Cryptocurrency analyst Astronomer, known by his handle @astronomer_zero on X, has provided a potentially compelling downside signal for Bitcoin that is based on the electricity costs miners incur to mine BTC. According to him, this particular metric has historically served as a reliable indicator for identifying optimal buying opportunities in Bitcoin’s price cycles.

Has the price of bitcoin hit bottom yet?

This analysis Titled “BTC Miners’ Electricity Cost, 100% Accurate Bottom Signal,” the article uses data to illustrate a scenario where Bitcoin’s cost of production falls below the market price, suggesting a key moment for potential investors. The astronomer elaborated on his methodology and findings by referencing his previous predictions that successfully pointed to market highs, most notably the 30% drop from the $70,000 peak that was guided by similar data-driven signals.

The astronomer’s current focus on mining costs stems from its significant implications for bitcoin’s supply dynamics. Despite the halving event designed to reduce the reward for mining bitcoin, there is still a 0.84% ​​annual inflation in the supply, which equates to about $10 billion worth of bitcoin entering the market each year. This is equivalent to the total holdings of major corporate investors like MicroStrategy, indicating a significant influx of bitcoin from miners who are willing to gradually sell to keep their operations afloat.

However, current market conditions, as Astronomer describes, have reached a sporadic state where the market price of Bitcoin has fallen below the weighted average cost of electricity required to mine it. This situation typically restricts miners from selling their holdings for a profit, potentially reducing selling pressure in the market.

“This not only means that miners can’t sell their BTC for a profit. It also means that it’s simply cheaper to just log into a CEX and buy 1 Bitcoin, rather than going through the pain of mining 1 Bitcoin. This not only makes miners (the people who control BTC) not want to sell, but it also makes them want to buy, because it’s cheaper to just buy instead of mining it,” suggests Astronomer.

This change not only affects miners’ selling behavior, but also their purchasing strategies, helping to reduce supply pressure and potentially triggering upward price movements. The astronomer supports his claim by pointing out that historically, when the cost of production has fallen below the market price, it has consistently led to significant price rebounds.

He detailed instances from the recent past, including significant declines in March 2023 when Bitcoin reached $19,500, November 2022 – $16,500, June 2022 – $18,000, May 2020 – $8,900, March 2020 – $4,700, and November 2018 when it hit a low of $3,500. Each of these moments was followed by mighty rallies, underscoring the potential credibility of this signal.

“How many times? 17 out of 17 times, it meant that the price was at levels that historically (with high statistical significance) you would have wanted to buy, or you would have missed out on and regretted it for a very long time,” the analyst added.

Now, with the cost of producing Bitcoin, according to Capriole Investment, at $60,711 and the price holding steady at $56,713, the conditions described by Astronomer are manifesting themselves once again. This combination poses a key question to the market: Is it time to buy?

While Astronomer’s analysis is based on historical data and detailed market observation, he remains cautiously sanguine about the results, embodied in his final sentence: “Will this time be different? Maybe.”

At the time of going to press, the BTC price was $56,804.

Featured image created with DALL.E, chart from TradingView.com