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Bitcoin has been the victim of quite a savage correction, bringing the price of the apex cryptocurrency to as low as $9,400. The consensus among analysts is criticisms of Facebook's Libra has given some investors cold feet. Therefore, sentiment could drive the prices even lower, NewsBTC reports.
However, according to analyst and trader FlibFlib, Bitcoin shouldn’t get anywhere near its previous low of $3,129.
In a Tradingview post, FlibFlib dismissed the predictions of a new Bitcoin low, saying the king crypto would maintain its price above the cost of mining, ensuring it remains profitable to miners. The analyst quoted Satoshi Nakamoto:
“…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.”
THREAD
— fil₿fil₿ (@filbfilb) July 17, 2019
1/ I have seen a lot of hysterical calls for bitcoin to find new lows and want to revisit a logical economics based approach which helped me call the 2018 bottom to near perfection and why I do not believe bitcoin will find new lows. https://t.co/HZ6L38dwKz
In January, JPMorgan stated that the production cost of mining one Bitcoin averaged around $4,060 in Q4 2019. However, miners were calculated to be making a profit of $5,500 per Bitcoin. As such, FlibFlib notes that miners will sell into demand where the revenue per unit outweighs the cost per unit. Similarly, they are disincentivized to sell when the cost outweighs revenue, which is what happened during the 2018 bear cycle.
Now, miners are holding on to their new-minted Bitcoins because of the upcoming halving event scheduled for May next year. Miners will now limit their sales in the hopes of capitalizing their profits when there is a higher demand.
6/ Mid term Action most likely from miners:
— fil₿fil₿ (@filbfilb) July 17, 2019
- Sell production / Hedge down while existing MC is still low
- Limit selling pre halving to envoke new halving bubble
- Limit sale of production
- Maximise revenue per unit
- Sell new bubble