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Bitcoin is not created out of thin air. It is produced by miners purchasing mining machines and providing computing power to solve mathematical problems. As a rate of return, miners receive Bitcoin as a mining reward. Therefore, it can be said that miners determine the supply of Bitcoin, and mining costs also have a significant impact on the price of Bitcoin.
WOO
Miner shutdown price: approaching cost, close to shutdown
When the price of Bitcoin is lower than the mining cost of miners, miners will stop mining, because in this case, the more they dig, the greater their losses will be. This price is also called the shutdown price.
The main cost of mining is electricity, and there are also many expenses such as mining machines, sites, management, etc. The current mainstream calculation method is based on electricity, and the cost does not include other expenses, so the shutdown price is relatively overestimated compared to the actual situation.
The shutdown price represents the "lower limit" of the currency price and is often used as an indicator to judge whether the currency price has bottomed out. The reason is due to psychological expectations. Most people are unwilling to bear losses and find it difficult to accept less and less profits. Therefore, when the shutdown price is close, the selling behavior of miners will also be suspended, and secondary investors will have a "cheap-picking" mentality to buy Bitcoin.
The electricity cost is calculated based on $0.07/kWh and the currency price is 56,000. Currently, of the 25 mainstream mining machines, only 7 of the higher-end models are profitable. The other 18 mining machines have all fallen below the cost price. It should be noted that this chart does not include the previous paragraph. Other fees mentioned. If we simply estimate that other expenses only account for 10% of the electricity bill, then there are only three mining machines on the market that are profitable.
Therefore, from the perspective of "shutdown price", there is a high probability that the current currency price has bottomed out.
Image source: TechFlow
Miner transfers to exchanges: slight decrease, no significant change
The income gained by miners from mining must be transferred from the chain to the exchange to sell and cash out in order to maintain the operating costs of continued mining. If the number of transfers is larger, the potential selling pressure will be higher, which is bearish on Bitcoin; if the transfer is If the quantity becomes smaller, it means that the potential selling pressure decreases, which means you are bullish on Bitcoin.
It can be observed in the chart below that the number of transfers has dropped significantly since April this year. It can be speculated that it is related to the Bitcoin halving on April 20 this year, with the output decreasing and the transfers decreasing.
There has been no significant change in the number of transfers to exchanges in the recent past, except for a decrease in the number of transfers during non-trading days. The number of daily transfers from Monday to Friday is approximately between 7,500 and 10,000. On holidays, the number of transfers per day is 2,500, compared with approximately 3,500 to 4,500 previously.
Image source: TechFlow
Exchange balance: bullish, new low in a year and a half
Bitcoin wallet balances from exchanges are also an indicator of whether the price has bottomed.
Centralized exchanges are the main place where transactions occur in the cryptocurrency market. When the number of Bitcoins in the exchange increases, it usually means that funds from the chain are transferred in, ready to be sold into assets such as stable coins, which is bearish on Bitcoin.
The decrease in Bitcoin on the exchange represents a transfer to the on-chain wallet. Since the liquidity of currency exchange on the chain is not as good as that of a centralized exchange, transfer to the chain is usually not considered a selling behavior, and the expected selling pressure faced at this time is low. , to be bullish on Bitcoin.
The figure below shows the changes in the Bitcoin balance of centralized exchanges in the past three months. It is currently about 2.4 million, a new low in the past year and a half. Binance has lost about 53,000 Bitcoins in the past 30 days.
Image source: TechFlow
Conclusion: The price is close to cost, the exchange balance has also hit a new low, and the bottom is near
The current cost of mining for miners is close to the shutdown price, and the number of transfers from miners to exchanges is gradually decreasing, indicating that potential selling pressure is reducing. Meanwhile, Bitcoin balances on exchanges continue to hit new lows, further supporting the bullish signal. Based on these data, we can speculate that the current Bitcoin price may have reached a stage bottom, and the future market trend may gradually pick up.
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
This article is reproduced with permission from: "Deep Wave TechFlow"
Original author: WOO
