Bitcoin’s Production Cost is at US$13k! BTC at the Verge of a Free Fall

The Bitcoin production cost has significantly declined and is now affecting the broader cryptocurrency market

Bitcoin and several other cryptocurrencies slumped sharply in 2022 after a steep rise in 2021, a quite similar situation took place in 2018. Earlier, the market plummeted due to the emergence of several initial coin offerings, where investors poured money into crypto ventures that eventually ended up failing. But the current crypto crash is a result of several deteriorating macroeconomic factors including inflation, the FED's aggressive steps to reduce the effect of inflation, and the central banks' rampant hike in interest rates. The crypto market has been trading in close fashion to the stock market, which is making things even more difficult for investors. This sharp reversal in the functionalities of the decentralized market has caught individual and institutional investors off-guard. Currently, Bitcoin has given investors another reason to become wary. The cost to produce Bitcoin has fallen around US$13,000 from around US$20,000 at the beginning of June. Investment bank JPMorgan says that this phenomenon is excessively bad for the broader cryptocurrency market, and will further enhance the bearish market trends.

Bitcoin is a crypto asset that has made its mark in the financial and economic markets. Other altcoins were created with the hopes of mimicking the success of the BTC network. Now, after BTC become too expensive for some investors, they started piling their investments into other altcoins, hoping to find the next Bitcoin and generate similar profits from it. But the current crypto crash is making investors run for their lives! Besides the BTC declination, TerraUSD and UST, the algorithmic stablecoin, also lost their peg from the US dollar, which spoiled investors into selling off their investments. This sent shockwaves throughout the crypto industry but it also exposed several shortcomings that the industry had.

Why did Bitcoin's production cost fall?

A group of strategists in JPMorgan, led by Nikolaos Panigirtzoglou stated that the drop in Bitcoin's production cost was caused due to the recent decline in electricity use as interpreted by the Cambridge Bitcoin Electricity Consumption Index. Bitcoin's hash rate has also been fluctuating for the past few weeks but has not demonstrated any clear signs of a downtrend. If Bitcoin experiences a positive uptrend in its prices, there would be less selling pressure on miners to sell their BTC tokens, and also less sell-off pressure on investors who are trying to avoid further financial risks. But the drop in its production costs will quite negatively affect the overall Bitcoin price, and in turn, will not encourage investors to further trade BTC tokens.

Should you buy Bitcoin's dip?

After the recent turmoil in crypto assets, several crypto firms were exposed to being bankrupt. The massive crypto sell-off wiped out around US$2 trillion from the overall market cap since the all-time highs in 2021. Bitcoin plunged significantly and experienced its worst quarter in the last 11 years. Meanwhile, the plunging macroeconomic environment continues to remain unsupportive of digital assets. Inflation and impending recession fears continue to harm investors. Currently, economists and financial executives have warned crypto investors to stay away from digital assets. But smart investors and BTC whales continue to buy the dips, which in turn, is enhancing the Bitcoin community.