It seems the most important digital currency has dropped to a point where it’s not that profitable to produce them. “Bitcoin currently trades essentially at the break-even cost of mining a bitcoin,” Fundstrat’s Thomas Lee said yesterday. Fundstrat’s model incorporates three factors: the cost of equipment, electricity and other overhead such as maintaining cooling facilities.
“In some cases, the miners may simply turn off the machines until the price comes back a bit,” said Shone Anstey, co-founder and president of Blockchain Intelligence Group.
Bitcoin is created through an energy-intensive “mining” process that uses high computing power to solve a complex mathematical equation, proving an anonymous miner used the process the network agreed upon to build the blockchain record of transactions. Miners then get bitcoin in reward for successfully completing the equation.
If the cost and the effort to create bitcoin exceeds the reward, miners lose incentive. “It’s got to be getting to the point that some of them may be losing money,” said Shone Anstey, co-founder and president of Blockchain Intelligence Group.
Bitcoin mining requires hardware that can cost a few thousand dollars.
