Bitcoin Break Above $26K May Cancel Crypto Winter
Bitcoin, like many other cryptocurrencies, has taken a beating during the last crypto winter. But with spring just around the corner, the crypto market is heating up.
BTCUSD was rejected after briefly making it over $26K per coin today. But above this barrier, the bear market can be officially cancelled. Here’s a closer look at why.
The Painstaking Process of Choosing Bitcoin Bottoms
Bottoms in markets are challenging to call, and are not confirmed until much later. But this also means that you as an investor or trader can be left in the rearview mirror of the next bull run to new all-time highs.
A huge amount of effort goes into technical tools designed to tell analysts whether an asset has bottomed or peaked. Bitcoin, as volatile as it is, makes things even more confusing, but there are some tools that are showing some success.
For example, the “Pi Cycle Top Indicator” has named each crypto bull run top. No such tool has a perfect track record on bottoms, but due to the proof-of-work system behind Bitcoin, we can have an idea of a theoretical price floor.
The chart below shows the cost of producing each BTC, which has been flatlining for months, forming a long-term base for the first time ever. This type of base building is evident in raw materials, which often fall around production costs. Why should 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 the prices of commodity-like assets would “gravitate” towards the cost of producing after supply sufficiently outweighs demand.
“The price of any commodity tends to move toward the cost of production. If the price is below cost, production is reduced. If the price is above cost, profit can be made by generating and selling more. At the same time, the increased production will increase the difficulty , and push the cost of generating against the price,” Satoshi said in a 2010 BitcoinTalk forum thread.
Bitcoin has spent a lot of time grinding against this floor without breaking it. The cost of production tools created by Charles Edwards has an upper and lower threshold. The upper threshold is just above $26,000, making the key level particularly important from a cost perspective.
Above this level recently has resulted in 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 crypto winter and make way for an extra hot crypto summer.