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.
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 claims that Bitcoin miners are losing money at any price less than $8,600. This is laughably wrong - they're off by at least $5,000 if not more.— Pomp 🌪 (@APompliano) April 19, 2018
The incumbents are in trouble. They can't even accurately measure the business metrics of this new threat. 😂
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.