On March 1st, it was reported by the Financial Times that the price of Bitcoin had reached a new record high in relation to many currencies. The approval of a Bitcoin exchange-traded fund in the United States fueled the market's enthusiasm. The expectation of a reduction in Bitcoin mining output at the end of April intensified the market's frenzy. The increase in demand from buyers expecting the next halving explains why the cryptocurrency bull market is now happily predicting that Bitcoin's price will soon exceed $100,000.

However, this bullish target seems somewhat suspicious upon closer inspection. According to estimates by JPMorgan, the current production cost - mainly the cost of electricity used for mining calculations - is about $27,000. This sets a price floor for Bitcoin. After the halving, this price will jump to around $50,000 in the short term.

However, the recent surge has pushed the price of Bitcoin far above the production cost. This situation is not sustainable for Bitcoin. In addition, these costs should begin to decrease shortly after the halving, as inefficient miners exit the market and cannot keep up with the pace. As old machines are phased out, the hash rate should decrease, and production costs should also decrease.

At some point, the momentum of price increases will weaken. Assuming that mining processing capacity decreases by one-fifth, production costs will correspondingly decrease to around $43,000. This provides a useful guide for where prices may find support after the current frenzy subsides.