The Economics of the Bitcoin Cycles

BITSTAMP:BTCUSD   Bitcoin / U.S. Dollar
This is a continuation of the chart shared which helped be nail the absoloute bottom in 2018 please review the original chart and commentary for further explaination.

As a recap, as Satoshi said himself rightly pointed out that commodity costs are likely to gravitate to production cost.. why? Because miners will sell into demand where revenue per unit > cost per unit. Likewise, collectively they are disincentivized to sell when revenue < cost.

So what happened in 2018

- Sell off to Marginal Cost
- Race to the bottom of most efficient miner
- Eliminate Inefficent competion
- Utilize futures to lock in profit

Where did that leave us
- Inefficient miners eliminated
- Disincentive to Sell
- Incentivised to limit output sale
- Push price to 2x production pre halving
- Simple to do due to huge short interest
- Disincentive to sell below new production cost
- New bottom 2x old bottom

Whats likely to happen next
Action most likely from miners:
- Sell production / Hedge down while existing MC is still low
- Limit selling pre halving to envoke new halving bubble back to current prices
- Limit sale of production
- Maximise revenue per unit
- Sell new bubble

This ofcorse is a theory but this theory did exactly what it said on the tin last year. We have also seen the pre halving hype bottom out at 2x the cycle bottom.
Comment: ps follow on twitter as per my bio, same handle for more.
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Fantastic analysis @filbfilb. I wonder what the base cost is to mine one Bitcoin today?

Some analysis suggests that China now no longer mines most Bitcoin (though it is owned by Chinese pools), eg:

If this is correct, and electricity costs of mining a Bitcoin provided here are correct:

Then the average cost of mining one BTC may be closer to $10,000. What do you think?
And of course, next year’s halving would effectively double this.
+5 Reply
barhoc11 capriole_charles
@capriole_charles, Where did you hear that China no longer mines most Bitcoin? Why would the majority of pools be in China, if mining was not?
@barhoc11, see link in my comment where that was the finding. I have not investigated this further.

Assuming it is true, there is no reason there couldn't be Chinese owned pools, operating in other countries.
+1 Reply
@flibflib - Sir, please ignore the negative comments. There is always 5% of shot and we cannot do anything about it. The majority of us, like me, always love and are grateful for you for sharing your thoughts. Thank you so very much, you are Awesome:)
+5 Reply
bitoin will break 20000$ soon
+4 Reply
highly agreed ! the flash crash in November 2018 created an artificial halving effect IMO
+4 Reply
elshanti elshanti
just breathtakingly accurate so far
+3 Reply
That bottom you nailed may have not been the bottom at all. We could be in a bear rally about to make new lows.
+3 Reply
@aconcept, we could be in a simulation
+10 Reply