{"id":418354,"date":"2020-03-16T17:00:59","date_gmt":"2020-03-16T17:00:59","guid":{"rendered":"https:\/\/wncen.com\/?p=418354"},"modified":"2024-06-11T13:46:27","modified_gmt":"2024-06-11T13:46:27","slug":"bitcoin-trades-below-production-cost-miners-are-better-off-buying","status":"publish","type":"post","link":"https:\/\/wncen.com\/news\/bitcoin-trades-below-production-cost-miners-are-better-off-buying\/","title":{"rendered":"Bitcoin Trades Below Production Cost, Miners Are Better Off Buying"},"content":{"rendered":"<p class=\"p1\"><span class=\"s1\"><a href=\"\/tag\/bitcoin\" rel=\"nofollow\">Bitcoin<\/a> recently experienced a historic single-day drop, taking the cryptocurrency from $7,500 to under $4,000 in less than 48 hours.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">The first-ever cryptocurrency is now trading below the cost required by miners to produce each Bitcoin. Now that miners are better off buying BTC outright, what could this mean for the strength of the underlying network, the asset\u2019s future, <a href=\"https:\/\/wncen.com\/2020\/02\/19\/bitcoin-halving-overhyped-previous-cycle-led-to-another-6-month-crypto-winter\/\">the upcoming halving<\/a>, and the price of Bitcoin?<\/span><\/p>\n<h2>Bitcoin Falls Under Cost of Production, Miners May As Well Buy BTC Instead<\/h2>\n<p class=\"p1\"><span class=\"s1\"><a href=\"\/tag\/bitcoin\" rel=\"nofollow\">Bitcoin<\/a> may be in its most dangerous position yet, following one of the asset\u2019s worst 24-hour drop in its short, ten-year history.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">As the stock market melts down, and <a href=\"https:\/\/www.nytimes.com\/2020\/03\/16\/world\/coronavirus-news.html\" target=\"_blank\" rel=\"noopener noreferrer nofollow\">the coronavirus shuts down all human activity<\/a>, Bitcoin and the rest of the cryptocurrency market also tanked as the globe entered a state of lockdown and panic.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">The drop took Bitcoin from $10,500 just a month ago to $7,500, then to below $4,000 just days ago.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">The crypto asset is trading around $5,000 at the time of this writing, which is still well below the cost to produce each BTC.<\/span><\/p>\n<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-large wp-image-418361\" src=\"https:\/\/wncen.com\/wp-content\/uploads\/2020\/03\/Screen-Shot-2020-03-16-at-11.58.43-AM.png?resize=860%2C534\" alt=\"bitcoin mining cost of production\" width=\"860\" height=\"534\"><\/p>\n<p class=\"p1\"><span class=\"s1\">The underlying <a href=\"\/tag\/bitcoin\" rel=\"nofollow\">Bitcoin<\/a> blockchain protocol is powered by a process called proof of work, which involves miners using computer processing power to make complex calculations to validate each new block.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">The reward for doing this that miners receive is BTC. But there\u2019s an energy cost associated with operating miners that must be considered. <\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">And if that cost is higher than the value of Bitcoin, miners would be better off buying the asset rather than running rigs and continuing to power the network.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">That\u2019s exactly what has happened now that Bitcoin has fallen to such low prices. It\u2019s at the point where even on the cheapest end of producing each BTC, miners would still struggle to be profitable at current prices and are better off buying outright.<\/span><\/p>\n<h2>Post-Halving Hell: Miner Metrics Suggest The Worst Is Yet To Come<\/h2>\n<p class=\"p1\"><span class=\"s1\">According to the current cost of production, on the highest end, it costs around $8,000, and on the low end, it costs roughly $4,800.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">That implies that most miners are currently <a href=\"https:\/\/blokforge.com\/\" target=\"_blank\" rel=\"noopener noreferrer nofollow\">running their machines<\/a> at a loss.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">The cost of production is also about to rise significantly within the next two months. While the halving was expected to be a bullish event, causing the supply and demand to be thrown off in favor of skyrocketing prices, it very well could end up being bearish this time around.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">The <a href=\"https:\/\/wncen.com\/2020\/01\/13\/only-120-days-remain-until-bitcoins-halving-heres-what-to-expect\/\">halving cuts the reward miners receive in half<\/a>. This means that in just two months when Bitcoin\u2019s halving rolls around, the cost of production will double overnight, taking the aforementioned prices to $16,000 on the high end and $9,600 on the lower end.