Does Bitcoin mining cost matter ?

in btc •  6 years ago 

Hi,

We often hear that Bitcoin can't get below a certain price because mining cost is above that.

Short/Mid term price is determined by financial speculation. Long term price is determined by fundamentals and adoption. People that sell on exchanges drive the price down and people that buy on exchanges drive the price up.

Mining cost is geographically variable and irrelevant for the price action. The price dictates the behaviour of miners and not the other way around.
We can say that there are two kinds of miners. Miners that sell Bitcoin for immediate profit and miners that accumulate.
These last ones don’t care about the price today. They mine to accumulate and hold because they are very bullish long term. In fact, these kind of miners, want the price to go down short term. They get less competition and more reward. Why ? Because the group of miners that sell immediately are going to shut down their machines at break even. Some of them cloud mining company’s that pose great competition.
Miners mine BTC and hold it or sell it. If they sell the price goes even further down. If they hold it they help support the price but it’s still not going up. Only people that buy on exchanges drive the price up.

The biggest danger for Bitcoin’s price is it’s centralization. Very few people have most of Bitcoin. If one of them, for some reason, decides to sell on exchanges, the price can go dramatically down. Mining cost, at a given point, somewhere in the world, cant stop that.

Best Regards,
Alexandre Simões

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We have that conversation a while ago, nice post

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