JPMorgan Warns Bitcoin Hash Rate Grows More Sensitive to Price Moves

Quantitative analysts at JPMorgan Chase issued a warning on Bitcoin mining on June 18, Investing.com reported. The beta of mining difficulty to Bitcoin prices has grown to 0.62 over the past six months, reflecting that a higher share of miners are operating near their breakeven zone, making the aggregate hash rate more sensitive to Bitcoin prices, the analysts said. Hash rate is a key measure of Bitcoin mining difficulty, calculating the rate at which all computers on the network create hashes to process transactions and mine new blocks.

JPMorgan Analysts Report Increased Hash Rate Sensitivity to Bitcoin Prices

The beta of mining difficulty to Bitcoin prices has grown to 0.62 over the past six months, according to JPMorgan quantitative analysts. The hike reflects the idea that a higher share of miners are operating near their breakeven zone, making the aggregate hash rate more sensitive to Bitcoin prices, the analysts said. Mining margins are relatively tight and miners react more quickly to price changes. As per the report published in Investing.com, Bitcoin miners have been switching rigs on or off in response to even modest price movements. When Bitcoin's price falls below its production cost, higher-cost miners switch off their rigs, leading to a decline in the hash rate and difficulty level going down. JPMorgan quants expect higher hash rate responsiveness to Bitcoin prices to continue as long as Bitcoin trades below its production cost, which is currently estimated at $78,000. A higher frequency of large adjustments in mining difficulty will also continue, as per the analysts.

Bitcoin Trading Below Estimated Production Cost

As per Decibel, Bitcoin was exchanging hands at $64,525 at the time of writing. JPMorgan quants currently estimate Bitcoin's production cost at $78,000.

FAQ

What did JPMorgan quantitative analysts warn about Bitcoin mining on June 18?

JPMorgan quantitative analysts issued a warning that Bitcoin's hash rate and mining difficulty have become more responsive to price movements year-to-date. The beta of mining difficulty to Bitcoin prices has grown to 0.62 over the past six months, reflecting that a higher share of miners are operating near their breakeven zone.

Why are Bitcoin miners more sensitive to price changes according to JPMorgan?

According to JPMorgan analysts, mining margins are relatively tight and a higher share of miners are operating near their breakeven zone. This makes the aggregate hash rate more sensitive to Bitcoin prices. Miners have been switching rigs on or off in response to even modest price movements. When Bitcoin's price falls below its production cost, higher-cost miners switch off their rigs, leading to a decline in the hash rate.