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">Mining difficulty will decrease as miners shut off their rigs, and eventually, the cost to produce each BTC will lower to compensate, but the initial, sudden change in reward could have unknown implications.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">Another metric that follows mining activity, are Bitcoin\u2019s hash ribbons. In the past, these hash ribbons have signaled when miners are about to capitulate, and following this is normally a huge buy signal for Bitcoin.<\/span><\/p>\n<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-large wp-image-418362\" src=\"https:\/\/wncen.com\/wp-content\/uploads\/2020\/03\/Screen-Shot-2020-03-16-at-11.58.11-AM.png?resize=860%2C534\" alt=\"bitcoin cost of production mining btc\" width=\"860\" height=\"534\"><\/p>\n<p class=\"p1\"><span class=\"s1\">Miners capitulated in late 2018 and again in late 2019. The hash ribbons are currently curling downward and with the cost of production so low, miners could capitulate again, causing yet another massive selloff.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">The only positive amidst the negative outlook related to Bitcoin mining is that after the destruction ends, a <a href=\"https:\/\/wncen.com\/2019\/12\/27\/key-bitcoin-signal-preceded-330-rally-14000-flashes-again\/\">buy signal usually takes Bitcoin to a new all-time high<\/a>.<\/span><\/p>\n<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-large wp-image-418360\" src=\"https:\/\/wncen.com\/wp-content\/uploads\/2020\/03\/Screen-Shot-2020-03-16-at-11.46.11-AM.png?resize=860%2C369\" alt=\"bitcoin mining hash ribbons halving capitulation\" width=\"860\" height=\"369\"><\/p>\n<p class=\"p1\"><span class=\"s1\">During past <a href=\"\/tag\/bitcoin\" rel=\"nofollow\">Bitcoin<\/a> cycles, the hash ribbons had three major phases of capitulation before the new bull run triggered. Bitcoin has had two, and the next major miner capitulation could be the final shakeout before the next bull market finally kicks off.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Bitcoin recently experienced a historic single-day drop, taking the cryptocurrency from $7,500 to under $4,000 in less than 48 hours. The first-ever cryptocurrency is now trading below the cost required by miners to produce each Bitcoin. Now that miners are better off buying BTC outright, what could this mean for the strength of the underlying network, the asset\u2019s future, the upcoming halving, and the price of Bitcoin? Bitcoin Falls Under Cost of Production, Miners May As Well Buy BTC Instead Bitcoin may be in its most dangerous position yet, following one of the asset\u2019s worst 24-hour drop in its short, ten-year history. As the stock market melts down, and the coronavirus shuts down all human activity, Bitcoin and the rest of the cryptocurrency market also tanked as the globe entered a state of lockdown and panic. The drop took Bitcoin from $10,500 just a month ago to $7,500, then to below $4,000 just days ago. The crypto asset is trading around $5,000 at the time of this writing, which is still well below the cost to produce each BTC. The underlying Bitcoin blockchain protocol is powered by a process called proof of work, which involves miners using computer processing power to make complex calculations to validate each new block. The reward for doing this that miners receive is BTC. But there\u2019s an energy cost associated with operating miners that must be considered. And if that cost is higher than the value of Bitcoin, miners would be better off buying the asset rather than running rigs and continuing to power the network. That\u2019s exactly what has happened now that Bitcoin has fallen to such low prices. It\u2019s at the point where even on the cheapest end of producing each BTC, miners would still struggle to be profitable at current prices and are better off buying outright. Post-Halving Hell: Miner Metrics Suggest The Worst Is Yet To Come According to the current cost of production, on the highest end, it costs around $8,000, and on the low end, it costs roughly $4,800. That implies that most miners are currently running their machines at a loss. The cost of production is also about to rise significantly within the next two months. While the halving was expected to be a bullish event, causing the supply and demand to be thrown off in favor of skyrocketing prices, it very well could end up being bearish this time around. The halving cuts the reward miners receive in half. This means that in just two months when Bitcoin\u2019s halving rolls around, the cost of production will double overnight, taking the aforementioned prices to $16,000 on the high end and $9,600 on the lower end. Mining difficulty will decrease as miners shut off their