3 ms·
> What this all tells us is that we can watch the relationship between Bitcoin’s price and difficulty to see situations where Bitcoin is overvalued. These situa
by svara 9y ago
> What this all tells us is that we can watch the relationship between Bitcoin’s price and difficulty to see situations where Bitcoin is overvalued. These situations would be times where the difficulty rate stayed the same while the price continued to go up.
That seems backwards. Miners will adjust their costs until marginal cost equals marginal revenue. In other words, if the Bitcoin price goes up and the hash power does not follow suit, that doesn't mean Bitcoin is overvalued, it means that there's an opportunity to profit from running more miners.
- Retric 9y agoIn there is a large middle ground between profitable to add more miners and turning off existing miners to save energy is worth it. Remember, capital cost payback depends on the long term value, so short term price spikes don't necessarily create enough value for long term purchases.
- js4 9y agoBut the question is why aren't people taking advantage of the perceived opportunity to profit? The only time this would happen is if something about the underlying economics changed --like energy got more expensive.
- dia80 9y agoLimits to arbitrage, same reason GBTC the bitcoin trust trades at 100% premium.