JPMorgan has caused a stir amongst miners, after estimating ’s ‘fair value’ at $2400. This assessment derives from the marginal cost of producing , but some disagree with Chinese miners’ production cost estimations.
The Price Of Dystopia
In the report, JPMorgan analysts claimed that the “average cash cost of a low-cost Chinese miner was around US$2,400 per ” in Q4 2018.
This, they suggested, is the break-even point; the marginal cost of producing one . With currently hovering around the $4000 mark, that represents a price drop of 40% before achieving ‘fair value’.
This actually seemed like progress from , when a JPMorgan analyst claimed only had value in a dystopian environment. Unless the suggestion is that we are already living in a dystopian environment?
The Fallacy Of Metrics
Anyway, that the design of means that the very concept of an average ‘marginal cost’ was flawed. Ben Gagnon, co-founder of hardware developer, LuTech explained that there could be no ‘average cost’ or ‘break-even point’.
With a finite supply of around 1800 per day, a miner can only get a bigger share of that relative to other miners. As Gagnon says:
…there will always be miners seeking to create blocks and get rewards so long as they can operate with power-efficient hardware at low electricity cost… When price falls, the cost of a will also fall, as miners with more expensive operations will be the one to exit the market first. This leaves room for more market share and profitability to lower-cost miners
Valuation Motivation
Perhaps JPMorgan are unhappy with that they hold 200 times more customer deposit value than the top five exchanges combined?
A price of $2400 would increase this to over 300 times the value, even if the exchanges holdings were spread evenly across all available . The fact that the majority of held by the exchanges are , would make this gap even wider.
And one wonders how JPMorgan would value its own JPM coin? Presumably centralised, it would not require , therefore the ‘marginal cost’ of production per coin would be…
Zero?
Do you agree with JPMorgan’s valuation of ? Share your thoughts below!
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Published at Thu, 21 Feb 2019 14:04:16 +0000
