Bitcoin miners with low electricity costs and a sustainable energy mix are the only ones likely to survive in a progressively more competitive environment, according to a research report from JPMorgan (JPM) on Thursday. The report noted that electricity costs are the main factor in mining, and miners have been looking for cheaper and sustainable energy sources to protect their profitability.
Lower electricity costs should help contain the rise in the bitcoin production cost in the current phase of rising hashrate, said analysts led by Nikolaos Panigirtzoglou. The average price of electricity for bitcoin miners globally is about $0.05 per kilowatt hour (kWh), however, some large mining firms have been able to pay as little as $0.03/kWh.
The bank said that lower electricity costs help the large bitcoin miners keep bitcoin production costs down and “maintain their profitability even in the current highly competitive environment, where the hashrate has risen steeply making new record highs.” Miners with higher electricity costs have been facing losses due to falling bitcoin prices over the past year.
JPMorgan believes that over time the bitcoin mining industry will consolidate and become more competitive because only miners with lower production costs will be able to survive. Miners have also been trying to diversify their power mix with renewable sources in order to become more environmentally friendly.
Vulnerable miners, including Core Scientific (CORZQ), Argo Blockchain (ARB) and Iris Energy (IREN) have struggled to survive due to a “combination of falling bitcoin prices, rising debt servicing costs and rising electricity costs,” the analysts wrote.