Indicator Overview

The Bitcoin Production Cost Model is a revolutionary fundamental valuation framework that estimates the global average cost to mine a single Bitcoin. Inspired by the work of Capriole Investments, this metric treats Bitcoin not just as a financial asset, but as a produced commodity. It is built on the principle that Bitcoin’s market price is fundamentally anchored to its marginal cost of production, creating a hard floor based on real-world energy expenditure.

The visual core of this tool is the dynamic staircase line. Unlike smooth regressions, this model accounts for the halving shocks, the pre-programmed events that cut the block reward in half every 4 years.

By integrating Network Difficulty, Global ASIC Efficiency (J/TH), and Industrial Electricity Rates, the indicator visualises the shifting equilibrium between miner profitability and network security, highlighting zones where Bitcoin is statistically "too cheap" to exist.

How To Use

Investors can use the Production Cost Model to identify macro-generational buying opportunities and to understand when the mining industry is under extreme stress.

• Efficiency-Adjusted Support: The model assumes a decay in Joules per Terahash (J/TH) over time, reflecting the transition from older ASICs to modern, hyper-efficient hardware. This allows the indicator to remain accurate across 13+ years of data, accurately depicting the "fair value" of the network in both the $100 era and the $100,000 era.

• The Halving Step-Function: The line features distinct vertical jumps. These represent the Bitcoin Halvings (2016, 2020, 2024). When the reward drops, the cost to produce 1 BTC instantly doubles. This creates a supply-side pressure that has historically forced the market price to eventually catch up to the new, higher production cost.

• Miner Capitulation Zones: When the white price line falls below the Production Cost line, miners are essentially (on a whole) operating at a net loss. Historically, these miner capitulation zones are extremely short-lived and represent the most significant buy signals in Bitcoin's history.