5 ms·

Taking the cost of the ASIC as a sunk cost, the amount of electricity required to mine a Bitcoin to be 150 kWh, the cost of electricity being 6 cents per kWh, a

Taking the cost of the ASIC as a sunk cost, the amount of electricity required to mine a Bitcoin to be 150 kWh, the cost of electricity being 6 cents per kWh, and ignoring overhead such as wages and rent, then the breakeven price for Bitcoin mining is $9,000 USD. You may consider multiplying that by a factor to add some conservatism (though my estimates themselves may actually be conservative given that a lot of mining happens in country with low energy and labour prices), but it still seems like it's more profitable to keep the ASICs running than to switch them off, which is attested to by the fact the hashrate hasn't been significantly affected by the recent fluctuations in price. https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a https://www.eia.gov/electricity/monthly/epm_table_grapher.ph...

lottin 4y ago
If the break-even price was $9,000, miners would be making a truckload of money, and more of them would be entering the market. Yet the opposite is happening. Miners are trying to disinvest by selling some of the hardware and struggling to find buyers. [1] [1] https://blockworks.co/crashing-prices-expose-bitcoin-mining-industrys-addiction-to-leverage/ https://blockworks.co/crashing-prices-expose-bitcoin-mining-...
thehappypm 4y ago
Taking the cost of hardware as a sunk cost is foolish it’s one of the largest costs
- timmg 4y ago
  I think what OP means is: if you've already paid for the hardware, it make sense to keep mining until the cost of electricity is higher than the value of a coin. And I agree with that.
  - scoopertrooper 4y ago
    Exactly. I was speculating on why the hash rate doesn't seem correlated with the price of Bitcoin. The miners already have their rigs, so the initial investment wouldn't be relevant to the decision to keep mining or not. Though, you might expect the hash rate to decay over time as miners stop buying new machines.
    - thehappypm 4y ago
      This makes sense if the buyers totally bought their rigs outright, which isn’t usually the case. They usually buy rigs on credit which assumes a certain amount of profitability to be able to pay it off. Why? Well, imagine you have the capital to buy 3 rigs outright. You can use this to make a profit of $X / day on your outright owned rigs. Well, maybe it’s smarter to buy 30 rigs on credit, pay interest, make $10X/day in profit (before your loan payment). At some profit $X you should go the credit route because you’ll earn more, in fact a lot more. However if you buy assuming $X and the profit craters you could be in deep trouble
      - scoopertrooper 4y ago
        Even if you bought your rig on credit, you're still on the hook for making those payments regardless whether you have the machine off or on, so the cost of the machine is still a sunk cost. Therefore, it'd make more sense to keep it running for so long as the machine hadn't been repossessed and the profits from mining outweigh variable costs such as electricity. Repossession and liquidation can be a slow and costly process and the initial cost of the machine is also a sunk cost from the perspective of the lender and a mass wave of defaults could put their liquidity at risk. So, they have an incentive to make accommodations to the borrowers in order to ensure at least some payments keep flowing.

lottin 4y ago

If the break-even price was $9,000, miners would be making a truckload of money, and more of them would be entering the market. Yet the opposite is happening. Miners are trying to disinvest by selling some of the hardware and struggling to find buyers. [1] [1] https://blockworks.co/crashing-prices-expose-bitcoin-mining-industrys-addiction-to-leverage/ https://blockworks.co/crashing-prices-expose-bitcoin-mining-...

thehappypm 4y ago

Taking the cost of hardware as a sunk cost is foolish it’s one of the largest costs

timmg 4y ago
I think what OP means is: if you've already paid for the hardware, it make sense to keep mining until the cost of electricity is higher than the value of a coin. And I agree with that.
- scoopertrooper 4y ago
  Exactly. I was speculating on why the hash rate doesn't seem correlated with the price of Bitcoin. The miners already have their rigs, so the initial investment wouldn't be relevant to the decision to keep mining or not. Though, you might expect the hash rate to decay over time as miners stop buying new machines.
  - thehappypm 4y ago
    This makes sense if the buyers totally bought their rigs outright, which isn’t usually the case. They usually buy rigs on credit which assumes a certain amount of profitability to be able to pay it off. Why? Well, imagine you have the capital to buy 3 rigs outright. You can use this to make a profit of $X / day on your outright owned rigs. Well, maybe it’s smarter to buy 30 rigs on credit, pay interest, make $10X/day in profit (before your loan payment). At some profit $X you should go the credit route because you’ll earn more, in fact a lot more. However if you buy assuming $X and the profit craters you could be in deep trouble
    - scoopertrooper 4y ago
      Even if you bought your rig on credit, you're still on the hook for making those payments regardless whether you have the machine off or on, so the cost of the machine is still a sunk cost. Therefore, it'd make more sense to keep it running for so long as the machine hadn't been repossessed and the profits from mining outweigh variable costs such as electricity. Repossession and liquidation can be a slow and costly process and the initial cost of the machine is also a sunk cost from the perspective of the lender and a mass wave of defaults could put their liquidity at risk. So, they have an incentive to make accommodations to the borrowers in order to ensure at least some payments keep flowing.