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The key argument seems to be: > Third, the futures markets have changed the game, enabling miners to estimate their mining losses and profits at the outset — i
by ckastner 8y ago
The key argument seems to be:
> Third, the futures markets have changed the game, enabling miners to estimate their mining losses and profits at the outset — if you can buy in a futures market at a price below my mining costs, why mine for a sure loss?
- 21 8y agoThere is only so much you can buy in a futures market before it starts pulling the spot market up.
- moomin 8y agoYou might be interested to learn this is a point of some contention. There have been real markets with utterly wild and out of control futures markets where the spot seems to have happily trundled along with the fundamentals.
- 21 8y agoLike? If true it means that either the futures market are tiny or that there is a barrier to efficient arbitrage.
- moomin 8y agoChinese commodity markets have been known to be hugely volatile with huge volumes. The actual producers react by pulling out of the futures market. Which I guess might qualify as a trading strategy.
- vbezhenar 8y agoThis is wrong argument. Mining costs are different for different miners. Someone has cheap electricity, someone has cheap electronics. If mining is not profitable for some part of miners, they'll stop mining and difficulty of mining will decrease, making mining more profitable again. It's a self-regulating mechanism.
- pbhjpbhj 8y ago>If mining is not profitable for some part of miners, they'll stop mining // Real world is always more complex than this. My expectation would be that done miners will contribute to mine at below profit levels because they seek to cut their losses. If they have cheap electricity but large sunk costs due to expensive hardware, that's not paid off, then - absent other uses for the hardware - they'd seek to reduce the loss? So mining wouldn't stop, but it would drop off precipitously.
- wongarsu 8y agoThere is a level below profitability but above electricity costs where most professional miners will keep mining. But at some price level miners start dropping out because the electricity is more expensive than the mining income. Luckily this wouldn't be one huge even but dragged out over a large price range since electricity prices vary considerably depending on location and source. This ensures that there is enough time for difficulty adjustments to kick in and correct the market.