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The difficulty Bitcoin by issue, a working proof (PoW) pricing model, could provide indications on the next crucial level BTC would have to clarify.
Bitcoin Difficultly Approaches By Emission Model 2.0 Level.
As pointed out by an analyst on Twitter, the BTC price is almost double the cost of production now. "Difficulty by Issue" is a bitcoin pow price model based on two measures: mining difficulty and emission.
The mining difficulty is a mechanism of the Bitcoin network that sets the computing difficulty for miners to mint new coins and insert blocks on the chain. The problem lies in the fact that the BTC network has been configured to maintain its supply production at a constant value.
Whenever the Bitcoin hashrate, a measure of the total amount of computing power connected to the blockchain, changes its value, the rate at which miners produce new blocks also fluctuates. Since the network is programmed to prevent this, it adjusts the difficulty exactly as necessary to counteract these fluctuations.
Since the challenge depends on hashing in this way, it covers all mining-related expenses incurred by miners and can therefore be used to estimate production costs.
The challenge by delivery model is based on that idea. To calculate the cost of 1 btc, the model divides the term of difficulty with the "issue", the total amount of new parts added to the offer in circulation.
Now, here is a chart that shows the three essential levels of this model and where Bitcoin stands in relation to them:
The three difficulty per issuance pricing levels | Source: @paulewaulpaul on Twitter
As displayed in the above graph, the Bitcoin price was under the difficulty per issuance 1.41 level a while back (the middle line). This level represents some sort of average production cost to BTC miners.
The bottom line provides an estimate of the lower limit for the cost of production, whereas the top line provides an upper limit. The graph shows that btc never hit the bottom terminal during this cycle.
With the last rally, BTC has surpassed level 1.41 and is now near level 2.0 (the top terminal). In the past, Bitcoin has stayed between these two levels for prolonged periods for a few different cases.
Usually, bull rallies have taken place after Bitcoin has successfully broken out of this zone in the past. Thus, if the price of crypto succeeds in exceeding that level, it could be a positive sign for investors.
However, the failed difficulty exhibit per 2.0 level is just as real a possibility as there is history to it. It remains to be seen how the price will react once it has retreated this line (assuming that it will even make one in this rally).
At the time of writing, Bitcoin is trading around $23,100, increasing by 1% in the past week.
Looks like BTC hasn't moved much recently | Source: BTCUSD on TradingView
