Bad news for bitcoin miners: It’s no longer profitable to create the cryptocurrency, by one estimate

Bitcoin has dropped to a point where it’s not that profitable to produce, according to some estimates.

“Bitcoin currently trades essentially at the break-even cost of mining a bitcoin, currently at $8,038 based on a mining model developed by our data science team,” Fundstrat’s Thomas Lee said in a report Thursday.

Fundstrat’s model incorporates three factors: the cost of equipment, electricity and other overhead such as maintaining cooling facilities.

The cryptocurrency traded mildly lower, near $8,000, Thursday, according to CoinDesk’s bitcoin price index, which tracks prices from four major global exchanges. Earlier, bitcoin hit a low of $7,676.52, its lowest since Feb. 8, according to CoinDesk data.

Bitcoin is created through an energy-intensive “mining” process that uses high computing power to solve a complex mathematical equation, proving an anonymous miner used the process the network agreed upon to build the blockchain record of transactions. Miners then get bitcoin in reward for successfully completing the equation.

If the cost to create bitcoin exceeds the reward, miners theoretically lose incentive.

“In some cases the miners may simply turn off the machines until the price comes back a bit,” said Shone Anstey, co-founder and president of Blockchain Intelligence Group. “It’s got to be getting to the point that some of them may be losing money.”

Bitcoin mining today requires custom hardware that can cost several hundred to a few thousand dollars. And like much technology, more efficient equipment is always coming out.

In fact, the need to regularly replace equipment accounts for more than half the cost of mining, according to Fundstrat’s model, said Sam Doctor, head of quantitative data science. He assumes electricity costs of 6 cents per kilowatt hour and other expenses to arrive at the break-even estimate of $8,038…

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