Bitcoin is priced above $ 20,000 per coin – a shock to most new and long-term holders of cryptocurrencies. The sell-off has pushed cryptocurrency back to its production costs, which have worked as low in the past.
In this article we will take a closer look at the cost and price action of each BTC production. We’ll examine why rare digital resources could most likely find a bottom at such a level.
Bitcoin production costs fall, aligning with the former ATH retest
Bitcoin is like no other asset before it, and from its inception an entire industry has been created hoping to emulate the success of its network. Investors pile up on altcoins in hopes of the next bitcoin and profit.
Cryptocurrency relies on an energy-intensive proof-of-work process to create new coins. Mining is not cheap, otherwise everyone will do it. In fact, according to the Production Cost Indicator designed by Bitcoin expert Charles Edwards, at the low end it costs about $ 20,260 per BTC.
Related Reading | Coinbase sees bitcoin makers as a risk to the business, which is why here
It doesn’t take a mathematician with Satoshi’s skill to know that it is only a few hundred dollars away from the current price. Interestingly, sales volume falls directly on production costs. Looking back, the notable bottoms of December 2018 and March 2020 both touched lower boundaries.
The upper end of the metric is about $ 33,766, which once violated could be a sign that the bad side is over. Like Black Triders, re-testing it is even more bullish.
BTC Production Cost Indicator could call the bottom | Source: BTCUSD on TradingView.com
How Satoshi called Bottom 12 years ago
Given the brutal sell-off and the background of Bitcoin’s most bearish macro environment, it may seem hard to believe or be true. But there is a reason for such base-building behavior in scarce resources.
Rare resources such as commodities form the basis and bottom of production costs. Even Satoshi discussed it in the past, until 2010. The mysterious founder is quoted as saying that “the price of any product is attracted to the cost of production. If the price is below the cost then the production decreases. If the price is above the cost then more can be produced and sold.
Related Reading | Why Bitcoin doesn’t need musk, seller or anyone else
What Satoshi describes is the revenue model that BTC miners follow. They make new coins at as profitable a rate as possible and sell them because the price deviates more than the cost of production. Returning to such levels often clears the market for less efficient activities, leaving only the most deserving.
BTC miners are capitulating | Source: BTCUSD on TradingView.com
Is this what is happening with Bitcoin now? And what happens when only the strong survive? Could Satoshi really have made the following predictions so early?
Follow টুইটTonySpilotroBTC on Twitter Or join TonyTradesBTC Telegram Exclusive daily for teaching market insights and technical analysis. Please note: Content should not be considered as educational and investment advice.
Featured image from iStockPhoto, Charts from TradingView.com