Bitcoin has suffered significant losses after dropping by thousands of dollars to take its value below the $9,500 level. Market analysts believe that the criticism of Facebook’s cryptocurrency Libra by the US senators has unsettled investors. The sentiment, therefore, could push the bitcoin price further lower.

Nevertheless, the cryptocurrency would not go anywhere near its previous bottom level of $3,120, according to noted analyst and trader FlibFlib.

The Twitterati rubbished the frantic calls that predicted bitcoin rate at new lows. He said the cryptocurrency would maintain its price above the cost of mining to remain profitable for miners, citing the Bitcoin creator Satoshi Nakamoto who stated:

“…the price of any commodity tends to gravitate toward the production cost. If the price is below cost, then production slows down. If the price is above cost, profit can be made by generating and selling more.”

THREAD 1/ I have seen a lot of hysterical calls for bitcoin to find new lows and want to revisit a logical economics based approach which helped me call the 2018 bottom to near perfection and why I do not believe bitcoin will find new lows. https://t.co/HZ6L38dwKz — f i l ₿ f i l ₿ (@filbfilb) July 17, 2019

Miners are Holding Bitcoin

Analysts at JP Morgan Chase said in January that the cost of extracting a single bitcoin, based on a global average, was around $4,060 in Q4 2018. Pitting the input against the current bitcoin rate, miners are still raking in approximately $5,500 profits per bitcoin. FlibFlib noted that they would sell into demand anytime the revenue per unit goes above its mining cost. Likewise, they would sell bitcoin on a loss against a weaker requirement, which was visible during the 2018 bearish action.

“What happened in 2018 was miners selling off their bitcoins at marginal costs. Only the most efficient miners survived, while their inefficient competitions got eliminated,” said FlibFlib in a listicle format.

He added that miners now are holding onto their newly minted bitcoin stock. It is because of a halving event that would take place next year, which would reduce the supply of bitcoins by half. Miners will limit their sales in hopes to maximize their per-unit profit against a potentially higher demand. And eventually, they will sell bitcoins at the top of the bubble.

6/ Mid term Action most likely from miners:

– Sell production / Hedge down while existing MC is still low

– Limit selling pre halving to envoke new halving bubble

– Limit sale of production

– Maximise revenue per unit

– Sell new bubble — f i l ₿ f i l ₿ (@filbfilb) July 17, 2019

“This, of course, is a theory,” said FlibFlib. “But this theory did precisely what it said on the tin last year. We have also seen the pre halving hype bottom out at 2x the cycle bottom historically. Coincidence? I think not.”

Where is Bitcoin Demand?

FlibFlib’s analysis followed strong-worded comments from the US President Donald Trump, Federal Chairman Jerome Powell, and Treasury Secretary Steven Mnuchin about bitcoin. The trio expressed their resentment towards the cryptocurrency, believing it facilitates a large-scale criminal industry worth billions of dollars. Mnuchin even called it “a national security threat,” sending a wave of negative sentiment in the US crypto industry.

I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity…. — Donald J. Trump (@realDonaldTrump) July 12, 2019

So far, people have believed that the entry of mainstream financial firms like Fidelity Investments, E*Trade, and TD Ameritrade in the cryptocurrency industry would boost bitcoin’s demand among retail and institutional investors. Nevertheless, the comments provided by some of the most influential people could, at a minimum, put cryptocurrency firms under a stricter regulatory watch.