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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 investmen
by 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 agoThis 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 agoEven 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.