Topic: relationship of bitcoin prices and mining price (Read 3991 times)

Nobody said that the price will rise. Probably if the coin lost all of it interest, goes right to our cryptocemetery.

When you have bitcoins for the speculation, the only things that count is the current price and the future price. What you paid for the coins, is no longer relevant.

Historic prices may be, for chartists, only a help in considering the future price.

Basically, you can just forget what you paid for them. If you have a coin you paid 1000 for, you are in the exact same position as someone else with one coin, who paid only 200.

Since mining is a business venture, the same considerations apply as that of a factory or a service business. They need to buy capital or rent (a building, the miners, the power) and hire labour to install and run. Importantly, there is a time factor - from the moment of decision to a running mining farm, there is a time lag. The investor has to speculate on the future prices of all his input cost, and the value of the output (the coins). Including to continue to produce for less than total cost, as long as the cost to run, disregarding the capital cost, is less than output (the sunk cost concept).

So mining needs investment, and speculation of all relevant future prices. That means the investor might overinvest based on current prices, because he wants to be in position with mining power when, as he might think, the bitcoin price rise in the future. Some win, some lose. But as time goes by, the mining cost has to continously close in to bitcoin price.

Slight difference - for people who bought bitcoins at $1000, it is a sunk cost. So if their view is that Bitcoin is going down further, the right thing to do would be to sell bitcoins for their current price. People losing money on investments is different from people making investments that are definitely going to lose money.

yeahh im newbie, and i want to know it too

People bought bitcoins at $1000 each a while back -- how could they sell them for less? Yet, they do. People frequently lose money on investments, selling them for less than they cost.

A smart miner whose operating costs are greater than the value of the mined coins will simply stop mining so they don't have to sell at a loss.

so in some weird was bitcoin price is related to electricity prices?

Ah, think about it a little bit more.  here's a little example. If electricity would cost 10 usd/hour and for miners would mine a btc in like 50 hours how could they sell it for less than 500 usd? And in this case we can't even speak about breakeven

Yeah, but that means we need to increase the block size no?

And if we dont that just means we`ll have transactions to be clogged up or taking way too long for even non-daily stuff. Like any purchases etc.

It is always a very interesting thing to discuss the interaction between mining cost and market price

Labor theory of value is true when demand > supply. This theory worked many centuries when most of the products are insufficient

Because mining is the lowest possible cost to get coins, smart buyers will first seek to mine bitcoin if they want serious amount of bitcoin. Only when mining production can not keep up with the demand, the price will surge, otherwise the miners will quietly accumulate coins at a price close to mining cost

If demand << supply, then the first thing we will notice is that the mining difficulty will drop, means investors are scaling back of their mining operations due to less demand in bitcoin. So far this has not happened, means the demand is still strong

If demand >> supply, then we can expect that the mining difficulty will rise quickly. It does not matter it is caused by technology shift or more people joining mining, as long as difficulty is rising, we will know for sure that the competition is getting tougher. As a result, cost will rise, market price will also rise

If demand = supply, then the price will stay flat, most of the demand is satisfied by mining

A very fast price rally is caused by an anticipation of dramatically increased demand. Because the daily supply is fixed, those demands can only be satisfied by market order, which will drive up the price

Currently about half of the daily coin supply are generated through mining, after next reward halving, the mining will get less coins, so the serious demand can only turn to market and purchase, which will raise the price

There's no relation between Bitcoin prices and mining prices.
Bitcoin prices are based on market trading volume and on the mood of Whales.
But the mining prices are based on network difficulty.

it's marginal cost and marginal product, so it's irrelevant if it's consumed or stockpiled or whatever. Oil, wheat, silver, rubies, lithium etc. What only matters is the marginal cost - which is the cost of producing the next unit regardless of how many units may already exist or have existed or will exist in the future.

And what do you mean every holder is a producer? Only miners are producers of new bitcoins. Whoever obtains them afterward (presumably because miners sold them in the first place) are not producers they are just owners. Please clarify.

For the second point the miner isn't stockpiling, he is offering one unit higher and shuts down production in the meantime. In reality he will also sell that one unit at a loss. For semantics when I say the miner offers $300 that does not necessarily mean he has a unit for sale, but would offer that price if he did. Perhaps a better phrase is he "would offer" instead of imply that he actively does offer it.

