Bitcoin is currently in a bear market — that much is widely accepted.
But Jim Ferraioli, Director of Digital Currencies Research and Strategy at Charles Schwab, offered a more nuanced and structural take during a Bloomberg appearance on Wednesday. He argued this downturn has a quantifiable price floor — one rooted not in market sentiment or technical chart patterns, but in the real-world physics of energy consumption.
The numbers help put the decline in perspective. Bitcoin hit a peak of $126,000 in the fall before plunging to around $60,000 in February — a 50% drop. While painful for those who bought near the top, it’s far less severe than the 75%-plus crashes that characterized previous Bitcoin bear markets.
At the heart of Ferraioli’s analysis is a deceptively simple question: what does it actually cost to produce a Bitcoin? The answer, he says, establishes a natural price floor that has held firm across multiple market cycles.
For the most efficient miners — large-scale operations running cutting-edge ASIC hardware with access to the cheapest wholesale electricity — the cost to mine one Bitcoin is roughly $60,000, according to Ferraioli.
That number isn’t pulled from thin air. It reflects the total cost of running a mining facility at approximately $0.07 per kilowatt-hour using the most advanced semiconductor equipment available today.
Less efficient miners — those with older ASIC machines, higher energy rates, and slimmer profit margins — face a production cost of about $95,000 per BTC, based on Glassnode data referenced in Schwab’s May 2026 research report. That spread between $60,000 and $95,000 effectively defines Bitcoin’s current valuation band.
Bitcoin’s energy floor: Why $60,000 could mark the bottom
Ferraioli contends that in deep bear markets, the production cost for the most efficient miners has historically acted as the market bottom. February’s low near $60,000 lines up almost exactly with that level — and also coincides with Bitcoin’s 200-week moving average.
The selling pressure in Bitcoin isn’t random — it comes from a specific group of investors. Those driving forced liquidations are largely buyers who entered the market over the past 18 months, riding Bitcoin from below $80,000 up to $126,000 before watching their gains disappear entirely.
Schwab uses two cost-basis metrics to measure this pressure. The average purchase price for U.S. spot ETF and ETP holders is around $83,000. Meanwhile, the active investor cost basis — excluding coins earned by miners — sits near $78,000.
Both figures are well above current market prices, meaning most recent buyers are sitting on unrealized losses. This dynamic turns $83,000 into a resistance level — a ceiling of overhead supply — rather than a support floor.
Glassnode’s on-chain data supports this picture. Bitcoin’s most recent rally attempt stalled right at the aggregate ETF cost basis near $83,000. Total realized losses surged to $1.35 billion per day, and long-term holders began capitulating from their cycle-top positions. Hedge funds account for roughly 30% of spot ETP ownership but are running market-neutral strategies — executing basis trades rather than making directional bets — which means they don’t provide a natural buying cushion when prices drop.
This is where Ferraioli’s outlook turns more optimistic. Every major publicly traded Bitcoin miner has announced a strategic shift toward high-performance computing (HPC) for AI inference workloads. On the surface, the economics seem to favor abandoning mining altogether: AI inference generates higher net revenue per megawatt-hour than Bitcoin mining during peak demand periods.
But AI inference demand isn’t constant around the clock. Models run intensively during business hours but sit largely idle overnight and on weekends.
That creates a structural opportunity that complements — rather than replaces — Bitcoin mining. Schwab’s analysis frames Bitcoin mining as the ideal way to monetize power during off-peak hours, with AI inference layered on top during peak business-hour demand.
A data center running this hybrid model maximizes utilization across the full 24-hour cycle instead of leaving capacity unused when inference demand drops off. For miners, this means more stable revenue, fewer forced Bitcoin sales to cover operating expenses, and reduced structural risk during bear market downturns.
Bitcoin is backed by energy
The core thesis comes down to energy economics. Bitcoin has no earnings, no free cash flow, and no CEO providing forward guidance. In Ferraioli’s framework, its value is derived from the energy cost required to produce it — a cost that is transparent, verifiable, and historically resilient.
In commodity markets, prices can’t sustainably trade below the cost of production. When they do, producers shut down, supply shrinks, and prices eventually recover toward equilibrium.
Bitcoin operates on the same principle. When spot prices approach $60,000, the least efficient miners shut down, the network’s hash rate adjusts through Bitcoin’s built-in difficulty mechanism, and the cost to produce each new coin declines.
As of May 2026, the average mining cost across all Bitcoin miners sits near $85,604, while Bitcoin’s price trades in the mid-$60,000s. That means the network as a whole is operating at a loss — a setup that has historically preceded market recoveries, not further declines.
