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It's a little bit simpler than the psychological drama described. If your marginal/flexible operating costs (i.e. electricity, temp staff, etc) are higher than
by dantillberg 9y ago
It's a little bit simpler than the psychological drama described.
If your marginal/flexible operating costs (i.e. electricity, temp staff, etc) are higher than your expected revenue, then you shut off your miners temporarily. It's a simple rational decision: if you want bitcoins, they're cheaper to buy on an exchange.
If your total operating operating costs (building rent, etc) are higher than your expected revenue, then you lose money due to paying down liabilities. You might try to trim long-term operating costs (laying off staff, move to smaller building, move to place with cheaper electricity), or you might try to exit (sell mining hardware).
There's very little psychological drama in all this: the market for hashing power is very predictable, and it will adjust over time to provide narrow profit margins to the most efficient operations. The profitable periods were only ever going to be temporary aberrations in response to cryptocoin price fluctuations.
If your operation is not efficient, your own balance sheet will tell you when it's time to pack up.
- braddeicide 9y agoI wish I could buy Bitcoins on the exchange and convert them back into power.
- bryanlarsen 9y ago"and it will adjust over time to provide narrow profit margins to the most efficient operations" Unlike actual mining operations where costs are dominated by sunk capital costs. They can stay hugely irrational: once you've invested a few billion in a highly automated mine those billions are gone and you keep the mine operating even if the market collapses since your marginal + fixed costs are still lower than the price. Or worse: sometimes a mine operates in the red since that's cheaper than the cost of decommissioning it...
- maxerickson 9y agoThe market for hashing power is only as predictable as the price of bitcoin. (it's really the aggregate profitability of mining all cybercurrencies that have competitive rewards, but the price of bitcoin is close enough)
- dantillberg 9y agoThis is true, but only in the short term. When prices go up, mining becomes very profitable. Given a little time (measured in hour/days/weeks or a couple months at most) people build out mining operations, and the mining returns adjust to the previous baseline. When prices go down, it's largely the same in reverse. All that is to say: if one were to build out mining operations in expectation of a future increase in coin price, be forewarned that your market advantage will be short-lived and will only last as long as it takes others to fill in the gap.