Bitcoin’s Production Cost Indicates a Strong Base for Liftoff
The price of Bitcoin is currently approaching $40,000 per coin, leading many to believe that the bottom is in. A reliable signal has emerged that accurately identifies when BTC has established a strong base, and historically, Bitcoin has experienced significant bull runs after moving away from this base.
Bitcoin Production Cost Tool as an Indicator
Despite some investors anticipating a drop to $10,000 or lower, a fundamental signal has reappeared that has consistently marked the bottom. The signal is Bitcoin price rising above the Production Cost tool developed by Charles Edwards of Capriole Investments. Whenever BTCUSD surpasses the “Total” metric, it has consistently led to a massive bull market.
Data Supporting Bull Runs After Base-Building
The chart shows that in 2017, BTCUSD experienced a 1,400% price increase after establishing a base. In 2019, the increase was only 180%, but in 2020, BTCUSD saw a more substantial gain of 370%. The average of these three rallies suggests a potential 650% increase, which would put Bitcoin closer to $300,000 per coin. However, the median increase is 370%, suggesting a more reasonable price of $175,000 per coin. Even with a modest 180% increase, BTCUSD would surpass $100,000 per coin.
Satoshi Nakamoto’s Insight
Bitcoin’s behavior aligns with Satoshi Nakamoto’s observation about commodity-like assets. He noted that the price of a commodity tends to gravitate towards its production cost. If the price falls below cost, production slows down, while higher prices generate more profit and increase production. Therefore, Bitcoin rising above the Production Cost metric is consistent with Nakamoto’s theory.
Hot Take: Bitcoin’s Production Cost Signals a Bull Run
The signal provided by Bitcoin’s production cost tool has historically indicated the bottom and preceded significant bull runs. With BTCUSD currently above this metric after spending an extended period below it, there is a possibility of an even stronger base for the next bull market. Considering this reliable indicator and Nakamoto’s insight, it may be prudent to reassess bearish expectations and recognize the potential for Bitcoin to continue its upward trajectory.
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