You can't compare oil and wheat markets with bitcoin markets because oil and wheat are consumed and bitcoins are not. In the bitcoin market, every holder of bitcoins is a producer, not just miners.

Thank you for your recommendation, but I am well-versed in economics. I am not disputing, "marginal cost = marginal product = selling price, always and everywhere." I am simply pointing out that selling price determines marginal cost for miners and not the other way around because miners have no more control over prices than anyone else.

As to the second point. If the current price is $249 and the miner offers it at $260, they are by definition holding their coins, waiting for a better price.

It is irrelevant if miners are only a small percentage of the stock of bitcoins, because it is only producers who consistently offer them to the market at all times. oil producers are only a small part of the oil market. wheat farmers are only a small part of the wheat market. And yet marginal cost = marginal product = selling price, always and everywhere. Read an economics text book if this still confuses you (it is hard to wrap your mind around, I know!). I can give you some good recommendations.
Your second point point about not sitting on them is precisely why they offer them for sale in the market as they are produced. They are not speculating, they are in the business of producing them and immediately selling them. I never assert that miners hold on to coins waiting for a better price.


So let me be more clear as to why I think you see a contradiction. There are two forces at work here, one manifests itself in scenario 1 and the other scenario 2.

[1] in a world where there are heterogeneous miners, some with different efficiency or energy costs etc., then as difficulty (cost) increases, it will weed out all but the most efficient miners. Why? Let's say there is a point at which Miner A has a break-even of $250 and Miner B has a break-even of $300. Miner A & B will both offer $300, but for B this will be his absolute minimum. Nobody pays $300, so Miner A will offer $299 but miner B will still offer $300. Miner A will offer $298 but miner B will still offer $300. And so on until miner A's offer is $250 and miner B still offers $300. Assuming there are many like Miner A they will all be in competition with each other driving the offer quickly down to their $250 limit. This is individualistic competition not a cartel.

[2] in a world where the majority of miners are subject to the same efficiency (largely homogeneous), say now most miners are all like miner A, and nobody is able to increase their efficiency or lower their electricity cost any further. Their break even now is $250 and so they offer $250 in the market. Another miner adds his hashpower to the network so now all of their break even price rises to $251. Nobody offers $250 anymore, they all offer $251. Another dozen miners join the network, increasing the difficulty even more. Nobody offers $251 they all offer $260. This is not a cartel, this is each individual looking out for their own self-interest. The invisible hand somebody once called it.


Going back to scenario 1. say the market offer is $250 and nobody is willing to pay $250. The best bid is $240. Will a miner sell $240? probably not unless his breakeven is $240 or lower. But a speculator, trader, market maker etc. just might sell $240s. However, once those have been sold @ $240, the best offer will soon return to $250 after those lower offers have been cleared.

Next, if bitcoin is indeed currency, most people enter the market to buy bitcoin. They then "sell" their bitcoin by spending them on goods or services and do not ever offer them in exchange for dollars, so offers will be lifted. If my job is to produce and sell bitcoin I do not speculate on their price (just as oil companies do not speculate on the price of oil, they make it and sell it). So if my cost is $249 and I can sell $250, I will do that all day long. But why not raise my offer to $251? Because if I am competing with many other producers to sell my bitcoins and they also have a cost of $249 they can offer $250 and nobody will take my $251s. So I will have to at least match - or even improve if I can - that best offer. If the world price for oil is $40 a barrel and I am offering $41 nobody will buy my barrel of oil. If it cost me $41, well I am just out of luck - there must be a lower cost producer out there it turns out.

Finally, this mechanism happens over time. There will be periods of time, days, weeks maybe many weeks, where spikes in demand may drive up the price or spikes in supply may depress the price at levels well above or below the cost of production price. Extrinsic value drivers will tend to keep the market price, in fact, above the avg. cost of production.

You have contradicted yourself. First you wrote that if the cost rises, then miners stop mining. Then you wrote that if the cost rises, they continue to mine but they hold the coins, waiting for a higher price.

I agree with your first statement, that if costs exceed value, miners will stop mining.