rigs, and eventually, the cost to produce each BTC will lower to compensate, but the initial, sudden change in reward could have unknown implications. Another metric that follows mining activity, are Bitcoin\u2019s hash ribbons. In the past, these hash ribbons have signaled when miners are about to capitulate, and following this is normally a huge buy signal for Bitcoin. Miners capitulated in late 2018 and again in late 2019. The hash ribbons are currently curling downward and with the cost of production so low, miners could capitulate again, causing yet another massive selloff. The only positive amidst the negative outlook related to Bitcoin mining is that after the destruction ends, a buy signal usually takes Bitcoin to a new all-time high. During past Bitcoin cycles, the hash ribbons had three major phases of capitulation before the new bull run triggered. Bitcoin has had two, and the next major miner capitulation could be the final shakeout before the next bull market finally kicks off.<\/p>\n","protected":false},"author":517,"featured_media":418363,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[5651,3],"tags":[428,6664,1558,8080,2990],"class_list":["post-418354","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-bitcoin","category-news","tag-bitcoin","tag-crypto","tag-cryptocurrency","tag-halving","tag-mining"],"acf":[],"yoast_head":"\n<title>Bitcoin Trades Below Production Cost, Miners Are Better Off Buying<\/title>\n<meta name=\"description\" content=\"Bitcoin recently experienced a historic single-day drop, taking the cryptocurrency from $7,500 to under $4,000 in less than 48 hours. 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As the Head of Research at NewsBTC, Tony leads a team dedicated to providing cutting-edge insights and forecasts, helping both novice and experienced traders navigate the complexities of the crypto market. A seasoned Chartered Market Technician, Tony's prowess in identifying and capitalizing on market patterns is unmatched. His academic and professional journey in market analysis has firmly established him as a leading authority in technical trading strategies. Tony\u2019s approach is heavily influenced by the principles of Elliott Wave Theory, a method known for its rigorous assessment of investor psychology and price movements. Beyond his role at NewsBTC, Tony is the visionary founder of CoinChartist.io, an educational platform aimed at demystifying the nuances of cryptocurrency trading. CoinChartist.io serves as a valuable resource for traders seeking to enhance their technical analysis skills. The platform offers a range of learning tools and resources designed to empower traders with the knowledge to make informed trading decisions. In addition to his educational initiatives, Tony is a prolific author and a dominant voice in the crypto community. He writes the CoinChartist VIP newsletter, a weekly dispatch that has become a staple among crypto enthusiasts, revered for its insightful analysis and actionable trading advice. This newsletter has consistently ranked as a best-seller on SubStack, boasting thousands of subscribers who rely on Tony\u2019s expertise to guide their trading strategies. Tony is also celebrated for his literary contributions to the field. He is the author of the highest-rated Crypto Trading Journal on Amazon.com, a testament to his ability to communicate complex trading concepts in an accessible manner. This journal is widely regarded as an essential tool for traders aiming to track their progress and refine their strategies. Before his ascent in the financial analysis world, Tony honed his skills in journalism. His background in this field has endowed him with a unique ability to present intricate market dynamics in a clear and compelling manner, making his insights highly sought after by a broad audience that ranges from casual readers to professional traders. His professional affiliations underscore his commitment to excellence and continuous learning. As a partner of Elliott Wave International and TradingView, Tony collaborates with other leading experts to enhance his knowledge and skills. His active membership in the CMT Association further aligns him with the highest standards of industry practices and ethics. Tony\u2019s nickname, \\\"The Bull,\\\" aptly reflects his aggressive and optimistic outlook on the cryptocurrency markets. His forecasts often anticipate significant upturns, earning him a reputation for bullish predictions that have frequently led to lucrative outcomes for those who follow his advice. In summary, Tony \\\"The Bull\\\" Severino, CMT, is more than just a technical analyst; he is a mentor, educator, and innovator whose influence in the cryptocurrency space continues to grow. 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