Topic: Is the AVERAGE PRODUCING COST of 1 Bitcoin representative of the lowest PRICE?? (Read 1789 times)

There is nothing preventing Bitcoin from dropping below the "cost of mining it" - quite a few folks still run old miners that cost MORE to make Bitcoins than their cost, though the LARGE farms aren't wasting money doing that.


 If Bitcoin price dropped through the floor again, what would happen would be a lot of folks turning miners off - and that's likely to happen to a noticeable degree as of the halfing by folks with non-FREE electric running S5/SP20E generation gear and older as they'll be VERY unprofitable at that point unless Bitcoin price almost doubles vs. diff increases in the meantime.

 Even with CHEAP electric, S5s are getting really marginal even now, and SP20Es aren't a LOT better off (though they can undervolt to STAY somewhat more profitable easier than a S5 can).




 After review of the OP, I note that they're talking about the cost of running a bloody NEPTUNE - which is what, 2 or 3 generations OUTDATED by Bitcoin mining gear standards now? No WONDER they think the cost and the price are related, their COST is probably 3-4 TIMES what current miners cost for the same hash power.

I think the price of the bitcoin has never drop below the mining cost of with considering the electricity.

 Almost NOBODY would farm if the average production cost was the same as the price. No incentive TO farm in that case.


 The COST to mine a Bitcoin right now with current gear is quite a bit less than the current price, unless you have fairly high electric cost.

 The whole theory of "the production cost = the price" makes ZERO sense, most folks AND ALL MAJOR FARMS are in this to make money, and if the cost and the price on the same THEY CAN'T MAKE MONEY.


 The floor at around $400 seems to be more about the major influx of cash in Nov/Dec timeframe when the Chinese markets started accepting fiat currency for purchaces. It has ZERO to do with any "production cost", which is well under $300 and possibly under $200 (if they've replaced most or all of their gear with current gear) for most or all major farms and a lot of home miners. I suspect most of the major farms cost is closer to $200, but I don't have hard figures on the total overhead for any of them (though I have a VERY good estimate on electric cost for most or all of the large farms in Washington state).

 The issue for home miners is achieving ROI on the cost of the MINER, which cost is quite a bit higher per hash than for large farms (some of which buy the chips and build their own miners to save on equipment cost, the rest get large bulk discounts, earlier access, and in the case of the farms run by the miner manufacturers like Bitmain they run at least some of the gear for a while THEN sell it for a large markup making their effective equipment cost ZERO or a negative number).

Since I've started this thread, the price of bitcoin didnt go under 400 as mentioned in the beginning of our discussion here , simply because there is no more "room" under 400$.

How?

Because the difficulty factor and the COST$ for mining one bitcoin in electricity is about 400$ or higher.

I mean all the miners in the world ( and 400$ is an average between theyr electrical costs, some may mine with free electricity , but most would have to cover theyr monthly bills)

therefor there is no incentive for miners to sell below a certain level , this creates a strong wall at a certain value, review what happened when bitcoin crashed all the way from 1200 to 200 , when it met the producing cost the decline STOPPED.(at around 200$),and the difficulty instead of declining it Tanked.

Now with that difficulty more than tripled we shouldve been in the 600$ area but at the same time more COST effective miners roll out bringing the average cost of production lower.

Toughts?

If the average production cost = average sale price, pretty much NOBODY would waste time farming as they'd make NOTHING.

 For certain, none of the BIG FARM operators would waste their time with mining if they couldn't make a good profit at it.

For a little while, I mined a relatively worthless altcoin called quark. For the most part, I did it just for the experience.

With a dedicated GNU/Linux and OS X command line client and a dedicate Windows PC - even on a coin that rarely ever had a transaction in any of the blocks, I rarely actually mined a block. With bitcoin where there is demand, the competition for blocks is even more fierce, meaning if you do not live where there is very cheap power and you do not have the latest high tech equipment, obtaining them from people who do have those things is easier than trying to mine them yourself. And probably cheaper.

That's why the price is higher than production. Way more people have demand for bitcoin than can possibly mine them, so rather than paying electricity and buying specialized equipment that is outdated quickly, most of us just prefer to buy them. Just like I would rather buy a steak than raise a cow in my backyard.

No. Price is determined by supply and demand, not by how much it costs to mine them.

Most people buying bitcoins do not have the equipment to mine it, just like most people buying automobiles do not have the equipment to manufacture them.

Price of manufacture is almost always well below retail.

How does that make any sense? The average producing cost would be the average price. Right?

For now price tanks 400, watch the price closely as I still believe there is a link between cost of production and actual price .

If its not profitable for a miner to mine then he will buy BTC so miner that shut down , become buy pressure, so price even if it goes below the average cost for production eventually it will get back on the resistance thats formed around the average cost for production.

Regarding miners that shut down when bitcoin becomes cheap, The only time I saw difficulty drop was when it met the average cost for production back when it struck 200.

And the difficulty dropped very little before stagnating for a period.(as price did)

Of Course the price has plenty of room to the upside , but for the downside part I personally dont see any space left.

Definitely true for Bitmain.
Appears to be true for BW.com/LKetc.
Definitely true for KnC.
Definite true to some degree for BitFury, though they seem more inclined to sell chips to large farm operators for THEM to build the actual miners with.
Does not appear to be true for Innosilicon.
Sorta-true for Zoomhash - they farm then sell on at least some of the gear they sell, even though they don't actually manufacture it.
Probably sorta-true for some of the other bigger gear dealers but I have no direct info in those cases.

