Will Miners Manage to Maintain $6.5k Support?

The price of any commodity tends to gravitate toward the production cost. If the price is below cost, then production slows down. If the price is above cost, profit can be made by generating and selling more. – Satoshi Nakamoto

Seems simple enough, right?

This basic economic theory can be applied to every commodity in existence, and Bitcoin is certainly no exception. This is precisely what popular crypto trader Filb Filb has done quite successfully several times in the past, and is attempting to do once again during this market cycle. Applying this principle to Bitcoin can give us a rough estimate of where the miners will stand their ground and begin holding the Bitcoin they mine rather than immediately selling it, subsequently flipping the price action in the bullish direction. However, there are other factors that need to be taken into consideration when attempting to make this estimate.

Race to the Bottom

It is important to remember that, in many ways, Bitcoin miners are in direct competition with one another. There is a constant race taking place among the miners to drive price down and eliminate inefficient miners from the ecosystem. Miners driving the price down may initially seem counter-intuitive, but miners are able to lock in a profit during this time by utilizing Bitcoin futures. This allows them to secure a long term profit by taking up long positions and eliminating competition in the mean time. We have seen this in action recently, as Bitcoin long positions have spiked as we approach the estimated bottom.

What Can We Anticipate About Price?

Unfortunately, it is impossible to extrapolate the exact production cost of a single Bitcoin at any given point in time. We can, however, assume that the relationship between price and production cost will hold true, allowing us to form a rough estimate of where the bottom will hit. Filb Filb theorizes that we will not see new price lows any time soon, as miners attempting to maximize profitability will not let the price drop below $6.5k. That being said, price is rapidly approaching this threshold and we still have 5 months until the May 2020 halvening. Only time will tell if price will continue to wander down past the $6.5k mark, or if this will truly be the flipping point for the Bitcoin market.

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