Bitcoin Price Holds Steady, May Fall Further

Cryptocurrency markets continued their free fall for most of yesterday, dropping to as low as $318.1 billion at 21.57 UTC before recovering this morning. At 15:22 UTC today, they were worth $336.1 billion.

The price of a single bitcoin rose slightly from 24 hours ago. At 15:47 UTC, the cryptocurrency was changing hands at $8465.42, an increase of 2.52% from the same time yesterday. It might fall further, according to Thomas Lee of Fundstrat Advisors. In a note out yesterday, he stated that a breach of the $8370 support level means that bitcoin could fall all the way down to $5873 before staging a recovery.

Along with Litecoin, bitcoin registered the biggest price gains among the top 10 most-valuable cryptocurrencies. Others mostly moved sideways or remain unchanged.

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Expectations of a further crash in prices may convince some investors to sell. But noted Silicon Valley investor Peter Thiel is not one of them. “I would be long bitcoin and neutral to skeptical of just about everything else at this point with few possible exceptions,” he told audiences at the Economic Club of New York. Thiel is skeptical of the hoopla surrounding blockchain, bitcoin’s underlying technology. Instead his bet on bitcoin rests on the coin’s evolution into a store of value. “There will be one online equivalent to gold, and the one you’d bet on would be the biggest,” he said. Thiel has invested between $15 million to $20 million in bitcoin.

Bitcoin Mining May Have Become Unprofitable

But bitcoin miners may disagree with Thiel’s assessment of its value due to their shrinking profit margins. Thomas Lee’s report yesterday also mentioned that bitcoin trades at a mining break-even cost of $8,038. (Note: Bitcoin dipped to prices below $8,000 yesterday evening). Adding to miner troubles are low transaction fees, which constitute the other source of income for them, on bitcoin’s network. The estimate by Fundstrat took into account the cost of replacing mining machines, which cost between $800 to $1,000. According to the firm, mining equipment replacement accounts for half of overall costs. Electricity costs, which account for 90% of overall total, were assumed to be 6 cents per kilowatts per hour.

An earlier estimate by Bloomberg New Energy Finance (BNEF) put the break-even cost for miners at $6,925 under “any electricity regime”. Discounted rates of electricity bring that rate down further to $3,900. Shone Anstey, co-founder and president of Blockchain Intelligence Group, told CNBC that miners may turn off the machines to ride out the swoon in bitcoin. “It’s got to be getting to the point that some of them may be losing money,” she said.