Bitcoin, like many other cryptocurrencies, has taken a beating during the most recent crypto winter. But with spring just around the corner, the crypto market is heating up.
BTCUSD was rejected after briefly breaking above $26K per coin today. But above this barrier, the bear market could be officially cancelled. Here's a closer look at why.
The painstaking process of choosing Bitcoin funds
Funds in the markets are difficult to announce and are not confirmed until much later. But this also means that, as an investor or trader, you could be left in the rear view mirror of the next bull train to new all-time highs.
A great deal of effort is devoted to technical tools designed to tell analysts whether an asset has bottomed out or topped out. Bitcoin, as volatile as it is, makes things even more confusing, but there are some tools that are showing some success.
For example, the โPi Cycle Top Indicatorโ has called every crypto bull run a spike. None of these tools have a perfect track record on funds, but due to the proof-of-work system behind Bitcoin, we might get some idea of โโa theoretical price floor.
The chart below shows the cost to produce each BTC, which has been stagnant for months and forms a longer-term basis for the first time. This type of base building is evident in commodities, which frequently bottom out around the cost of production. Why would Bitcoin be so different?
Moving above the cost of production has put in past bottoms | BTCUSD on TradingView.com
Why Cracking $26K Could Cancel Crypto Winter
Even Satoshi knew that commodity-like asset prices would "gravitate" toward the cost of production after supply sufficiently exceeds demand.
โThe price of any product tends to gravitate towards the cost of production. 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. At the same time, increased production would increase the difficulty, pushing the generation cost towards the price,โ Satoshi said in a 2010 BitcoinTalk forum thread.
Bitcoin has spent a considerable amount of time fighting this floor without breaking it. The cost of production tool created by Charles Edwards has an upper and a lower threshold. The upper threshold sits just above $26,000, making the key level especially important from a cost of production perspective.
Above this level in the past has led to some of the biggest bull runs in recent years. If BTCUSD can cleanly break above $26K, it could be the last time the top cryptocurrency trades below $20K again. It could also officially cancel the crypto winter and make way for an extra hot crypto summer.
