At current price levels, the Bitcoin (BTC), mining business is larger than ever. New data also shows how unlikely it is for a mass-miner sale to occur.
Popular Twitter account @venturefounder noted that the BTC/USD trading pair is about 20% higher than miners’ cost price at $42,000.
Miner capitulation behind “worst” BTC price dips
BTC remains attractive to miners despite falling $27,000 below its all-time highs. The hash rate, which is an estimate of total mining power, hit new highs this week.
Concerned that a new BTC price drop could force miners to sell, they received data detailing how much BTC/USD they should trade at in order to break even.
Venturefounder, Charles Edwards, CEO, Asset Manager Capriole, revealed that the current breakeven point is $34,000.
He added that “The worst Bitcoin dumps ever had were due miners capitulation” (December 2018, March 2020). When BTC fell below production costs it was at risk of miner capitulation.
“BTC was at high risk of miner capitulation at $30k per month in May.” Current production costs are $34k, 20% lower than the current price.
Screenshot: Annotated chart showing the cost of producing Bitcoins (screenshot). Source: @venturefounder/Twitter
Miners have no incentive to sell due to their future prospects and profitability.
Edwards also noted in a Medium post that miners are protected against spot price incursions at a lower production cost by paying transaction fees.
Another insight says that “Historically, the electricity cost to produce Bitcoins has represented a price floor for the Bitcoin market price.”
This year, mining shrugs off spot price movements
Cointelegraph reported that miners vote with their wallets when BTC consolidates below $50,000.
Related: The Bitcoin cycle is not over, and miners are still in it for long-term: Fidelity report
Instead of selling, miners have been accumulating BTC in greater numbers this month than they did during the highs.
This speaks to both a healthy balance sheet as well as a resolve over the future. Currently, fears about economic problems on the horizon do not affect the mining sector.
Chart of the Bitcoin hash rate. Source: Blockchain
According to well-known analysts, the worst-case scenario for Bitcoin is no lower than $30,000.