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When market cap / price goes up, more people enter the market to mine until supernormal profits are gone - This is the relationship being discussed. People wil
by Closi 4y ago
When market cap / price goes up, more people enter the market to mine until supernormal profits are gone - This is the relationship being discussed.
People will enter the market which pushes up the difficulty / electricity and hardware consumption until profits are brought back down to a normal level.
- cowtools 4y agoYes, but I predict people will cease entering the market once the hype dies down and people learn how flawed bitcoin is.
- Closi 4y agoPeople will always enter the market (to produce) if there is a difference between the price of a Bitcoin and the cost to produce a Bitcoin (electricity, equipment etc). If the price goes down and it costs more electricity to produce a Bitcoin that is economically viable, people will leave because the juice isn’t worth the squeeze. So the same relationship works inversed too - difficulty to mine and electricity consumption is related to market cap / price from an econ perspective. I agree with your point on Bitcoin hype, but the production side is just economics and people trying to make a buck if there is money on the table.