Bitcoin has dropped to a point in the unfavorable to produce, according to some estimates.
"Bitcoin is currently being traded on a break-even fee for bitcoin mining, at $ 8,038 based on the mining model developed by our team," Thomas Lee, Fundstrat said in a report on Thursday.
The Fundstrat model incorporates three factors, namely the cost of equipment, electricity and other overheads such as maintaining cooling facilities.
Cryptocurrency traded slightly lower, approaching $ 8,000 Thursday, according to the CoinDesk bitcoin price index, which tracks prices from four major global bourses. Earlier, bitcoin hit a low of $ 7,676.52, the lowest since Feb. 8, according to CoinDesk data.
Bitcoin is created through an energy-intensive "mining" process that uses high computational power to solve complex mathematical equations, proving that an anonymous miner uses an agreed-upon process of networking to build a blockchain transaction record. Then, miners get bitcoin as a reward for successfully completing the equation.
"In some cases, miners might just shut down the engine until the price goes back a bit," said Shone Anstey, co-founder and president of Blockchain Intelligence Group. "Keep in mind that some of them may lose money."
Currently, Bitcoin miners need specialized hardware whose price can reach several hundred to several thousand dollars, because it requires a lot of technology, and more efficient equipment.
In fact, the need to replace equipment accounts for more than half the cost of mining, according to the Fundstrat model, said Sam Doctor, head of quantitative data science. He assumes electricity costs of 6 cents per kilowatt hour and other costs to a break-even forecast of $ 8,038.
