BTC $29,000 Post-Halving Target! Cost to Produce DOUBLES in 90D!
Yesterday I posted about the 12H rising wedge suggesting one last long entry below $10K if price broke down below the pattern. Last night it appeared that was going to happen, however, bulls quickly bought the dip and it didn’t stay down for long. With the entire crypto market very bullish right now with BTC halving coming up, I am throwing TA out the window and relying on fundamentals. The fundamentals are simple—Supply, Demand, and Cost to Produce.
Everyone by now knows what halving means for supply and demand. The block reward will be cut in half from 12.5 to 6.25, making BTC all that more scarce. But what does this mean for the cost to produce 1 BTC? It is simple—the cost will DOUBLE. The resources BTC miners currently allocate to mining BTC will not change. What will change, however, is that the revenue (BTC) generated by those same resources will be cut in half. Thus, miners will need to allocate twice as many resources to their mining operations to generate the same revenue as they did pre-halving.
What is the current cost to produce 1 BTC? There is no easy answer because there is no way of calculating it with any real degree of accuracy. If we could, who would ever buy above cost, and what would be incentive for miners? What we can do is get a range based on energy costs ($/KWh) around the globe and input those costs into various mining calculators or, as I attempted, create a spreadsheet that calculates the range for you.
Depending on your sources and the assumptions made regarding $/KWh and miner Hashrate, you will get a cost to produce 1 BTC somewhere between $5,700 and $6,850. This is an estimate for GLOBAL average cost to mine 1 BTC as of Today. Yes, there are certain countries with very cheap energy that could theoretically mine BTC for as low as $2,000 - $3,000 per BTC. I say theoretically because if it were a viable option, those countries would be the major producers of BTC instead of China. In China, the average electricity cost is reportedly around $0.052/KWh for BTC mining. Other data suggest upwards of $0.08.
Using China as the cheapest, and assuming the cost to produce 1 BTC in China really is around $.052/KWh, the current cost per KWh would be around $5,000. This means that upon halving, the cost to produce 1 BTC in the country that produces over 50% of the BTC mined each year will double to $10,000, MINIMUM. The current price is UNDER $10,000. How can you not buy?
Now, let’s turn to my $29,000 price prediction. As of writing this, BTCUSD is trading on Coinbase for around $9,850, and it printed a new Yearly high of $9,888. First, I want to caution against FOMO. We still have 90 days (89 days and 8 hours as of writing this) until halving occurs. We are seeing overbought conditions on many shorter timeframes. If your holding period is less than 3 months, I would caution against buying at this price, and I would certainly caution against using stops. But if you can HODL for at least another 3 months, possibly even 6 months to a year, then the risk to you is extremely small if you simply look at the fundamentals. I can go on and on about BTC fundamentals beyond what I discussed above, all of which would support a long-term buy and hold position at the current price. Thus, buying at this price vs. holding out for a lower price is about probabilities at this point. Sure, we can see a correction and another opportunity to buy cheaper around $8,500, possibly even in the $7Ks (see my previous post for that strategy). But the probabilities are much higher for a push above $10K and beyond. Once that happens, the chances of dropping below $10K again are very slim.
Does TA support the fundamentals? Zoom out and I would say it does. The Weekly MACD crossed over the signal line about 2 weeks ago, and the 2W MACD is likely do the same very soon. On the Weekly DMI, the +DI crossed over the -DI in the first week of January and the ADX is rising. Zoom out to the 2W DMI and you’ll see that ADX seems to have bottomed out at 30.5 an is rising agin, suggesting we are still in a strong long-term bull market (which started at the beginning of 2019). Although shorter time frames signal overbought conditions, the longer timeframes show we have a lot more room for some serious gains in the months ahead. The weekly RSI just hit 60 for the first time since the beginning of September. Moreover, on the week of Jan 20, RSI easily held above 50 (as opposed to dropping below like it did in October), suggesting we are in for another leg up in this long-term bull run. Looking at the 2W RSI and the Fibonacci Retracement levels, RSI dipped below 50 briefly around the same time price was hovering above the 0.5 Fib level. Lastly CCI is bullish on the weekly and 2W timeframes as well. Weekly just crossed over 100 on the CCI and is currently at 150. This indicates a strong bull trend with room to move further up. Although 2W CCI has yet to cross up over 100, if you look to November when BTC dropped from $9K to $6,900 you’ll notice that it only briefly dipped below -100 before quickly coming up. Additionally, if you look back to on the 2W to the low of $3,128, you’ll notice bullish divergence on all three of these indicators (RSI, MACD, and CCI). TA can’t be more consistent with my fundamental analysis above than this.