But, your second statement assumes that miners are operating as an informal cartel in which they agree to restrict supply of bitcoins in the market. I hardly think this is a realistic assumption. First, mined bitcoins are only a small part of the market. A mining cartel would have very little influence on the price. Second, miners have to pay their bills regardless of what happens to the bitcoin price. Many miners don't have the luxury of sitting on their coins waiting for a higher price.

Miners don't control the market, they are controlled by it.

That was Satoshi's vision.. that at some point when bitcoin has mass appeal and wide use with orders of magnitude more transactions per day than today, that at some point the tx fees will surpass the block reward for "total miner reward per block". Maybe this will be when the block reward is 6.25 or 3.125.. It is certainly possible in the future when the block reward is 3.125 that fees might equal 10 BTC per block = 13.125 total miner reward ! (right now total miner reward is averaging around 25.13 BTC per block).

There should always be enough miners because of transactions fees.

first we must agree that as producers of bitcoins, miners (on average) sell what they produce each day in the market. Same way oil producers sell their oil or farmers sell their wheat. It is important to understand that not every miner needs to do this, just enough of them to keep a steady supply offered in the market each day. Just like in oil or wheat markets there are also non-producer participants such as speculators, investors or other users. All those other users, however, do not have a new consistent and steady supply each day to offer to the market. This is why in all competitive commodity markets, marginal cost = marginal product = selling price.

second we must agree that any producer (of bitcoin or anything else) will never consistently operate at a loss.

if the cost of mining increases sufficiently (difficulty increases, electricity $ increases, etc.) then ultimately a miner will spend more money in electricity per day than the value earned in bitcoins produced per day. Rather than produce at a loss every day, they will simply stop producing. Then as miners turn off their rigs, the difficulty should fall... right?

The issue is hardware energy efficiency is increasing. So if you have a 1.00 W/GH/s rig and I have a 0.5 W/GH/s rig, and we both have the same electricity cost, there will become a point where the mining difficulty is high enough to make you drop out of mining, but I will still keep going. Through competition, more and more people will abandon their inefficient rigs and deploy newer, more efficient hardware.

And what if the efficiency does not increase or reaches a limit, yet more miners join the network and difficulty increases? Well, then producers will have to offer their bitcoin at increasingly higher prices in the market just to break even. This is how prices are caused to rise.

Of course there could be holders of bitcoin who are not miners who want to sell, but these people generally do not have a steady supply of bitcoin since they are not producing them. Therefore, after they dump their holdings the price may be temporarily depressed but when they are done selling, it is the producers left who will only offer prices that will leave them with a profit (or at least break-even).

Please explain how it puts a lower limit on the price. If the cost of mining is higher than the value of the mined coins, what exactly causes the price to rise? How does the cost of mining prevent people from selling for a lower price or encourage people to pay more?

exactly, and that is why that cost of production (mining cost) could be an intrinsic value estimate. A value has both intrinsic and extrinsic value. The extrinsic value is sometimes called the premium added on to the intrinsic value and is made up of many factors, including excess demand, a speculative premium and so forth.

The fact that there IS an intrinsic value (or lower bound in price) based on its cost of production is important since many people (incorrectly) assert that bitcoin has no intrinsic value at all! So if the cost of production model estimates that a Bitcoin should be $225 and the market price is $275, the extrinsic value composes $50 and the intrinsic $225.

mining doesn't influences the highest price. but influences the lowest, because under an x price the mining costs more than the mined coins.

yeah if no one would mine there would be no new blocks found and people would not be able to use bitcoins, though its kinda impossible right now as a lot of people invested in mining equipment and they wouldnt quit

This is only the effect of disinvestment, and does not change the basic rule.

well despite the mining cost to mine for bitcoin.

arent the miners needed regardless if they mine for bitcoins or not, since bitcoins rely on miners to find the transaction log?

Only if people start shutting down miners because the price of bitcoin is too less. As long as their marginal costs are covered, they will continue to mine.

It is good to know that the costs of mining decrease if the price decrease which is vice versa of what we think.

In general, it is the speculation of future value. Taking into account exceptional situations, where other currencies fail, can not be moved, can be confiscated and so on, is included in my personal valuation.

