Re-use the "shutdown coin price" to calculate the bottom and top of BTC before the reduction in production

After BTC’s short-term surge last month, Bitcoin has retreated nearly 40% from its high and entered a volatile mode between 9,000 and 10,000 points.

As one of the best performing assets this year, Bitcoin has risen more than 4 times from its lowest point in 2018 to now, becoming the best investment asset in the world, without a doubt.

Coupled with events such as Libra and Justin Sun, the crypto market has received unprecedented attention this year.

Baidu Index shows that the BTC search index has been on an upward trend since 2011. We can see from the picture that during the first peak of BTC at the end of 2013, the BTC search index also hit a new high in China. On June 24 this year, BTC's Baidu index was 8376, even exceeding the Chinese real estate in 2016-2017 (the highest index was 7256).

In terms of Google Trends, the trend of the BTC Google Index is highly consistent with the trend of the currency price. It is undeniable that BTC not only performed the best this year, but is also one of the most popular assets in the current investment field.

While BTC remains hot, as a digital asset with great volatility, many holders have been concerned about where the bottom of BTC is and where the high point is. Investors who have been waiting on the sidelines are also waiting for a suitable time to enter the market.

1. Judging the BTC bottom from the shutdown price

At the end of last year, due to the sharp drop in BTC prices, a large number of mining farms were closed and mining machines were sold off. As the biggest driving force for BTC network security, miners' income actually affects not only the price of the currency, but also the future development of BTC.

Also last year, in order to provide miners with a more intuitive reference indicator for understanding their profit and loss situation, f2pool released a "shutdown coin price".

(November 20, 2018, produced by f2pool)

Calculated based on the BTC miner cost at the time, the "shutdown coin price" of most mining machines was around 20,000CNY, and more mining farms also favored mining machines with higher computing power and lower mining costs.

At the same time, the lowest point of BTC last year was around 22,000 CNY, and under the influence of multiple extreme events last year, it failed to break through this barrier.

This is because when Satoshi Nakamoto formulated the BTC issuance mechanism, in order to motivate miners to maintain network security, he used the results of the computing power competition as the reward standard and gave a certain amount of BTC rewards to the miners who won the competition. As the absolute upstream of the BTC industry chain, the BTC price bottom maintains a delicate balance with the "shutdown coin price" of most mining machines.

Not only Bilibili, most of the big names in the currency circle also firmly believe in the "shutdown coin price".

Recently, "The King of Escape" Charlie Lee hinted in an online interview with Australian media ZyCrypto that the upcoming LTC reward halving may cause a blockage in the crypto market and drive prices down. The reward halving means that miners will now receive a block reward of 12.5 LTC instead of 25 LTC.

But he also said that after some miners are squeezed out, the price of the currency will gradually return to normal as the mining difficulty is automatically adjusted.

Regardless of whether LTC will be reduced to zero after August 6 (the day of production reduction), we can clearly see from the tone of Emperor Wright that the coin price maintains a delicate relationship with the “shutdown price”, which has also become a consensus among major long and short investors.

Times have changed. Since the beginning of this year, with the upgrading of mining machines, BTC production reduction and other multiple factors, the "shutdown coin price" has also been adjusted accordingly.

Bilibili has re-created a set of shutdown coin prices based on the data provided by f2pool.

From the chart, we can see that due to changes in the computing power, cost, and difficulty of block generation of mainstream mining machines, the average price of the shutdown coin has risen to 32658CNY this year, which is equivalent to 4733 USD, and the lowest is 3143 USD (close to the previous round of bottom)

But we also have to consider the impact of the sentiment of production cuts. The current trend of BTC has completely deviated from its original track, and its market share exceeds 60%.

Bilibi roughly estimates based on the multiple relationship that after BTC's production cuts next year, the lowest price of the coin may be $6,300, and the average price will be $9,400. This is also the bottom that the market has repeatedly tested within a month.

However, this year, from US President Trump and Federal Reserve Chairman Powell to Nasdaq and New York Stock Exchange, some have criticized or praised BTC, and BTC will be at the center of public opinion at least before the production cut (May 2020), and large fluctuations will be difficult to avoid.

2. Judging the bottom of BTC from the weekly chart

Filbfilb, a popular analyst on Tradingview, also deduced this round of "shutdown coin prices" based on the K-line model, which were US$7531.94, US$6352.77, and US$3172 respectively.

However, Bilibili focuses on his BTC technical trend model for the next 12 months. From the model, BTC will form an arc shape from the bear market to the bottom and then to a new high. And it confirms that the weekly bottom is $7,000.

Friends who understand technical analysis know that generally, after the currency price has bottomed out, if it can form a perfect U-shape, the currency price will rise in a parabolic form in most cases.

According to the technical model, in May 2020, the unit price of BTC is conservatively estimated to hit the $30,000 mark, reaching a historical high.

The analyst also pointed out: Because the broken support in the downward trend will become resistance in the future rise, BTC has now perfectly broken through some of the previous resistance, but has come to an area where the (short-term) upward energy is temporarily exhausted and the number of short sellers has increased.

Historically, BTC will at least retrace to the 61.8% Fibonacci retracement line, where a large number of longs will usually appear and the price will rise again. In his opinion, BTC may still fall back to $7,000 and then rise again.

However, considering the current financial environment and the many uncertainties in the long-term market, Bilibili believes that there is a high probability that the market will bottom out before BTC production is reduced.

Investors can focus on the three bottom positions of US$6,300, US$7,000, and US$9,000. As for the high points, from a technical perspective, in the absence of extreme factors, BTC will most likely hit a record high of US$30,000 before production is reduced.