The Only Real “Fundamental” Bitcoin Indicator I Know Of Says It May Be Time To Buy.

I’ve been a long-time gold owner and my interest in Bitcoin since late-2022 is solely as “digital gold.” I never believed it would ever become legal tender and I do not believe it ever will, simply because hard money periods have never lasted long anywhere in world history and I do not believe humanity or history will ever change. It will be, like gold, a “shadow” reserve asset. I also believe that Bitcoin, as digital gold, will continue to eat market share from gold and this will give it outsized returns for at least another decade, assuming quantum and AI does not destroy it.

The one thing Bitcoin and gold have in unison is they are “mined.” Each have a cost of mining. For gold this includes land rights, mineral rights, water use, human capital costs, regulatory costs, equipment costs, energy costs, among others. For Bitcoin it is capital costs, land costs, human capital costs, regulatory costs, energy costs… essentially the same, although in varying amounts between the categories.

The truest thing I’ve ever seen about gold valuation, since it creates no revenue and pays no dividend is the following simple fact… when it costs more to mine gold than it trades for on the market, rigs shut down, workers and capital are redeployed, and many miners go out of business. This re-allocation eventually reaches equilibrium and usually goes too far the other way. And then eventually the dynamic reverses, where the profits become so high that there are many new entrants… and the cycle begins anew. This is also exactly how the oil industry has worked for a century. And it is also how Bitcoin has worked since about 2011, when it became almost impossible to mine on a home computer.

Bitcoin has seen the same boom/bust mining cycles.

And much like oil and gold, the cost to mine vs. the market cost is about the only real “fundamental” indicator I’ve seen that if you look at real market results, has consistently led to superior long term returns. It simply makes no sense to mine when you are guaranteed a loss. And there is no reason not to mine if you are guaranteed a profit. Bust… boom. Human nature.

Right now is the first time since 2022 where the cost to mine significantly exceeds the market price. Right now, here are very recent estimates of the “all in” cost to mine a single Bitcoin. This includes all costs, not just energy costs. It includes depreciation of equipment, which any real businessperson would demand to include. I am sure more estimates can be found.

MARA: $70,027
Million Miner: $78,000
Vitalik Buterin: $93,700
MacroMicro: $89,155
Crypto Ticker: 81,000.

People are not dumb for long. And we see now that easy money no longer exists, the “mining” capacity is shifting to AI Data centers, where the sky is the limit (for now.) Several Bitcoin miners are losing millions. MARA stock is down 75% from Bitcoin’s peak. RIOT is down 40% from its peak this year alone. Bitmine lost $69 million last quarter. MARA lost $13 million (generating $30M in revs against $43M in costs), HIVE lost $79 million. This cannot continue. This is what you call “blood in the streets.”

So right now we have one of those “once every few year” opportunities that I’ve never once seen not work out, long term. I’ve never in my 4 decades in investing ever seen an upside-down mining/market price not be a good investment when purchased in times like this, especially if done via DCA (Dollar Cost Averaging.) Like I said, the last time Bitcoin cost this much more to mine than sell for was 2022. How did that turn out? Remember when oil briefly traded at $0 during Covid? How did that do? Or gold in 2015 when it cost $1200-1350 to mine an ounce but sold for $1050. Where is gold now?

The two great things Satoshi did were cap Bitcoin at 21 million coins and the other was POW mining that gives it what critics just can’t seem to see… a real fundamental indicator that has worked for a century in commodities. Mining cost vs market price. To assume this will not work is to assume business people will willingly lose money for long periods of time. I’ve never seen that.

My opinion is that as long as AI, LLMs and quantum do not destroy Bitcoin, and I cannot rule that completely out because that topic is above my pay grade, that this is a very good time to buy Bitcoin at some level. These greed/fear indexes are silly because we never see the data behind it and it is, as my father, who was an engineer once said… GIGO. Plus the gauge is so short-term and determined by animal instincts. Price to mine vs market costs is not an animal instinct, it is a fact that assumes people will eventually act rational.

I am not saying go all in. I own more stocks than Bitcoin and about as much gold as Bitcoin. What I am saying is research for yourself this topic and how it has turned out in previous Bitcoin bear markets and see for yourself how it would have worked out. If there is a strategy that seems to have worked very, very, very well it is to buy when others are getting out of mining because it is irrational to mine. Right now is one of those times. I plan to begin buying Bitcoin every month this dynamic is in play with whatever money I have saved that month. A great time to DCA in. This is why I am excited, not fearful of this price action and honestly would be even more elated to go sub-$60k. Because the mining cost is only going one way….. up. And eventually this adjusts. The worse the ratio between mining cost and market price, the more I believe I will win because over time, it makes so much sense and history is on its side.

I am not willing to argue about this topic as I feel no need. Like I’ve said, it’s always worked for me over decades and barring a technological catastrophe, I think it is very likely to continue. Hope this helps some. Good luck!