If you can profit on the ups and downs; good for you, and good for the stability of the value. It applies both to mining decisions and trading decisions.

it is the reason why someone should buy when the price is not being pumped and mine when it is pumped only, to take advantage of the diff that can't catch up the price so fast, then you can shut down your miners if electricity isn't good enough or sell it if you want...

The same rule goes for all things in the market, however harder to understand, like cars and bread and whatnot. The consumers value it, and the cost in the free market adjusts to price. But for bitcoin, it is rather straightforward, because you have the difficulty that adjusts.

Note that it is the market that does the cost adjustment. If there is no freedom in the market, the cost will not adjust, this is also the reason for the loss of productivity in socialism.

I am thinking most of the people think wrong about it and it iscomplicated

Many people get this wrong. Do you think majority makes it right?

your question is very vague. please specify what you mean by "mining prices".
However, mining cost shouldn't affect bitcoins since people involved in buying and selling of bitcoins aren't necessarily miners.

So the direction is vice versa of what people including me think

Correct. Higher price means more expenditure on mining. Note the direction of the causality.

No. The difficulty increases. The coin creation (finding) is essentially predetermined.

When the price of Bitcoins is higher, people are more likely to mine, especially people whose costs are close to their expected proceeds.
As the demand of bitcoin increase, mining prices also increase as it include hardware to purchase,supply of electricity (countinous flow of power)etc.
because of blockchain as it has to countinous update in transaction.
as with decrease in demand of bitcoin ,mining price may effect as they have to overcome with their regular charges.

But does nt the chance of finding more coins increase?

more miners does NOT equal more coins, that is the whole point. More miners only equals more difficulty.

mining gets harder in price for THs mining BTC and price of BTC gets lower too sometimes soo the mining will become a bit more rare but the other part of coin its true more miners more coins and a bit more devaluated coin too less rarity

Yeah anyone can, shit look at the us dollar for example.

The price is based on new blood, new volume of buyers at a rapid pace using it daily. Or else I dont see any value going up imo.

It takes time to find bitcoin, so its just only a matter of how many being left in my view.

People who sell based on their personal reasons, but if its difficult to find something its value should be double checked before selling..

The labour theory of value and the cost theory of value is the same. The idea is that capital is only condensed labour in the form of half made stuff that is the raw materials, and tools which also have to be made by someone. So all products and services are things from nature plus labour. Which is correct, the wrong part is that it governs the price.

The price is however derived from individuals preferring some thing over another thing; gather some people in a market and the price will be revealed by their actions.

Cost of production is not indicative, rather it is the result of the price after the free market has adjusted the capital structure according to the price.

Many do not understand this, therefore refuse to sell that lovely house that they built for a sum, since it will cost the same to build another house just like it. Maybe to their disadvantage.

Let me add than the cost of mining is not fixed. Just like the price of BTC. Price of processing power constantly goes down. Price of electricity is different between night and day, and it varies a lot between countries. Somehow, I guess the 2 are related, but it's a very distant relation, like the cost of producing an iPhone in China, and its retail price in a flashy London store.

A house is a unique item, so is a piece of jewelry or artwork etc. Bitcoin, like oil is a reproducible commodity. You can't compare a reproducible commodity (where one bitcoin is just like every other) with something like a house.

Supply and demand always determine the market price, cost of production is indicative of a theoretical value - and the market price may deviate for long periods of time from that or perhaps never even converge with it. If there are more speculative buyers than miners selling, well the price will go up and miners will make more profit because there cost is the same --- BUT the high price will induce more to miner which will increase the difficulty and increase the cost of production in a negative feedback loop.

What are shares of Microsoft worth? Supply and demand right now is the market price. But there is a value based on fundamental and technical analysis with various pricing models that will indicate a theoretical value that it should be. For bitcoin, cost of production is that theoretical value only.

Also, I am not invoking labor theory of value a la Marx or Smith. Austrian economics has a lot to say about cost of production (cost plus pricing) in its theory of the firm. Look it up.

As for whether or not bitcoins are consumed is another story... if you spend money you consume it - although it persists you no longer own it once spent. Gold and other metals also are produced commodities which persist.

