How much it costs miners to produce each Bitcoin in electricity or whatever their energy source of choice is, greatly impacts profit margins. The next major factor is the price each BTC is currently trading at.

When the cost to produce each Bitcoin is higher than the asset’s price, there’s a higher chance that miners will sell their BTC supply to fund operations or as they cash out and capitulate.

A tool has been developed that measures the current cost of production and layers it over Bitcoin price action. This tool is aptly named the Cost of Production indicator.