GlossaryBTC production cost
BTC production cost
What it costs the Bitcoin network in electricity and operations to produce one bitcoin, as two lines over the price: at the bottom the pure electricity cost floor, above it the production cost including additional costs. Below these lines, the average miner is operating at a loss.
On the chart
Two lines over the candles: the production cost on top, the electricity cost floor below in blue. The upper line's color shows the current state: green if the last close is above the production cost, red if below. The color applies to the entire line and follows the last candle.
At each halving, both lines jump to double, because only half as many coins are created per block.
How to read it
- Price above production cost: Mining is profitable on average, new machines come online, and the hashrate and with it the cost line follow upward.
- Price between the lines: The electricity costs are covered, the total costs are not. Weaker miners come under pressure.
- Price below the electricity cost floor: An average miner sells below its running costs and eventually switches off. Such phases have been rare so far, lasted several months and came at cycle lows.
The lines are more a floor than a target: the price can run far above them for a long time.
Limitations
- Fixed assumptions across the entire history: Efficiency and electricity price apply equally to every candle. Earlier hardware was many times less efficient, so the lines sit far too low in the older years. The curve is an approximation of the order of magnitude, not the bookkeeping of individual miners.
- 144 blocks per day: In growth phases, blocks come a little faster; the real daily issuance is then higher and the cost per coin slightly lower.
- Without fees: The model does not count the transaction fees miners earn on top.
- Delay: The 90-day average lags behind the hashrate.
- Bitcoin only, meant for daily to weekly charts.