How did I get my $29,000 price target? I looked at the Fib. retracement and extension levels. If you use a Fib retracement level for entry, you can use its corresponding extension level for exit. The correction from the $13,868 high in June touched the 0.5 Fib. level. Thus, I simply look to the 1.5 Fib. level for my exit point. For me, the question is not if we reach the target, it is when. In my opinion, the most likely scenario is pre-halving FOMO takes us up to test $14,000 again, maybe even breaking it, before unprofitable miners are squeezed out and we see them taking profits (if you think the market is manipulated by a handful of whales, you can assume they’ll be taking some profits in this area as well). This makes the $13,800 to $16,000 range my first sell target. I will have sells scattered all over this range (as well as the $11,800 gap fill). I do not think we will see $29,000 until late 2020/early 2021 at the earliest. I will, however, have some sells up in that area just in case.
As for you HODLers, there is nothing wrong with holding through all of this if your long-term goal is to just accumulate as much BTC as possible. You can use this analysis for possible entry points to add to your position. If you want to maximize your gains, and thereby accumulate even more BTC, however, I suggest taking at least some profits along the way. If your timeframe is several years, it is very easy to flip BTC during overbought/oversold conditions and make some profits along the way. Perhaps if you got stuck holding the bag after the 2017 bull run, you’ll be more likely to take some profits this time around.
Everyone by now knows what halving means for supply and demand. The block reward will be cut in half from 12.5 to 6.25, making BTC all that more scarce. But what does this mean for the cost to produce 1 BTC? It is simple—the cost will DOUBLE. The resources BTC miners currently allocate to mining BTC will not change. What will change, however, is that the revenue (BTC) generated by those same resources will be cut in half. Thus, miners will need to allocate twice as many resources to their mining operations to generate the same revenue as they did pre-halving.
What is the current cost to produce 1 BTC? There is no easy answer because there is no way of calculating it with any real degree of accuracy. If we could, who would ever buy above cost, and what would be incentive for miners? What we can do is get a range based on energy costs ($/KWh) around the globe and input those costs into various mining calculators or, as I attempted, create a spreadsheet that calculates the range for you.
Depending on your sources and the assumptions made regarding $/KWh and miner Hashrate, you will get a cost to produce 1 BTC somewhere between $5,700 and $6,850. This is an estimate for GLOBAL average cost to mine 1 BTC as of Today. Yes, there are certain countries with very cheap energy that could theoretically mine BTC for as low as $2,000 - $3,000 per BTC. I say theoretically because if it were a viable option, those countries would be the major producers of BTC instead of China. In China, the average electricity cost is reportedly around $0.052/KWh for BTC mining. Other data suggest upwards of $0.08.
Using China as the cheapest, and assuming the cost to produce 1 BTC in China really is around $.052/KWh, the current cost per KWh would be around $5,000. This means that upon halving, the cost to produce 1 BTC in the country that produces over 50% of the BTC mined each year will double to $10,000, MINIMUM. The current price is UNDER $10,000. How can you not buy?
Now, let’s turn to my $29,000 price prediction. As of writing this, BTCUSD is trading on Coinbase for around $9,850, and it printed a new Yearly high of $9,888. First, I want to caution against FOMO. We still have 90 days (89 days and 8 hours as of writing this) until halving occurs. We are seeing overbought conditions on many shorter timeframes. If your holding period is less than 3 months, I would caution against buying at this price, and I would certainly caution against using stops. But if you can HODL for at least another 3 months, possibly even 6 months to a year, then the risk to you is extremely small if you simply look at the fundamentals. I can go on and on about BTC fundamentals beyond what I discussed above, all of which would support a long-term buy and hold position at the current price. Thus, buying at this price vs. holding out for a lower price is about probabilities at this point. Sure, we can see a correction and another opportunity to buy cheaper around $8,500, possibly even in the $7Ks (see my previous post for that strategy). But the probabilities are much higher for a push above $10K and beyond. Once that happens, the chances of dropping below $10K again are very slim.
Does TA support the fundamentals? Zoom out and I would say it does. The Weekly MACD crossed over the signal line about 2 weeks ago, and the 2W MACD is likely do the same very soon. On the Weekly DMI, the +DI crossed over the -DI in the first week of January and the ADX is rising. Zoom out to the 2W DMI and you’ll see that ADX seems to have bottomed out at 30.5 an is rising agin, suggesting we are still in a strong long-term bull market (which started at the beginning of 2019). Although shorter time frames signal overbought conditions, the longer timeframes show we have a lot more room for some serious gains in the months ahead. The weekly RSI just hit 60 for the first time since the beginning of September. Moreover, on the week of Jan 20, RSI easily held above 50 (as opposed to dropping below like it did in October), suggesting we are in for another leg up in this long-term bull run. Looking at the 2W RSI and the Fibonacci Retracement levels, RSI dipped below 50 briefly around the same time price was hovering above the 0.5 Fib level. Lastly CCI is bullish on the weekly and 2W timeframes as well. Weekly just crossed over 100 on the CCI and is currently at 150. This indicates a strong bull trend with room to move further up. Although 2W CCI has yet to cross up over 100, if you look to November when BTC dropped from $9K to $6,900 you’ll notice that it only briefly dipped below -100 before quickly coming up. Additionally, if you look back to on the 2W to the low of $3,128, you’ll notice bullish divergence on all three of these indicators (RSI, MACD, and CCI). TA can’t be more consistent with my fundamental analysis above than this.
