“But no one has yet to point out the fatal flaw in Bitcon. Yes, when the price to produce goes below the cost people are going to unplug their banks of computers and wait out the drought. As of Monday the 5th of February Coindesk shows a low of $6583.56 for Bitcon. Coindesk shows a high of $19,343.04 on December 16th for a decline of 66%.
The map from MarketWatch shows a cost of production of $7,059 in Hawaii, $6,951 for Connecticut and $6,674 for Massachusetts so anyone mining in those states is shutting down.”
Bob’s logic is pretty impecable because it is the same logic miners use to close mines when a metal price drops below the cost of recovery.
Obviously, the cost of mining a bitcoin is tied pretty directly to the cost of electric power in a given jurisdiction and it does not make a heck of a lot of sense to mine in high electricity price states. The same Marketwatch map has the cost of mining a bitcoin in Idaho or Washington at around $3300. And, in theory, it is a fraction of that cost to mine a bitcoin in Iceland or China.
However, what Bob is pointing out is that the dive in bitcoin price will render higher cost miners uneconomic on an operating cost basis. But what happens when you take the CAPEX into account? Big miners have big investments in the “mining rigs”. And those investments tend to decline in value very quickly as new generations of mining rigs come online. If Bitcoins are worth $10,000 the relatively short “mine life” of a generation of rigs is fairly unimportant. But if Bitcoins are $6000 or less, the capacity to recover the miner’s investment drops hard.
Moriarty is canny enough to apply the well understood principles of economic mining to the absurdly abstract world of Bitcoin. It isn’t pretty but it is certainly necessary.