access to the capital markets.

The massive sell-off is a sharp turn in the strategy that has mostly been about holding block rewards until the market conditions get better. But the drop in Bitcoin prices and its effect on miners’ profitability means many are now struggling to meet operating costs.

According to the strategists,

Offloading of Bitcoins by miners, in order to meet ongoing costs or to deliver, could continue into Q3 if their profitability fails to improve.

Already, it has likely “weighed on prices in May and June, though there is a risk that this pressure could continue.”

However, JP Morgan strategists point out that it’s not all gloomy. One silver lining is a drop in the cost of mining Bitcoin from around $18k – $20k earlier in the year to $15k this month. This is due to the drop in hash rate and mining difficulty over the past two weeks.

Meanwhile, the cost of production varies based on the size of the miner. According to Arcane Crypto, large miners spend around $8,000 to produce one Bitcoin. Meanwhile, Securitize Capital says the cost of production might be over $20k for some miners after adding overhead costs and interest rates.

Bitcoin Price 69% Away From ATH

Bitcoin price has declined by more than half compared to its value at the beginning of the year. It’s also down 69% from its all-time high as it hovers around the low 20k range in the last few weeks.

Several factors have pushed the crypto markets over the edge, including the crash of Terra’s ecosystem and the near-insolvency of crypto firms such as Celsius and 3AC. But the Fed hike in interest rates has been the primary factor behind the drop.

Almost every other niche in the space, like non-fungible tokens and decentralized finance, has reported losses too. With most miners also having debt obligations, selling their Bitcoin stash appears as the best course of action to stay afloat.