Calculating Mean-Reversion Strategy: Bitcoin Energy Costs Reveal Price Drop Signals

To understand Bitcoin price decline potential, it is first important to grasp how to calculate the mean in market analysis—a method used by analysts to identify “fair” price levels based on historical averages. Using energy cost metrics as a reference, Bitcoin shows indications of short-term price pressure, with a possible correction toward the $59,450–$74,300 zone if the miner exodus trend continues.

Production Costs and How to Calculate the Mining Average

Recent data from Capriole Investments, a crypto-focused hedge fund, reveals the structure of Bitcoin mining costs that need to be understood through an average approach. By early 2026, the average electricity cost to mine one Bitcoin will reach around $59,450, while net production expenses—which combine various operational components—are approximately $74,300. Calculating this mean cost is important because it provides an overview of the breakeven point for miners. At the time of this report, Bitcoin is trading around $69,370, within a complex zone between pure electricity costs and total production costs.

Although the current price remains above the lowest average cost, Charles Edwards, founder of Capriole Investments, warns that many miners can still operate even if prices fall below this average. However, as prices approach the $74,300–$59,450 zone, their profit margins will significantly shrink, creating substantial financial pressure and prompting mining operations to migrate to regions with lower energy costs.

Hash Rate Decline and Network Adjustment

The decline of Bitcoin’s hash rate to mid-2025 levels at the end of January is a clear indicator of ongoing miner exodus waves. Some observers associate this phenomenon with miners shifting resources to the booming AI sector, while others point to the harsh winter storms hitting the US as a restraining factor.

Bitcoin’s network adjustment mechanism demonstrates system resilience: when miners cease operations, the Bitcoin protocol automatically lowers mining difficulty over time. This adjustment makes mining easier and more economical for those remaining active, stabilizing the network and preventing service disruptions. This automatic process can be predicted by calculating the mean of historical hash rate data, helping analysts project the timing and magnitude of difficulty adjustments.

From China Ban to Mean-Reversion: Historical Lessons

History provides valuable context for understanding this cycle. After China’s mining ban in 2021, Bitcoin’s hash rate dropped sharply by about 50%. This radical decline caused Bitcoin’s price to tumble from around $64,000 to $29,000. However, recovery momentum arrived quickly—in five months, the price surged back to $69,000, demonstrating a strong mean-reversion pattern.

Mean-reversion is a phenomenon where prices tend to return to their historical average after extreme deviations. Bitcoin has historically shown this pattern consistently. Based on energy value analysis—a metric that calculates Bitcoin’s fair value using energy and network input costs—the fair value of Bitcoin is estimated to reach around $120,950. The gap between the current market price ($69,370) and this energy value creates room for a potential rebound.

With an understanding of how to calculate the mean in the context of historical data and energy value, analysts can project that Bitcoin could reach a bottom anywhere in the $74,300 to $59,450 zone before a significant mean-reversion trigger occurs. Each rebound attempt from this zone has the potential to trigger a strong mean-reversion movement toward the energy value, creating opportunities for market participants who understand Bitcoin’s fundamental price mechanisms.