On Thursday, April 19, bitcoin traded at a rate slightly exceeding the margin of $8,200, as per Coindesk data.
It is known that the price of each BTC unit plays a crucial role in the revenues of bitcoin miners. Recent analysis, conducted by Morgan Stanley experts, has shown that the margin that will make all the work of miners unprofitable is $8,600.
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Miners Might Stop Generating Bitcoin
Within the past few months, the king of all cryptos barely managed to step on the path of recovery after it plummeted from the point of $19,000 in mid-December. And if it keeps going down, it is likely that miners will stop creating new units as long as it will no longer be profitable for them, CNBC reports.
In a special note, the equity specialist Charlie Chan stated:
"We estimate the break-even point for big mining pools should be US$8,600, even if we assume a very low electricity cost (US$0.03 kW/h). Therefore, we think the Bitcoin mining hardware demand and price will decline further and affect TSMC's wafer demand."
Here are the break-even points for BTC production, according to Morgan Stanley Research:
- Hardware cost
- Retailer - $1,050
- Large-scale mining farm - $1,050
- ASIC vendor - $450
- Daily revenue at bitcoin price = US $7,000
- Retailer - $7.05
- Large-scale mining farm - $7.05
- ASIC vendor - $7.05
- Electricity cost (per kWh)
- Retailer - $0.05
- Large-scale mining farm - $0.05
- ASIC vendor - $0.03
- Daily profits
- Retailer - $5.40
- Large-scale mining farm - $6.06
- ASIC vendor - $6.06
- Snapshot payback period (days)
- Retailer - 194
- Large-scale mining farm - 173
- ASIC vendor - 74
- Two-year breakeven point
- Retailer – approximately $10,200
- Large-scale mining farm – approximately $8,600
- ASIC vendor – approximately $5,000
It is remarkable that Taiwan Semiconductor Manufacturing (or TSMC) descended its earning recommendation for this year to 10% growth on April 19. And it was based on the ambiguity in the cyber money creation demand.
Morgan Stanley assesses that around 10% of the titan Asian chip producer's earnings now rely on the digital assets mining demand.
As it is known, the production of bitcoins requires the use of a lot of computing power. Without it, the sophisticated math equation would not be solved. Therefore, bitcoins would not be mined as these equations help to prove that an anonymous miner used the process that the net agrees upon to generate the record of financial operations on the blockchain. Apparently, for the successful completing of the equation miners receive their award – also a unit of BTC.
Usually, if there are lots of miners, the “pools” are created (like in China). It helps to enhance the effectiveness of their work. However, the more miners join the process, the harder it becomes to handle everything.
Concerning the issue, the Morgan Stanley experts said:
"We think the injection of new mining capacity will further increase the mining difficulty in 2H18. Even if the Bitcoin price stays the same in 2H18, we believe mining profits would drop rapidly, according to our simulation."
