Is Bitcoin expensive now? Mining cost analysis

As the Bitcoin halving date in May approaches, discussions about the halving have become more and more frequent in various media. The most heatedly discussed topics about the halving are the price of Bitcoin after the halving and the cost of Bitcoin.

There are many factors that affect the price of Bitcoin after halving, which is difficult to estimate accurately, but there are far fewer factors that affect the cost of Bitcoin after halving, so the estimate is more accurate.

The cost of Bitcoin mining mainly includes the one-time investment in mining machines and the monthly ongoing maintenance fees and electricity costs required for mining.

In terms of mining machines, China's mining machine output accounts for more than 90% of the world's total, so the production and delivery of Chinese mining machines will directly affect the price of mining machines.

Due to the impact of the current epidemic, the resumption of work of all domestic companies is delayed, including mining machine manufacturers. Mining machine manufacturers Bitmain, Canaan, and Shenma have all issued announcements, announcing the postponement of the production, delivery, and after-sales of mining machines.

For example, Shenma Mining Machine Co., Ltd. issued an announcement on January 29 that the holiday will be extended to February 9, and its production, delivery, after-sales delivery and repair arrangements will be postponed.

According to the official website of Bitmain, the leader in mining machines, popular mining machines such as Ant T17 and S17 are all sold out.

Not only has the production of mining machines been postponed across the board, but the shipment of mining machines will also be severely affected by restrictions on traffic and transportation. Therefore, it is very likely that even after the mining machine manufacturers resume production and shipment, the mining machines will not be able to be shipped smoothly.

Although the sale of mining machines has been affected by the epidemic, the market seems to have brought a glimmer of hope to mining operators. The price of Bitcoin has continued to rise recently. As of the time of writing, the price of Bitcoin has exceeded US$9,800, an increase of more than 36% from the beginning of the year.

Therefore, if the price of Bitcoin does not fall sharply in the future, mining operators will most likely continue to maintain a strong demand for mining machines, and the price of mining machines will undoubtedly rise. The rise in the price of mining machines will inevitably lead to an increase in costs.

As for electricity prices and mining machine operation and maintenance costs, Sichuan will usher in the flood season in April. In the past, many mining machines would be transferred from Inner Mongolia, Xinjiang and other places to hydropower mines in Sichuan.

If the epidemic continues to develop and cannot be reversed, these mining machines will not be able to migrate smoothly or their migration will be delayed, which will lead to higher electricity and operating costs.

Therefore, the epidemic is likely to simultaneously push up the cost of mining machines, electricity and operating costs, leading to an overall increase in the cost of Bitcoin mining. How will this affect the price of Bitcoin after the halving?

Based on the current mining situation (before the halving), the reward for each Bitcoin block is 25 Bitcoins, and the mining cost is $6,000 to $7,000. Assuming that the current cost remains unchanged after the halving, and the reward for each Bitcoin block becomes 12.5 Bitcoins after the halving, the cost will also rise to $12,000 to $14,000.

If we also take into account the overall increase in costs caused by the epidemic, the cost of Bitcoin mining after the halving is very likely to reach US$14,000 to US$16,000, or even higher.

Therefore, the current price of Bitcoin at $9,800 is lower than the cost price after the halving. For investors, the last two to three months before the halving will be a rare opportunity for us to buy Bitcoin at a price lower than the cost price.

Today's Fear & Greed Index (FGI) is 56

Compared with yesterday's 56, the greed level remains unchanged. The FGI index is inversely proportional to the market state, with 0 meaning "extreme fear" and 100 meaning "extreme greed."

Global Blockchain Index (GBI) 11119.94

The GBI index reflects the macro trend of the blockchain asset market. The peak index of the last bull market was 22570. The better the market conditions, the higher the index.

<<: Mining Report (February 10) BTC returns to $10,000 and ranks first in the hashrate of F2Pool

>>: As the halving approaches and the “black swan” suddenly attacks and faces numerous challenges, how can the mining industry break through?

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