It could be useful to know this if you need to sell a house in a declining market: The buyers decide what it is worth. What you bought it for, or what the building cost was, means nothing. If you don't sell, you reduce the supply, to the advantage of other sellers.

the bitcoin prices and mining price has nothing to do with each other imo.
The bitcoin price rice only trought supply and demand.

When a lot more people accept bitcoin the price will rice very fast or when a big company allow to pay with bitcoins like amazon.

It seems our god was wrong on this, or just had a bad moment, or was falsely cited.

The correct is that In the free market, the cost of any commodity tends to gravitate to the price. The mechanics is adjustment of volume - with too low price the production capacity is reduced by closing the least effective producers, until price rises to meet lowered marginal cost, the cost of the least effective remaining producer.  I thought he knew this well, because he designed mining regulation accordingly. (In bitcoin and gold, it is the closing of mines thus reducing difficulty (bitcoin) or increasing the marginal productivity (gold) that is most important, the small number of new coins does not change the potential supply that much)

The effect is appearant in all commodities, but it is obscured somewhat by the extended time it takes to reduce or increase production. Increase of gold production takes about 10 years, reduction of oil production takes 20 years, hereof 10 years to moan and yell and complain about the low prices.

The free market is necessary, and if some socialist tries to forcibly sell a commodity to the current cost, you know what happens, the cost rises and people end up with something expensive they have not asked for. Edit: Or (what they do now with oil) if they use subsidies including low interest rate to prolong the ineffective production, the price may go lower than cost.

What you describe is the labour (or cost)  theory of value, which has been debunked for a hundred years. By Mises (he again).

Basically: The value is in the heads of the market actors, it is subjective, and if they don't think it is worth the money, they won't do the exchange. What it cost to produce is of no importance. Try to sell a five wheeled car for just 25% more than a four wheeled car.

It will reach more than that, Bitcoin has real value, it has bright future,  Bitcoin is the revoulutionary technology, that enables a new way to send payment over the internet, you can think of it as an open accounting system. An accounting system which has real value, security and legitimate transparency.

The critical difference is that bitcoins are not consumed. That changes everything. Your oil, commodity, and produced goods analogies are all not applicable to the Bitcoin market. In the Bitcoin market, producers have little influence on the supply of bitcoins, so they little influence on the price.

No kidding you can't, but in scientific inquiry being able to see how things change by holding all else constant gives insight into how the world works!
Also cost of production influences price in nearly every market for produced goods, not only commodities. There is a ton of research on this subject in economics. Look up "cost plus pricing" to get an intro.

As for miners vs. traders all you need is enough miners to sell close to cost for this to work, you don't need each one to. In fact, many miners hoard or speculate on price. On the other hand, those in the business of mining are producers who sell as soon as they are made. Especially the Chinese mining farms. -- Take the analogy with the oil market. There are many more non-producers involved in the oil market - whether it is traders, consumers etc. and yet the price of oil usually trades around its cost of production (extraction + refinery & transport)

Incidentally, Satoshi Nakamoto knew this. In a quote from 2010 when he still posted on this forum:
I know it may hurt your brain that cost influences value, but just how the sun does not revolve around the earth and that black holes do in fact exist, many truths across many disciplines work counter to what the human brain intuits.

bears in mind that miners don't need to wait for the price to rise, to increase their hashrate, they can do it indirectly by enhancing their miners technology, which will consume less

one good thing is that the progress of this should not be so fast in comparison to the halving, at best 1:2 ratio(every two years they tech will evolve vs 4 years for the halving)

i think satoshi did calcute this in the equation, this could be another reason why he choose 4 years and not two, to permit some earning for miners, without the need that the price increases

You cannot assume that difficulty is constant. If miners can produce bitcoins for less than their value, then they will increase their capacity and the difficulty will increase until the cost of mining reaches the value of the mined bitcoins. I suppose there might be shocks that shift the supply curve temporarily, but otherwise, value drives cost and not the other way around.


Miners are not the only traders. Newly mined coins are only a small part of the market. Miners have only a small influence, if any.

The result of the halving will be that enough miners stop mining that the difficulty and cost adjust to a point where mining is profitable for the rest. There is no mechanism by which mining cost affects the value.

in a competitive market, economic theory says that price = marginal cost = marginal product.

