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Altcoin crash before Bitcoin will hit floor in 2018

In this video, I want to share with you a very powerful idea which I think actually could put you way ahead of everybody else out there who does not know this. You see right now there's a lot of fear, uncertainty, and doubt about Bitcoin, what's been commonly coined as Fud and of course many folks are asking, Hey, when is bitcoin going to stop dropping and start going up again. In fact, what could be the price level at which bitcoin could stop dropping and could start to rise again or put another way? What price could be the floor for bitcoin? So that's what I want to talk about with you in this video. Some very powerful ideas and information I want to share with you. So that was an interesting article recently in Market watch and they talked about what is the cost of producing one bitcoin.

 

 

Interestingly, the answer depends on which country your in. Now I'm going to go through the list of countries with you in just a few moments and show you exactly what the cost of producing one bitcoin is in different countries. But before I go into that, I want to share with you something much more important, which is this, you see, before we can discuss what's called a production costs or the breakeven cost of Bitcoin, we need to understand something about economic theory and about the boom and bust cycles of certain assets and commodities. You see, if you compare bitcoin to a commodity or asset like gold, we can begin to understand bitcoin probably a lot better. Now. Some people will of course disagree with this. I'm sure many gold investors right now shouting at me across the screen saying, how dare you compare Bitcoin to gold?

Gold is real money on Bitcoin is not.

You know what? I'm not going to get into that because we'll have a debate about that for the rest of our lives, about which one is real money, so let's not get into that, and I personally don't really agree with that whole argument. That's gold is real money on bitcoin is not real money. That's a very debatable situation. But here's the thing. What I've found is if you compare bitcoin to something like gold, you can begin to understand this price behaviour a lot better because a lot of the people who are investing in bitcoin right now are probably the same kind of people who bought gold some years ago because you see gold and bitcoin have some very important things in common. I think you will agree with me that both gold and bitcoin are bought by the same kind of investor because investors will buy gold and bitcoin.

They both have a deep distrust of government or establishment. They're both anti-establishment markets or assets, if you want to call it that. You see a lot of people who buy gold, they buy it because it's the opposite to feel worthless paper currency, and it's the same thing with bitcoin. Many people who will buy bitcoin do it for the same reason because they see it as an antidote to worthless paper Fiat currency and why the way, give me a thumbs up if you agree with that, and also bitcoin, similar to gold has to be mined. Now I know the mining of gold and bitcoin. Our model is different from each other, but nonetheless, they both have to be mined and there's an argument that there's a finite amount of each of these on the planet. Now, let's talk about the boom and bust cycles of commodities and assets.

You see certain assets like gold and oil and even the real estate market go through what's called boom and bust cycles, but let's stick with gold for the moment you see when there is an oversupply of a certain asset like gold. Okay? What you have is a situation which leads to a glut of that particular commodity or asset. All right? Now when there is a glut, in other words, when there is more supply than there meets demand, what you have is what's called a saturated market, and when the market is saturated, that essentially means that everyone who could have bought has already bought. That means there's nobody left to sell to. All right? So when there's more supply than there meets demand, what happens to price? Well, it's simple economics. Simple market forces that drive the price of that asset lower, so price drops as a result.

Now, when price of that asset drops, what happens then? Well, it depends how far drops because when the price of that asset falls to its production cost. Now let's take gold, for example. Gold has been said to have a production cost of $1,200. In other words, the average cost of producing one ounce of gold has set to be about $1,200. Now imagine gold folds down to $1,200. Okay. To with production costs. What happens then is that a lot of these mining companies are drilling for gold. Suddenly start thinking, well, hang on a second. What is the point of me? Keep drilling for gold, because remember, mining companies have enormous production costs, not only for drilling for gold, but also paying their employees and a lot of other expenditure they have to take into account, so when the price of that asset, like gold falls to its production cost or even lower than this production costs.

A lot of these mining companies stop mining. In other words, they stopped drilling or they have to go out of business to become insolvent, and when that happens, they have to lay off workers as a result. That of course produces a lot more panic in the market. Remember, psychology plays an important part in what price does as a result of that panic and capitulation prices continue to drop. Now what happens then is when a lot of these drilling companies and mining companies go out of business, the market forces that imply that there's scarcity and when there is scarcity of that asset or that commodity, that of course means there is now less supply than meets demand. So when there is scarcity, there's now less of that commodity about then there was before and when there is scarcity, that means of course, there's less supply than demand.

That of course means as market forces take control and that pushes up prices up again, and I remember when prices go back up, especially when they go above the production costs of that particular commodity. So imagine, for example, if gold prices went back above its average production cost of $1,200, then of course means now there is more investment being brought in. Suddenly you'll see more companies investing in that particular mining company that brings in more money, more investment prices start to go up again. And of course remember psychology plays an important part in this, and the average investor started joining again, pushing prices back up again. Now remember the same way that human psychology pushed prices massively lower in times of panic can also push presses massively higher in times of prosperity in times of market bubble. All right? In that situation, as we saw last year with bitcoin suddenly jumping up a thousand percent, we reach a bubble territory.

