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.


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John McAfee Defends Bitcoin From Donald Trump 'Please Sir, Get a Clue'

Francisco Memoria

Eccentric cybersecurity pioneer and 2020 Presidential Candidate John McAfee has responded to U.S. President Donald Trump’s comments on bitcoin, defending the cryptocurrency and those who use it.

As CryptoGlobe covered, Trump bashed bitcoin and Facebook’s cryptocurrency libra in a series of tweets this week, claiming that he isn’t a fan of bitcoin or other cryptos and that these aren’t meaning. The President added these are “highly volatile and based on thin air,” before claiming a lack of regulations only facilitates unlawful behavior.

Responding to Trump through a video on Twitter, McAfee argued that most disrupting technologies were adopted by criminals, but still greatly improved people’s lives. As an example, the cybersecurity pioneer used the telephone.

Per his words, the telephone’s invention “created a brand new America, with instant communications,” and also aided criminals as they then used the technology to coordinate criminal activities.

 McAfee then claimed the automobile’s invention aided criminals in bank robberies, as a getaway car helps them flee with stolen funds.

The internet itself, McAfee added, created criminal organizations that can coordinate on an international level, instantly. Cryptocurrencies, he argued, are no different and shouldn’t be as crime has been around for “50,000 years.”

Regulations, the cybersecurity pioneer added, are broken and ignored by the criminals they’re trying to stop, and as such “only hurt the people who are law-abiding.” He finished his video with “please sir, get a clue.”

In his tweets, Trump also argued there’s one “one real currency in the USA,” referring to the U.S. dollar. In response the cryptocurrency community pointed out bitcoin is “about personal responsibility and choice,” and thanked him for the free publicity.

Cryptocurrency Can’t Be Regulated: McAfee

In a follow-up video, McAfee noted that while regulations are well-intended, they only hurt the consumer. He also argued these don’t actually work and are mostly a large expense the government takes up.

As an example, McAfee pointed to the drug use in the U.S., claiming the country is the number one consumer of drugs despite having “the most stringent regulations and laws about drug use,” and the “largest force to prevent it on the planet.”

He concluded that government can’t stop people from doing what they want to in private, and as such cryptocurrencies cannot be regulated.

It’s worth noting McAfee is a well-known cryptocurrency bull, who late last month argued bitcoin will “break records” that’ll only be exceeded by altcoins. In May, he launched a “Bitcoin Play” app that lets users earn crypto while testing their knowledge.

Featured image via Gage Skidmore | Flickr | CC by 2.0