Bitcoin is Worth Less Than the Cost To Mine It

The production-weighted cash cost to create one Bitcoin averaged around $4,060 globally in the fourth quarter, according to analysts with JPMorgan Chase & Co. With Bitcoin itself currently trading below $3,600, that doesn't look like such a good deal. However, there's a big spread around the average, meaning that there are clear winners and losers. From a report: Low-cost Chinese miners are able to pay much less -- the estimate is around $2,400 per Bitcoin -- by leveraging direct power purchasing agreements with electricity generators such as aluminum smelters looking to sell excess power generation, JPMorgan analysts led by Natasha Kaneva said in a wide-ranging Jan. 24 report about cryptocurrencies spearheaded by Joyce Chang. Electricity tends to be the biggest cost for miners, needed to run the high-powered computer rigs used to process data blocks to earn Bitcoin.

'The drop in Bitcoin prices from around $6,500 throughout much of October to below $4,000 now has increasingly pushed margins further and further negative for just about every region except low-cost Chinese miners,' the analysts said, offering the caveat that their cost estimates may be skewed to the high side due to spotty data and conservative efficiency assumptions. The cost figures exclude equipment.

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