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Now remember, as prices start to rise and skyrocket, that means a lot of these mining companies and drilling companies start to drill in mind more for that commodity. There's now more production than there is demand. Why? Because I want to make more money. Simple as that. So as a result that overproduction oversupply leads back again to the same situation we were before, which means now we have a gluts, an oversupply that meets demand, and as a result, the whole cycle then repeats itself again. Alright guys, it's simple economics, simple market forces that bring about equilibrium and adjustment in the price. And by the way, let me just show you exactly what happened with gold. If your years ago, as you may remember, gold went through a tremendous bubble stage and it peaked at about just under $2,000 in year $1,900 already peaked and then prices start dropping.

But notice when prices dropped, notice at what point they stopped dropping. Take a look at this. Let me just bring this chart of it closer and you'll see notice the level at which gold stopped dropping right here, back in 2013. And again in 2013. Both of these were the 1200 magic number. The production costs, the average production cost of gold. Now notice in 2015 gold went below its production costs. As a result, a lot of these drilling companies, mining companies, went out of business and it's persisted because those mining companies went out of business, they stopped drilling is when finally, gold made a bottom there and started rising in price. Okay, so remember, knowing the production cost of a certain asset can help you understand that asset a lot better. Now, let's talk about the production costs that bitcoin. In other words, how much does it cost to produce one bitcoin?

Now this research was put together by elite fixtures and his courtesy of showing to you this particular information. Take a look at this and you will see that the production costs of one bitcoin depends on which country you are in the world. For example, let me just show you this and just go down this list for you and you will see that in the United Kingdom and the United States. So in the UK, the production costs, the average production cost of one bitcoin is a thousand $400. Whereas in the United States, the price is just under $5,000, but $4,758. Okay? Now there are other countries that are much more expensive and a lot cheaper. So for example, let's take a look at some other cheaper countries to produce one bitcoin. Well here is Ukraine. So for example, if you are in the Ukraine, the average production costs about $1,800. If you are in Trinidad and Tobago, it's a lot cheaper than that 1000, $190.

And in case you're wondering where's the cheapest place to produce bitcoin? Well guess what? It's Venezuela where the production cost is only $531 for one bitcoin. And just to mention a few other countries. For example, in Iran the production cost of $3,200 in India is about the same. And by the way, in case you're wondering where's the most expensive place to produce one bitcoin? Well that prize actually goes to South Korea where the production costs of Bitcoin is a staggering $26,170. That is by far the most expensive place to produce one bitcoin. So as you will see, the average production costs of bitcoin really depend on which country your in. And some analysts have said that the average production cost is about $80,000. This was actually put forward by one particular analyst, which is mentioned in Market watch, and they said that the average production costs of bitcoin are about $8,000.

I don't know if you agree with that or you don't agree with it. Let me know in the comments section. Now, if you look at the chart of bitcoin right now, you'll see I've marked in red the horizontal line, which is the average production costs of Bitcoin, the coordinate to some analysts, which is about $8,000. Now you may disagree with that. You may think the average production cost is much less, maybe about $5,000 or maybe even less than that. So let's, we're going to do here is I'm going to just scrunch up the screen now. You will see that I've actually marked in another level on my chart. That's the 5,000 level there. Alright? So if you think the average production costs of bitcoin is $5,000, then it's likely that that level may put a floor in the price of bitcoin if it continues to drop down to those levels.

All right, so knowing the production costs of bitcoin or the average production costs, can you really help you understand where could be the major support levels for that market? Now remember, just like I showed you with gold and market, certain asset can often go below its production cost as happened with gold. Gold went several times below its average production cost of $1,200 below its magic number and actually I think that's an important thing to remember because often markets don't bottom until they go below their average production cost. Why? Because we need to see a lot of those competition being destroyed. We need to see a lot of these other competitors, a lot of these other mining companies going out of business in order for the supply to dry up and in order for there to be scarcity. Let me just go back to this chart one more time.

As I explained to you just a few moments ago, what we need to see before a market bottom forms are this scarcity. Okay? When there is less supply than meets demand. The problem with Bitcoin, cryptocurrencies right now is there. There's still a lot of supply. If you think about it, it's not just bitcoin. We're talking about. There is a huge amount of other crypto coins and crypto currency is about a lot of these other cryptocurrencies have to go out of business. I would argue a lot of these other crypto coins that nobody's even heard off have to go out of business. They have to vanish before finally we see a bottom forming in the crypto market and in bitcoin are. Guys now let me know if you agree with that. Let me know if you disagree with that. Let's have a discussion about it in the comments section.

All right guys, I hope this video has helped you and if you found it to be informative and educational, please get a thumbs up and also please remember to subscribe to our videos for future updates. Thank you very much.


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