If you take the margin to be say a day, the marginal cost is the cost per day to mine = (price per kWh∙ 24 hr/day ∙ W per GH/s)(GH / 1,000)
where GH is your mining hardware's hashing power in gigahashes, W per GH/s is the mining efficiency per gigahash/second (equivalently Joules per gigahash). Take a moment to compute your marginal cost.

Good. now here's how you calculate your marginal product (how many BTC you'd expect to find per day):
 = [(block reward ∙ GH)/(difficulty ∙ 2^32)/3600 sec/hr] ∙ 24 hr/day
where block reward = 25, GH is your hashrate in gigahashes and difficulty is the mining difficulty right now for bitcoin. Go calculate that.

since cost is in units of $/day/hashpower and product is in units of BTC/day/hashpower -- and since they are theoretical equivalence (for why, read an intermediate microeconomics textbook) we can divide one by the other to get 1. But since the units are different if we divide marginal cost/marginal product the value will be scaled up for the dimension $/BTC or dollars per bitcoin.. in other words you'll get the price of bitcoin which is a breakeven level for you individually.

Now if you do the same exercise using the prevailing averages for the whole bitcoin mining network, you'll get the theoretical fair value of one bitcoin in dollars.

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Let's play for fun using some estimates for those network averages and using an arbitrary 1000 GH, or 1 TH miner (it will work with any hashrate you choose so long as you compute both the cost and product using the same chosen hashrate).

Average global cost of electricity per kWh = 13.5 cents, and the average mining efficiency is 0.75 W/GH/s.

(yes I know some people mine for very low cost in Iceland or whatever and some people have underclocked S5's at .4 W/GH/s.  It is important to be referring to AVERAGES and not the best out there nor the worst. It's also true that the average network efficiency is trending towards lower watts per gh/s over time).

Ok so the network cost per day = .135 x 24 x .75 x (1000/1000) = $2.43 per day per terahash. Got it.

Let's do the same for average marginal product for our hypothetical 1000 GH. The difficulty today is 49692386354.8938,
 [(25 x 1000)/(49692386354.8938 x 2^32)/3600] x 24 = 0.010173175 BTC per day per terahash.  Fantastic.

divide cost by product: ($2.43/day/TH)/(0.010173175 BTC/day/TH) = $238.86 per BTC.
The current observable market price is $244 per BTC, or something like 2% off from the prediction.

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So what happens when the block reward is halved? Well the marginal product is cut in half while the cost remains the same, or in other words the cost to produce a bitcoin goes up. That means that your personal breakeven market price has just doubled. If the network average also reacts similarly, the market price should also double.
If, on the other hand, the network average has really efficient hardware, it may be the case that while you are priced out of mining anymore because your personal cost has doubled, the market cost may only increase by a little because the average network energy efficiency may be lower next summer than it is now.

You can tinker with what happens when the other variables change such as the mining difficulty and cost per kWh.

don't confuse market price with expected value. The expected value of a share of stock for some company may be arrived at with some complex and accurate model by a big time investment bank. But the market price will fluctuate with variations in supply and demand at any given moment, and in fact it may never converge to the theoretical value, or deviate from it for prolonged periods of time.  The analysis says mining difficulty is just one of a number of factors and it is certainly not the only factor, although it is influential.

of course cost determines price. in a market where a large number of producers compete to sell their product, they will undercut each other driving price down to cost of production. what goes for a barrel of oil, or any other produced commodity goes for bitcoin too. electricity goes in, bitcoin comes out. The one unique difference is that bitcoin has a fixed rate of supply (1 block each 10 minutes) so the elasticity of supply manifests itself in the difficulty instead of changing the rate of supply to meet changes in demand.

so what happens if mining hardware becomes twice as energy efficient? holding difficulty constant, miners will be able to sell each bitcoin at a lower and lower price until it again approaches this new (lower) cost of production. If difficulty increases, this will serve to increase the cost of production (the same hashrate will now find effectively less BTC per day than before the difficulty increased) so it acts as a bit of a stabilizer -- so the question is what will progress faster? The network size (which raises difficulty and cost of production) or technological progress?

in which sense? instead of 25 coin miners will mine just 12.5, and instead of 3600 con per day(actually they are a bit more, like 3800 some times) they will mine only 1800-1900

but if they are spending 20% of their profit in electricity, with the next asic, it is legit to assume that they will spend much less, let's say 50% less, so only 10% will be reduced from their profit, which also will be halved, because of the block reward

so in the end less profit overall for them, but it will be still profitable to mine

Thanks if you are correct I think I get my response but others have different viewpoints.

