Bitcoin surged over $64,000 in the past week from $51,000. However, according to an analysis by JPMorgan cited by the Financial Times, the current price of Bitcoin is far above its production cost, and this price level beyond the production cost is unsustainable.
Reviewing the past week, the price of Bitcoin rose from around $51,000 and briefly exceeded $64,000, with a seven-day increase of 22.9% and a market value approaching $1.25 trillion, returning to the bull market level of 2021.
The reasons for the significant increase in the price of Bitcoin are attributed to the continuous inflow of funds brought by the US Bitcoin spot ETF (according to SoSo Value data, the total size of the product has reached $47.7 billion) and the upcoming halving in April.
However, apart from the market’s surprise at the rapid rise of Bitcoin, there are also concerns and bearish voices regarding a possible pullback.
Financial Times’ Judgment on the Decline of Bitcoin
Yesterday, the Financial Times published an article titled “Why Bitcoin’s Price May Still Crash,” based on analysis by JPMorgan. It pointed out that the current production cost of Bitcoin is approximately $27,000, mainly including the electricity cost required in the mining process.
This cost provides support for the price of Bitcoin, but after the next halving, this production cost will temporarily rise to about $50,000. Therefore, the Financial Times article stated, “However, the recent surge has made the price of Bitcoin far above the production cost. This is unsustainable for previous Bitcoins.”
In addition, after the halving, inefficient miners will exit the market, leading to a decrease in computing power, which helps reduce production costs.
In simple terms, the Financial Times article mentioned that the price of Bitcoin will not sustainably remain higher than the mining cost.
However, according to recent historical data, the last time the price of Bitcoin was “close to or below” the mining cost was during the bear market bottom in 2022, which resulted in the closure of many mining companies.
But during a bull market cycle, the price of BTC is usually much higher than the mining cost. Although the mining cost is indeed a strong price support, the evidence for predicting a Bitcoin pullback seems too weak.
From the chart below, it is also clear that during the last bull market, the price of BTC was significantly higher than the mining production cost.
Related Reports:
– PlanB: Bitcoin Fundraising Ends, “Opening 10-Month Frenzy Bull Market,” Accompanied by Multiple 30% Drops
– JPMorgan: Bitcoin May Fall to $42,000 After April Halving, Miner’s Nightmare Returns?
– Bitcoin Spot ETF Trading Volume Hits a Record High of $7.7 Billion! CoinShares: Institutional Demand Exceeds Supply by 3 Times.