JPMorgan has put a numeric indicator on this Bitcoin cycle, telling clients that the market’s “pain threshold” is currently around $94,000. This level is seen by the bank as both a lower bound for the mining economy and an answer to the question of how low spot prices can realistically trade before fundamentals start to crumble. As reported by The Block, a team of analysts led by Nikolaos Panigirtzoglou argues that “downside for Bitcoin from current levels appears to be ‘very limited'” as they “see Bitcoin’s support price at around $94,000.”
How far will Bitcoin fall?
At the heart of this debate is JPMorgan’s latest estimate of Bitcoin’s production costs. In a recent note cited by The Block, analysts say that the all-in cost to mine one Bitcoin has risen from about $92,000 to about $94,000 as network difficulties have skyrocketed in recent months. The spike in difficulty requires miners to deploy more hashing power per block, increasing the marginal cost per coin. Reiterating the framework it has used in previous cycles, the team emphasized that “Bitcoin’s production cost has empirically served as a floor for Bitcoin,” so higher costs will mechanically raise the support zone.
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JPMorgan figures show the ratio of spot prices to production costs is currently just above 1.0, near the lower end of its historical range. This means miners have low operating margins and limited scope to expand well below modeled costs without causing stress in the mining sector. From that perspective, the bank’s $94,000 level does not present itself as a precise line in the sand, but rather as a statistically grounded area where downside risk is compressed as there is less incentive to continue selling on miners’ weaknesses.
The same note maintains a more optimistic medium-term scenario. JPMorgan reiterates that the 6-12-month upside for Bitcoin, derived from volatility-adjusted comparisons with gold, is around $170,000. As summarized by The Block, analysts estimate that Bitcoin currently “consumes” about 1.8 times more risk capital than gold, but still has a smaller market capitalization, at about $2.1 trillion, compared to about $6.2 trillion for private sector gold investment through ETFs, bars, and coins. They calculate that on a volatility-adjusted basis, Bitcoin’s market capitalization would need to rise by about 67% to close this gap, “suggesting a theoretical Bitcoin price near $170,000.”
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The Block also highlights how this view fits with JPMorgan’s recent call history. The team argued in a note last month that Bitcoin appears to be significantly undervalued relative to gold, suggesting upside potential towards around $165,000 by year-end. Panigirtzoglou then adjusted his timing and reframed the $170,000 as a six-to-12-month scenario rather than a short-term target, telling The Block that given recent liquidations and very weak sentiment, “it’s not realistic to expect this price target by the end of the year.” The note further reminds us of our August prediction that it would be around $126,000 by the end of the year. Bitcoin then hit an all-time high of over $126,200 on October 6th, but a record liquidation event on October 10th suddenly reset the position.
These early studies are consistent with a broader framework that JPMorgan has publicly stated. In a separate analysis earlier this month, also led by Panigirtzoglou and reported by MarketWatch, the bank argued that deleveraging since October has made Bitcoin “very cheap relative to gold” on a volatility-adjusted basis, concluding that “this mechanical exercise therefore suggests significant upside for Bitcoin over the next 6-12 months,” with fair value once again centered around $170,000.
What this new note adds to, as relayed by The Block, is a more obvious downward anchor. As long as network difficulty and energy input assumptions keep the estimated cost of production around $94,000, JPMorgan sees that level as an effective lower bound for how far Bitcoin can fall before the mining economy forces the market to meet its constraints.
At the time of writing, BTC was trading at $97,505.
Featured image created with DALL.E, chart on TradingView.com
