A scathing story of $4060 production costs for a bitcoin which has ‘true value ‘of only $3,500 by an analyst group has upset the faithful in the crypto world lately. The group researching into the ‘value’ is backed by JP Morgan Chase, one of the Big 5 financial-banking institutions in the US.
Apparently, the costs incurred by the miners of these virtual assets were becoming increasingly high due to multiple causes. Traditionally nations such as China and Canada had taken to mining of the algorithm-based decentralized coins. However, these ‘mining farms’ were known to be guzzlers of electricity for computing and cooling down the devices.
Bitcoin is known to rely on volunteers to complete transactions. Computers using powerful processors will run through millions and millions of code lines and solve mathematical puzzles for every 10 minutes. When such a solution is found, a batch of transactions will be rewarded by means of the same bitcoin.
The process of running and purchasing the computer is known to be very expensive, and puzzles to solve become even more complicated and hard to solve.
There were some surprising revelations – Bitcoin networks were consuming power equivalent to the national power consumption of Ireland.
Chinese miners, at their pool-farms, are finding it tough to continue mining as the costs of power is highly expensive. Besides the government has officially banned the use of these cryptographic assets in the country and all transactions are handled at overseas exchanges such as Singapore or Malta-based Binance.
The downtrend of the pressures of mining, combined with the mighty-fall in bitcoin prices from fanciful $20,000 to a bitcoin has meant that transacting in bitcoin is not profitable anymore.
The analysis by the investment bank shows that “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 study concludes that the value of cryptocurrencies is so ‘dystopic’ since investors are disenchanted with “all major reserve assets (dollar, euro, yen, gold) and in the payments system,”
The investment banking firm view of Bitcoin use is evident in its CEO once famously remarks that “bitcoin is fraud” and said, “It’s worse than tulip bulbs. It won’t end well. Someone is going to get killed.”
However, the institution has been experimenting and is expected to play a very important role in the diversification of global equity besides bond portfolios.