A report released by Fundstrat could indicate some bad news for Bitcoin miners. In it, Thomas Lee says that the recent drop in Bitcoin’s value has meant that it is no longer profitable to produce.

The report states:

“Bitcoin currently trades essentially at the break-even cost of mining a bitcoin, currently at $8,038 based on a mining model developed by our data science team.”

The report uses three factors to calculate the cost of mining one BTC. These are the cost of equipment, electricity and other overheads such as hardware maintenance. The process of mining Bitcoin is extremely energy intensive, with the need to regularly replace hardware accounting for more than half the cost of mining.

The report is based on electricity costs being 6 cents per kilowatt hour. Adding this to other costs put the break-even point at $8,038.

Falling earnings

According to CryptoCompare, miner’s earnings have roughly halved from December, primarily due to an increased interest in mining BTC. Transactions rates, another important source of revenue for miners, has also fallen below 50 cents from previous highs of $34 in late December according to bitinfocharts.

According to Fundstrat, miners are likely to stop their operations if the price continues to sink to around $4,000 or below. CNBC reports that a drop in price is not likely to deter Chinese miners, as mining allows them to send money overseas and circumvent the government’s capital. Chinese miners also have access to cheap electricity produced by hydropower.

According to recent research by Elite Fixtures, which looked at the cost of BTC mining in 115 countries, South Korea is the most expensive country to produce a single bitcoin in. The price to mine a single BTC was put at $26,170, way above the $531 it takes in Venezuela.

Interested in hearing leading global brands discuss subjects like this in person? Find out more at the Blockchain Expo World Series, Global, Europe and North America.