Bitcoin has surged over 64,000 US dollars in the past week from 51,000 US dollars. However, the Financial Times yesterday cited an analysis by JPMorgan, pointing out that the current price of Bitcoin is far above its production cost and believes that this price level beyond the production cost is not sustainable.
Looking back at the past week, the price of Bitcoin has continuously surged from around 51,000 US dollars, breaking through 64,000 US dollars at one point, with a seven-day increase of 22.9% and a market value approaching 1.25 trillion US dollars, returning to the bull market level of 2021.
When considering the reasons for the significant increase in the price of Bitcoin, it is related to the continuous inflow of funds brought by the US Bitcoin spot ETF (according to SoSo Value data, the total size of this product has reached 47.7 billion US dollars) and the upcoming halving in April.
However, in addition to the surprise in the market due to the rapid rise of Bitcoin, there are also concerns about a possible correction and bearish views.
The Financial Times stated the reasons for the decline of Bitcoin
The Financial Times published an article titled “Why Bitcoin’s Price Could Still Plummet” yesterday, based on JPMorgan’s analysis, pointing out that the current production cost of Bitcoin is approximately 27,000 US dollars, mainly including the electricity cost required in the mining process.
This cost provides a price support for Bitcoin, but after the next Bitcoin halving, this production cost will temporarily jump to about 50,000 US dollars. Therefore, the Financial Times article wrote, “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 Bitcoin halving, inefficient miners will exit the market, leading to a decrease in computing power, which helps to reduce production costs.
In simple terms, the Financial Times article mentioned that the price of Bitcoin will not sustainably exceed the mining cost in the long term.
But according to recent historical data, the last time the Bitcoin price was “close to or below” the mining cost was during the bear market bottom in 2022, when many mining companies went bankrupt as a result.
However, during the bull market cycle, the BTC price usually exceeds the mining cost by a significant margin. Although the mining cost indeed provides strong price support, the evidence for predicting a Bitcoin correction seems too weak.
From the chart below, we can also clearly see that during the last bull market, the price of BTC was much higher than the mining production cost.
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