Morgan Stanley: As long as Bitcoin is below $8,600, mining is a losing business

According to foreign media reports, Morgan Stanley analysts said that if the price of Bitcoin cannot recover to $8,600 soon, Bitcoin miners will find it unprofitable to continue mining.

Bitcoin, which traded just above $8,200 Thursday, has been falling in the past few months since hitting a record high of $19,000 in mid-December, according to CoinDesk.

“Assuming very low electricity costs for mining ($0.03/kWh), we estimate the breakeven point for large mining pools to be $8,600,” Morgan Stanley equity analyst Charlie Chan and his team said in a Thursday note.

“We therefore believe that bitcoin mining hardware demand and prices will further decline, which will affect TSMC’s wafer demand,” they said.

TSMC on Thursday cut its 2018 revenue growth forecast to 10 percent from 10 percent to 15 percent, in part because of uncertainty about demand for cryptocurrency mining, which Morgan Stanley estimates currently generates 10 percent of the Asian chip giant's revenue.

Bitcoin mining uses high computing power to solve complex mathematical equations to prove the identity of an anonymous miner using this process to build a blockchain record of transactions. Miners who successfully complete the equation are then rewarded with Bitcoins.

There are now a large number of Bitcoin miners in China, who gather in "mining pools" to work together to improve efficiency. But as more miners get involved, the difficulty of the process increases.

Morgan Stanley analysts said: "We believe that the injection of new mining capacity will further increase mining difficulty in the second half of 2018. Even if the bitcoin price remains unchanged in the second half of the year, we believe mining profitability will decline rapidly."

Companies that sell specialized mining chips may have more wiggle room. Morgan Stanley’s model estimates that if the price of Bitcoin approaches $5,000, ASIC chip makers will also be unprofitable.