Bitcoin’s price recently surged to $91,950 as it approached a crucial market turning point. According to data from Capriole Investments, the effective production cost of Bitcoin is around $83,873, with the foundational energy cost for mining being lower at $67,099.
Key Highlights:
- Bitcoin is now trading slightly above the cost to mine, indicating reduced profitability.
- Rising hashrate and declining hash prices are pushing miners to their limits.
- The NVT ratio has dipped below a key threshold, historically indicating a bullish trend despite potential final downturns.
Tightening Miner Margins and Profitability Challenges
Currently, the miner price stands at $87,979, resulting in a mere 4.9% profit margin, among the cycle’s lowest levels. Typically, thin margins serve as a stabilizing influence rather than a sign of stress. As profits decrease, less efficient miners often exit the market, which leads to reduced competition and easing supply pressure.
Bitcoin miner price, production cost, and electrical cost data. Source: Capriole Investments
Recent insights reveal that miner profitability has been hindered by increased competition on the network. In October, Bitcoin’s hashrate reached an unprecedented 1.16 ZH/s, despite a decline in BTC’s price to around $81,000 as November approached.
Hash prices have dropped below $35 per hash, significantly less than the median of $45/PH/s that public miners previously earned. The time it takes for mining rigs to pay for themselves has now extended beyond 1,200 days, exacerbating the strain from rising capital costs.
Although numerous mining firms are pivoting towards AI and high-power computing, the revenue from these alternatives is insufficient to compensate for the declines in Bitcoin mining earnings.
As miner stress levels rise and spot prices near production costs, the market may shift into a reset phase. This often results in weaker miners exiting, adjustments in difficulty, and a reduction in overall selling pressure.
Dynamic NVT Ratio Highlights Market Undervaluation
Additionally, Bitcoin’s Dynamic NVT has fallen below the NVT Low level of 194, entering a zone where the network’s value is undervalued compared to transaction strength. This scenario generally indicates a potential reversal as market sentiment improves.
Bitcoin’s price and dynamic range NVT analysis. Source: Capriole Investments
However, caution is warranted as this indicator does not often mark the bottom of a market cycle definitively. Historically, Bitcoin has seen initial lows after a dip followed by a rebound before revisiting those levels.
If this pattern holds, BTC might see one last drop below $80,000. Regardless, the combination of tightening miner margins together with a low Dynamic NVT value signals a deeper transition toward establishing a bottom, rather than an ongoing decline.
Related: Bitcoin price bottom due ‘this week’ with BTC down 20% in November
This article does not serve as investment advice; all trading decisions involve risks requiring independent research.