How did I get my $29,000 price target? I looked at the Fib. retracement and extension levels. If you use a Fib retracement level for entry, you can use its corresponding extension level for exit. The correction from the $13,868 high in June touched the 0.5 Fib. level. Thus, I simply look to the 1.5 Fib. level for my exit point. For me, the question is not if we reach the target, it is when. In my opinion, the most likely scenario is pre-halving FOMO takes us up to test $14,000 again, maybe even breaking it, before unprofitable miners are squeezed out and we see them taking profits (if you think the market is manipulated by a handful of whales, you can assume they’ll be taking some profits in this area as well). This makes the $13,800 to $16,000 range my first sell target. I will have sells scattered all over this range (as well as the $11,800 gap fill). I do not think we will see $29,000 until late 2020/early 2021 at the earliest. I will, however, have some sells up in that area just in case.
As for you HODLers, there is nothing wrong with holding through all of this if your long-term goal is to just accumulate as much BTC as possible. You can use this analysis for possible entry points to add to your position. If you want to maximize your gains, and thereby accumulate even more BTC, however, I suggest taking at least some profits along the way. If your timeframe is several years, it is very easy to flip BTC during overbought/oversold conditions and make some profits along the way. Perhaps if you got stuck holding the bag after the 2017 bull run, you’ll be more likely to take some profits this time around.
Comment:
Here is a recent article suggesting post-halving cost to produce is between $12,000 and $15,000 for miners.
bitcoinist.com/bitco...er-gold-to-increase/
bitcoinist.com/bitco...er-gold-to-increase/
Comment:
This is the source cited in the above article. It says that BTC price would have to be between $14,000 and $15,000 to support the current mining levels. bitcoinist.com/bitco...halving-usd-15k-btc/
It is much more likely that we see miners, particularly unprofitable miners who have ramped up they mining operations going into halving, sell the pre-halving FOMO that is to come. Thus, we should expect the price to at least test the previous local high around $14K but a significant correction will likely follow as these unprofitable miners cash out and discontinue their mining operations. This is illustrated with the light blue line in my chart above.
Towards the end of this correct, as the mining market stabilizes, I suspect we will see some ranging in the $12,000 to $15,000 area for some time before we continue on to new ATHs.
It is much more likely that we see miners, particularly unprofitable miners who have ramped up they mining operations going into halving, sell the pre-halving FOMO that is to come. Thus, we should expect the price to at least test the previous local high around $14K but a significant correction will likely follow as these unprofitable miners cash out and discontinue their mining operations. This is illustrated with the light blue line in my chart above.
Towards the end of this correct, as the mining market stabilizes, I suspect we will see some ranging in the $12,000 to $15,000 area for some time before we continue on to new ATHs.
Comment:
Monthly linear regression from the day BTC began trading on Coinbase (not much difference on Bitstamp, which began trading in 2011). The chart shows we have clearly broken past the mean and are continuing the longer term bull run which started in at the beginning of 2019. It also shows that we have PLENTY of room to go up from here with just 90 days before halving. $15-16K is a real possibility for a pre-halving high. Moreover, you can expect a significant correction (what is known as regression to the mean) post-halving. This fits with the narrative that unprofitable miners will be squeezed out of the market, leading to another accumulation period (and perhaps an opportunity to acquire BTC below global mining marginal cost) before we go on to test 2017 ATH and beyond.
Monthly linear regression from the day BTC began trading on Coinbase (not much difference on Bitstamp, which began trading in 2011). The chart shows we have clearly broken past the mean and are continuing the longer term bull run which started in at the beginning of 2019. It also shows that we have PLENTY of room to go up from here with just 90 days before halving. $15-16K is a real possibility for a pre-halving high. Moreover, you can expect a significant correction (what is known as regression to the mean) post-halving. This fits with the narrative that unprofitable miners will be squeezed out of the market, leading to another accumulation period (and perhaps an opportunity to acquire BTC below global mining marginal cost) before we go on to test 2017 ATH and beyond.
Whether you agree or disagree with anything I said, please comment. I'm always open to learning as much as possible and would like to use this platform to both educate myself and others. If have any questions for me regarding anything I said here, or in my previous idea, please feel free to ask.
I'd be happy to share sources as well. I did not do so here because I used several and had to make some assumptions / judgment calls on my inputs. I used several different methods/sources to come up with my range for global cost to produce. In the end, I had to decide on which sources to rely on and which method was the most reliable. And no, I will not likely be writing a white paper any time soon. But it is something I have considered doing more research on. The lack of reliable information that is available makes it difficult and time consuming to do).
Thanks for reading!