🚨 How LOW will Bitcoin Price Drop?!? Explained | Hashpower Academy

Video Transcript:

hello there and welcome to the Hash Power Academy My name is Jake Scandlin I’m the lead educator here at the academy and this is a place that we delve into anything and everything about Bitcoin and its underlying network of technologies and commodities Delving into everything from energy compute and finance production technologies Bitcoin mining and the blockchain and everything in between We delve into everything But the topic of today is how low can Bitcoin go and I’d like to just share a few uh thoughts So I used to trade Bitcoin in an algorithmic way I used to build little bots and mess around with all that sort of stuff I built indicators and codes and scripts and everything in between before I got into Bitcoin mining And only when I learned about Bitcoin mining’s fundamentals did I truly understand the charts so to speak from a price context So the first thing I’d like to say is price is a premium You are paying for the convenience of exchanging uh bit of dollars into bitcoin at a rate that you had no cost required to to make that bitcoin But a bitcoin miner is deploying millions of dollars of hardware and exchanging his electricity into bitcoin And what is that current exchange rate And it’s fundamental to to the very specific topic of today The average network production cost right now is about4 to $50,000 And this is continually increasing over time Every time there’s a hinging event the uh electrical bill stays exactly the same for the miner but their uh amount of Bitcoin that they mine cuts in half So their production cost increases Now why is this production floor price fundamental to your trading knowledge Is because as I said price is a premium What’s what’s more intrinsic The exchange rate of electricity into Bitcoin or dollars into Bitcoin It’s the electricity a sought after commodity in this world And Bitcoin miners have two options They can either consume the energy buy the energy and produce Bitcoin sell it They are the commodity producer so they sell it So it’s buy energy sell Bitcoin Or if the price were to go below production why would you spend $45,000 of electricity to earn a $40,000 Bitcoin You wouldn’t You’d rather sell the $45,000 of electricity back to the grid and buy the $40,000 Bitcoin This is to say that when price ever goes below production which it rarely rarely does this is an opportunity for miners to just switch the machines off sell the power and buy the Bitcoin in a greater quantity than simply mining it And so what happens is the minor production floor price ends up being an intrinsic buying floor in which a natural buyer of Bitcoin steps in at the exchange rate of electricity to Bitcoin versus the dollar And the price to the dollar is a premium And so your understanding of the best time to buy Bitcoin should be framed around the dynamic difference between these two prices the electricity to Bitcoin exchange rate minor production and the Bitcoin to dollar exchange rate The closer the price gets to production the greater the value of the Bitcoin because it actually the Bitcoin allows you to buy more electricity from the miners That’s a topic for another day in which to say that the value of Bitcoin increases when the dollar price decreases And for example if the price right now were to shoot to 250,000 but the production floor is still 40 50,000 Bitcoin miners would be earning for $1 of electricity they’d be earning four to$5 of Bitcoin or even more So their mining profitability shoots through the roof And that is a good time to sell because naturally if you look through all of the historical cycles when the mining production floor versus the price is about 4x that is to say that when the Bitcoin price went to $20,000 um years and years ago the production floor was about one well 18th of that price a four to eight times production premium and that that difference between the two if price gets too far from production it’s time to sell When it gets really really close or even below it then it’s time to buy And so how low do I think Bitcoin could potentially go Well this is the network average with an electrical rate of about 5 cent per kilowatt There’s a lot of retail miners and they produce Bitcoin at about $73,000 And the public Bitcoin miners like Marathon and Bit Farms and all those other big ones they can produce Bitcoin close to 30 40,000 per Bitcoin And so you’ve got this entire zone that if p price were to drop into these levels there is a significant amount of those miners that will be doing that electricity arbitrage of switching their machines off Hash rate drops and the amount of Bitcoin per kilowatt for the other miners would actually increase And so natural buyers step in at all these levels I hope this is an interesting sort of video I hope this was a different sort of video for you if you are a trader But I’d like to offer my thoughts that trading has that aspect of being a zero sum game Exchanges are always wanting you to use their platform and offer anything and everything to do so But you’re only going to have the best information about price if you understand the fundamentals of production Understanding that say Satoshi didn’t log into a platform and buy his Bitcoin He converted electricity into Bitcoin You don’t have to delve into mining but it is fundamental to learn about to understand what the production sector of Bitcoin are doing at these fundamental levels because Bitcoin miners are accumulating Bitcoin at a different exchange rate with electricity And the efficiency of their machine aggregates where in this price chart they are And so all of these different price levels are going to have natural buyers step in So anything from about $70,000 down to 30 natural buyers step in and accumulate Bitcoin at those ultimate prices because isn’t it good to be able to exchange dollars into Bitcoin at the same rate that producers with millions of dollars worth of hardware are able to exchange it You’re getting it at the same rate at the producers Now that’s a bargain I hope this was a good video Hope you liked it Subscribe send it to the group chat the trading chat and all that fun stuff and I will see you in the next one Goodbye