JPMorgan estimates that the cost of creating Bitcoin has fallen from $90,000 to $77,000 since the beginning of the year due to a decline in the network hash rate.
In the past, this cost served as a “soft price floor” for Bitcoin. This means that BTC price often finds support around that level because miners don’t want to sell at a loss below their cost of production. recent Lower production costs This happened because Bitcoin’s hash rate and mining difficulty have decreased in recent months.
Hashrate measures the total computing power used to mine Bitcoin, and the network automatically adjusts the mining difficulty so that a new block is added approximately every 10 minutes. As the hashrate decreases, the difficulty level also decreases.
Analysts led by managing director Nikolaos Panigirtzoglou say mining difficulty has fallen by about 15% so far this year. Mining difficulty is recalculated approximately every two weeks.
This system aims to keep Bitcoin block generation predictable. The fewer machines trying to mine Bitcoin, the less difficult the network becomes. However, this makes it easier for other miners to solve the difficult puzzles required to add new blocks to the blockchain.
Reducing production costs increases profits for efficient miners
Analysts say there are two main reasons for the decline. Bitcoin prices have fallen this year, making mining less profitable for operators with high electricity costs or older, less efficient machines. Many of these miners were forced to turn off their equipment because they could no longer continue operating profitably.
Second, severe winter storms in the United States caused temporary operational shutdowns, particularly in Texas, where hundreds of mining operations are underway. However, during extreme weather events, grid operators often limit the use of electricity to protect the grid. The mines that were forced to cease operations included large mining facilities.
Historically, a sudden drop in mining difficulty has been considered a sign of “capitulation.” This occurs when high-cost miners exit the market and sell their Bitcoin to raise funds.
The same thing happened when China outlawed Bitcoin mining in 2021. As a result of this decision, the difficulty level decreased by about 45% from May to July of the previous year, but recovered by the end of 2021.
JP Morgan believes the reduction in difficulty will be a relief for miners currently operating in the business. Fewer competitors means each unit of computing power has a better chance of earning Bitcoin rewards. This increases profit margins for more efficient miners and allows them to capture market share from exited miners.
Analysts say some high-cost miners have sold their Bitcoin reserves this year to finance day-to-day operations, reduce debt or focus on artificial intelligence projects. This selling activity has added further pressure to Bitcoin prices since the beginning of the year.
However, he said he believes the bad news regarding the latest adjustment has already subsided. When a weaker player exits a stage like this, the remaining miners usually become much more powerful and efficient.
JP Morgan said signs of a hashrate rebound are already being observed. If this trend continues, mining difficulty and production costs may increase again in the next update.
JP Morgan expects institutional investors to strengthen crypto investment
Despite recent challenges in mining, JPMorgan remains optimistic about the broader crypto market into 2026. In a separate report titled “Alternative Investment Outlook and Strategies,” the bank said it expects to see more inflow into digital assets next year, primarily from institutional investors rather than individual traders.
Analysts believe additional crypto regulation in the US could help encourage institutional investor participation. They pointed to legislation such as the Clarity Act as a factor that would create clearer rules and encourage more large investors to enter the market.
JP Morgan also reiterated its long-term price target for Bitcoin at $266,000. This estimate is based on a volatility-adjusted comparison to gold. JPMorgan argues that its price could rise significantly over time if negative sentiment fades and Bitcoin is once again seen as a strong hedge against extreme economic risks.
At the time of writing, Bitcoin was trading at around $65,660, down more than 1% in the past 24 hours, according to market data.