Most of the large farms are not actual chip makers though - but even THOSE would likely get some big discounts on their equipment in bulk purchaces.

There was a user here who claimed the large farms are frequently also the equipment manufacturers. He said they manufacture the latest equipment, mine with it, then sell it to the small miners. If it's true then some of the large farms have no hardware costs, they make a profit on their hardware and only have to pay for electricity.

Avarage cost for the big farms has always been quite a bit LOWER than average price, with the exception of a couple of very early farms that have probably sold out or shut down by now (like the Polish megafarm that was trying to sell of large quantities of 55nm Bitfury gear a couple of months back or so).

 Very few large farms TODAY are paying more than about 3c/KWH for their electric, which keeps their production costs quite a bit lower than the large majority of "home" miners.


 The bulks of Bitcoin mining is done by large farms, which has been true for a while though I can't say HOW long that's been true. I'd guess "3-4 years ago" would be the timeframe that the large farms started mining more than half of all Bitcoin mined.

When the price crashed to $150 last January there were small pools that had to shut down because they said it was unprofitable for them to continue mining. The bigger pools carried on mining, probably because their miners had better hardware and cheaper electricity. One member here said he generated electricity for free off his own waterfall and had paid for his mining equipment, so he could mine Bitcoins for nothing. Miners have differing costs of producing Bitcoins, and if the lowest price dropped to single digits there would still be some miners continuing to mine and making a profit. The buyers decide the price, not the miners.

you cna always go ahead and try hahsnest or bit-x with their cloud service, their are legit do not worry

and they give you the possibility to mine with cheap electricity, but if you were one of those with the hobby for mining, and the need to have your miner at home, then maybe it's not the best choice for you

No, it is a free market and the buy/sell orders decide the price,people can dump to any price they want if they are to get out of crypto or they might buy at any if they are interested.Those are just profit strategies.

Im done with mining since august. With the halving just around the corner I dont consider mining a good choice for me ATM.

but a neptune is no where near as efficient as one s7, you should sell that neptune and buy one s7, your cost to produce 1 coin will reduce greatly

Thanks for all the replys guys , enjoyed reading them.

Valid points of view presented here but we still have to take into consideration that not every miner is a big farm , and not every miner lives in the same country with same electricity costs.


I just gave you my example , wich would have been in my case ,

For me personally one bitcoin would cost over 400$ to produce here in my country with a neptune wich still is one of the best miners on the market.

no it is not, check fact don't assume

1 s7 consume 1200w, this means around 30kw per day, this means $45 per month, at 0.05 cent per kw/h(every big farm run at 0.05 at max)

1 s7 produce 0.6 a month, this means $75(0.6:$45=1.00:X => X=1.00/0.6 x $45) a month to produce a single bitcoin

there are no additional cost, you can simply compare it to casual mining, if a user decide to runa  single s7, that would be the profit at present, then you need to factor the diff increase, in fact previously it was even higher...


because the cost to produce those machines, that are sold for $1200 are far cheaper than their final cost, which is $1200

so not only they have big profit, but they have more profit on top of it, by selling those machine for that price

Really, with Antminer S7 you can produce one Bitcoin for 75$ when it is sold for 370$ now?
If that is real tell me, why the producers of the Antminer do not use it for themself? They could literally print money everyday.
Selling machines who produce something for 75$ which can be insta-sold for 370$, I do not get it. I would never sell those machines.

Um...this calculation is ridiculous and isn't right.  The last time I calculated cost to produce a Bitcoin, SP30 had been out for a while and the energy price was like 2/3rds or higher with the hardware being the rest.  The energy price was something like $150+ then, and that was maybe over a year ago.  Besides the Bitfury 16nm chips, which I'm not sure of how many of those are deployed, efficiency hasn't change that much, but hash rate is a lot higher.  There is no way in hell the electric cost to produce a Bitcoin is $75 now.  It's probably somewhere between 200-300 with (huge) hardware costs on top of that.

Not really. Nobody ever claimed that mining should be profitable at all times. Mining is requires for a healthy network, and the by product is coins.

Most likely if it is unprofitable, small miners will shut down, raising the profits of the giants.

no, because neptune is trash, with antminer s7 the cost to produce one bitcoin is around $75, so the price can even go under 100, and it will be profitable, but a bit too risky for the miners in that case

No.

Average cost moves.

hi guys , I was thinking about this and im asking, what are your toughts on this matter?


--When bitcoin fell from ATH it hit the bottom when the price for PRODUCING 1 bitcoin was equal to 1 bitcoin.where i live that was about 200$.

    in my country in september 2015  , with a neptune at 54mm difficulty (half of now) I was able to mine one bitcoin per month and the electricity cost would've been 200$. Bitcoin was about 230$ at that time.

--Now with the recent price gains , and with recent increase in difficulty , im not mining anymore but it would go like this :

With a neptune it would cost me 200$ per 0.42 btc per month, So i would need to pay at least 400$ per bitcoin to produce it and sell it for profit.


***So to be profitable the price of bitcoin should stay anywhere in that area of 400$.
               
                Is the AVERAGE PRODUCING COST of 1 Bitcoin representative of the lowest PRICE 1 bitcoin could be??