Analysts at Morgan Stanley have warned that Bitcoin might lose its profitability completely if the digital currency doesn’t recover back to $8,600.
Bitcoin has been struggling to climb back up after dropping from a record high of $19,000 in December last year.
Analyst Charlie Chan and his team from Morgan Stanley estimate the break-even point should hit at least $8,600 if there’s to be any profit for miners of the cryptocurrency. This when the cost of electricity is assumed to be as low as $0.03 per kW/h.
Bitcoin Mining Capacity
Indeed, the series of events that may ultimately spell doom for Bitcoin was triggered by its string of poor performances, which spurred chip-making company TSMC (Taiwan Semiconductor Manufacturing) to lower this year’s revenue guidance from the initial 10 to 15 percent growth to 10 percent growth. According to Morgan Stanley, TSMC gets roughly 10 percent of its total revenue from Bitcoin mining.
Bitcoin mining is an integral part of the transaction process. Using supercomputers, miners follow a guideline provided by the network to build records of the transactions going on within the blockchain network in return for Bitcoin. This is a process that requires a lot of computing power and consequently raises the overall cost of mining since it consumes a lot of electricity.
Even if the Bitcoin price maintains its position in the second half of the year, Morgan Stanley analysts believe that based on their simulation, Bitcoin profits are going to drop rapidly over the next few months. They speculate that increases in mining capacity will contribute to the process’ difficulty in the long term.
The demand and price of mining hardware are also expected to drop further enough to affect the demand presented by TSMC.
The Future of Bitcoin
Morgan Stanley analysts, however, do not predict all doom for Bitcoin. Organizations that sell the specialized chips required to mine Bitcoin are expected to break even over two years even if Bitcoin trades at around $5,000.
Application-specific integrated circuit (ASIC) vendors have more wiggle room than large-scale mining groups should Bitcoin prices drop further.
However, Bitcoin retailers stand to suffer the most as Morgan Stanley estimates that they would need Bitcoin prices to rise to at least $10,200 if they were to break even over the next two years.
Bitcoin has been far from steady through the first quarter of 2018. Although, it has shown a bit of a positive streak for the past week, though little is certain about the future of what was formerly the world’s only cryptocurrency.
Whether this should be interpreted as a positive indicator of its future performances is a matter of speculation.