Is it possible that someone describes halving for me?
Thanks

So we may expect to falling price below 150$ and it is not good for BTC investors, is it true?

I feel the price of bitcoin has no or little effect from mining, since its based on a # of factors.

Like whales, and fraud, and other things that add in the price on the daily. Huge sell offs, like KNC moving bitcoin so its not just mining at all since its a small portion based on people views with only the mining difficulty is wrong.

He is mistaken. Anybody can write a flawed paper.

There is no mechanism by which the cost of mining drives the price of bitcoin. Mostly people that believe that just confuse correlation with causation, and make bad assumptions.

or you can expect the miners to remain the same and the price too, because the first will have a better technology that can sustain the price halving, because their electricity will halve too, so instead of having 80%(100-20 form electricity) they will have 40% (50-10)

I spoke with the CEO of BTCS, which has launched a mining farm down in the Carolinas (if I remember correctly). Based on the current hash rate and their price of electricity, they are still making a profit even with where the price of BTC is currently. And then there are chips that are coming out this summer that argue that their efficiency and hashing power will enable miners to remain profitable even if bitcoin were to drop underneath $100/BTC.

You can also expect some of miners just shut down their miners due to high electricity cost. At first halving , there was another expectation. ASICS race. Since there were more energy efficient miners came to the market , BTC price just went crazy due to this. However this time it will be a mistery. I still think there will be some increase at price but not too much.

But still, we have an opportunity about this halving by watching LTC first halving.

Quite simple, yes, but the opposite of what you say.

The thing is it depends on your situation. Someone that is living in a place where electricity cost are really low will have lower mining costs than someone living in Las Vegas or something. So the system regulates itself benefiting someone out there.

So can decreasing mining costs decrase bitcoin prices? other guys do not agree wirh this

its simple, higher mining cost > higher price.

When block reward halve, we can expect big increase of price

Eh.. no. Cost is a function of price.

actually there is, but only in the case the price fall too low, and their whole mining activity become unprofitable, the first thing they will try is to support buyers, to raise the confidence in the future price and starting a small pump that should bring the price to the profitable level, the second , well.... they will begin to sell their hwdware

There is no reason why miners would buy bitcoins.
Price totally gets affected of mining. There was one research made by Adam Hayes, i was listening on one of Bitcointalk podcast.

I just went to check and saw he posted all here: http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=2372041

Bitcoin mining is the process of earning bitcoin in exchange for running the verification to validate bitcoin transactions.

and bitcoin price now depends upon its usage..
we users of bitcoin will get only profit when more and more demands of bitcoin arises..vice versa with mining.

But price is a function of cost so it can affect

Most of the people buying and selling bitcoins are not miners so there is no reason why mining cost would affect bitcoin price.

The highest value of Bitcoin value rise upto 260$, According to Mark T. Williams, as of 2014, bitcoin has volatility seven times greater than gold, eight times greater than the S&P 500, and eighteen times greater than the U.S. dollar, the high volatility of a startup currency makes sense, because people are still experimenting with the currency to figure out how useful it is.

Thanka, n fact I was thinking that  bitcoin price is a function of mining cost which is opposit of what you are saying

It is absolutely clear that mining cost follows price. Higher price -> more mining -> higher difficulty -> higher cost.


Currently, it looks like miners are investing to position themselves before an expected price hike.

Yes it can be less too so how do some people predict its peice can be more than 1000$? It does not seem reasonable

I think you mean it currently costs about 400 usd to "extract" (eg. mining?) a bitcoin. I think it is much less at the moment, especially in countries with cheap power.

it's not very clear what do you mean, mining price in the sense of what? hardware cost? total earning per day?

also bitcoin extraction is unclear too, shed more light on those, if you want the right answer

Hello all, I want to know what relationships exist between mining prices and bitcoin prices and more clearly now bitcoin extraction is about 400 bucks so is it possible that bitcoin price goes more than 1000