Bitcoin Mining Only Profitable At Prices Above $8600, Says Morgan Stanley

Siamak Masnavi
  • Morgan Stanley analyst Charlie Chan believes that Bitcoin mining at prices below $8600 is unprofitable for everyone except ASIC vendors such as Bitfury, which can handle prices as low as $5000.
  • Bitfury CEO Valery Vavilov, however, says that Bitfury can be profitable even if Bitcoin price moved into the $2500-$3000 range.

A team of researchers at Morgan Stanley -- led by analyst Charlie Chan -- believes that Bitcoin miners can only be profitable if prices stay above $8,600. The recent rally in cryptocurrencies has resulted in Bitcoin currently trading at around $8,520, according to data from CryptoCompare.

We estimate the break-even point for big mining pools should be US$8,600, even if we assume a very low electricity cost (US$0.03 kW/h)... Therefore, we think the Bitcoin mining hardware demand and price will decline further and affect TSMC's wafer demand.

Charlie Chan, Morgan Stanley Analyst

Morgan Stanley’s research estimates show that given a 2 year breakeven point, even for large mining pools, the price has to stay above the $8,600 mark. The number drops to $5,000 in the case of large scale mining by ASIC vendors such as Bitmain and Bitfury.

However, not everyone agrees with these figures. One of the first to object to Morgan Stanley's estimated figures on Twitter was Anthony Pompliano, managing partner of blockchain/crypto venture capital firm Full Tilt Capital, which was acquired last month by hedge fund Morgan Greek Capital Management:

Morgan Stanley's report came to our attention yesterday thanks to CNBC’s coverage. Interestingly, a day earlier, on April 18, 2018, Bloomberg reported a roughly similar threshold price of $8,000 for Bitcoin mining, and claimed that if the price falls below that level again, there would be an even quicker consolidation to industrial-scale mining, which would leave Bitcoin vulnerable and at the mercy of a few major players such as Bitfury.

With mining power -- so-called hashrate -- aggregated in fewer hands, that also increases the risk that a few miners could band together to execute a so-called 51-percent attack -- where they would control enough of the transactions to dictate changes in the development of the blockchain to suit their preferences.


Finally, it is worth listening to what the major ASIC vendors are saying about all of this. Earlier this month, on the Unchained podcast, during an interview with Laura Shin, the founder and CEO of Bitfury, Valery Vavilov, estimated that Bitfury could be profitable even if the price of Bitcoin went down to somewhere in the $2,500-$3,000 range.


Illinois Lottery Winner Invests Half of His $500,000 Payout Into Bitcoin

Michael LaVere
  • Reddit user Joxnlol posed with an Illinois state lottery ticket check worth $500,000.
  • The user claims to have put half his payout into bitcoin, with the intention to hold the investment for a year. 

An Illinois state lottery winner has announced that he invested half of his $500,000 payout into bitcoin

According to a Reddit post published Nov. 5, user Joxnlol posted an image of himself holding an Illinois state lottery check worth $500,000. The accompanying title read, “Did this. Then put half into BTC in May. Remind me in 8 months if I ****ed up.”

The check is dated to April 19, 2019, when the price of bitcoin was trading for $5,200. Since that time, bitcoin has appreciated 78% to its current price around $9,300, making for a substantial return on investment. 

Joxnlol followed up the image with a post explaining his intention to keep the investment in bitcoin for at least a year, 

I don't intend to touch any of it for at least another year. I set aside money for emergencies, I set aside money for myself, and I set aside money for tattoos. The only major purchases I've done is [...] bought a new car for myself and put a downpayment on a house.

While Joxnlol’s winning ticket was worth $500,000, his end-payout was $357,000 after taxes, meaning he likely invested around $178K into bitcoin. 

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