Bitcoin is down big today, but it doesn’t appear that’s going to stop miners from continuing their current operations. Data shows large mining pools can take an additional 20% hit in the BTC price before they begin to capitulate and start exiting the market.
The “true cost of mining bitcoin” is a term that refers to the amount of money miners will lose when they stop mining because they can’t make any profit. A recent study suggests that if Bitcoin miners take a 20% hit in price, they will not capitulate and continue mining.
At the present price levels, the Bitcoin (BTC) mining industry is larger than ever, and new data highlights how improbable a large-scale miner sell-off actually is.
Even at $42,000, the BTC/USD trading pair is around 20 percent over miners’ cost price, as highlighted by well-known Twitter account @venturefounder on Jan. 14.
“Worst” Bitcoin price drops are a result of miner surrender.
Despite being $27,000 behind all-time highs, miners are more interested than ever in BTC. This week, hash rate—a measure of the amount of processing power devoted to mining—reached new records.
Data on the price at which BTC/USD should trade for miners to break even provided further reassurances for those worried that a new BTC price decline may force them to sell.
The breakeven mark is presently $34,000, according to venturefounder, who cited Charles Edwards, CEO of asset management Capriole, and his BTC manufacturing cost indication.
“Bitcoin is at danger for miner capitulation,” he said in comments. “The worst dumps Bitcoin has had were due to miners capitulation (December 2018, March 2020), when BTC went below production costs.
“BTC was at risk for miner capitulation at $30k in May. The current production cost is $34k, 20% below current price.”Bitcoin production cost annotated chart (screenshot). Source: @venturefounder/Twitter
Due to their operations’ profitability and favorable outlook for the future, miners have no motive to sell.
Edwards added that transaction fees given to miners provide them with further protection from spot price breaches below production cost in a Medium article on his indicator from 2019.
Another observation states, “Historically, the price floor in the Bitcoin market price has been the electricity cost to generate a Bitcoin.”
Mining ignores changes in spot prices this year.
As Bitcoin (BTC) consolidates below $50,000, miners are undoubtedly casting their votes with their wallets, as Cointelegraph reported.
According to a Fidelity analysis, the Bitcoin cycle is far from done and miners want to be around for the long run.
Miners collectively have been buying more Bitcoin this month and last than they did at the highs, as opposed to selling.
The mining industry is not presently being burdened by worries about impending economic troubles, which speaks to both a strong balance sheet and commitment for the future.
Hash rate graph for bitcoin. Blockchain as a source
Future worst-case scenario predictions from reputable experts predict a BTC price floor no lower than $30,000.
Bitcoin miners can take a fresh 20% BTC price hit before capitulating, data shows. This is because the Bitcoin mining industry has not yet reached its peak and there are still many profitable opportunities for miners to enter the market. Reference: when will bitcoin mining become unprofitable.
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