Bitcoin - what is its cost production value, really?!
I want to touch on the topic of bitcoin's cost production value. This is a rather important matter as it gives a better understanding of its price's cost bottom. Many miners talk about 15-20 thousand USD as its cost production value. They are right! When it comes to individual mining, then this is most likely to be the case. However, based on the above evaluation, many home miners and investors believe that the price of bitcoin cannot go any lower.
This is not the case!
The break-even point depends primarily on 2 factors: the efficiency of the equipment and the price of electricity or hosting. Globally, individual mining does not in any way affect the price action or its cost bottom.
Why is that?
This is because there is an industrial scale of mining by companies such as: Poolin & Bitmain from China, Crypto Scientific from US or BitBaza, BitRiver, CryptoUniverse from Russia, etc. where infrastructure investments range from 10 to 150 million USD. Bitcoin's cost for the mining giants is around 3,000-5,000 USD for the following reasons:
1. Equipment purchases are made in bulk directly from the manufacturers. Some companies, for example, like Bitmain produce their own ASICs.
2. The average efficiency of the equipment is around 40-45 J/TH. More advanced mining farms have even better equipment working at 60 J/TH.
3. Currently electricity's price for industrial use in the US is about 6-7 cents per kWh. Poolin, for example, offered 4 cents on its electricity contract in Texas. The price for electricity in Kazakstan and Russia's Irkutsk is around 2 cents - the two locations where some Chinese miners have been moving over the last six months. There are also examples of mining farms that are directly connected to power plants like Greenidge Generation. Such companies generally work without intermediaries.
Therefore, bitcoin's cost bottom price is not 15,000 USD at all, but is around 3,000-5,000 USD.
Can the price go below the cost production price?
Undoubtedly! Gold, oil and bonds - all of them had negative yields more than once over the past 60 years. A striking example is 20 April 2020, when the price of WTI crude oil fell below zero to -37 USD. Therefore, bitcoin's short-term drop to 1,500 USD is feasible and may well materialize.
Keep in mind that price action is fundamentally dependent on macroeconomic factors and the expectations of large speculators. Media feeds are always made for the crowd! As the saying goes, what every taxi driver knows - is no longer the news.
This is not the case!
The break-even point depends primarily on 2 factors: the efficiency of the equipment and the price of electricity or hosting. Globally, individual mining does not in any way affect the price action or its cost bottom.
Why is that?
This is because there is an industrial scale of mining by companies such as: Poolin & Bitmain from China, Crypto Scientific from US or BitBaza, BitRiver, CryptoUniverse from Russia, etc. where infrastructure investments range from 10 to 150 million USD. Bitcoin's cost for the mining giants is around 3,000-5,000 USD for the following reasons:
1. Equipment purchases are made in bulk directly from the manufacturers. Some companies, for example, like Bitmain produce their own ASICs.
2. The average efficiency of the equipment is around 40-45 J/TH. More advanced mining farms have even better equipment working at 60 J/TH.
3. Currently electricity's price for industrial use in the US is about 6-7 cents per kWh. Poolin, for example, offered 4 cents on its electricity contract in Texas. The price for electricity in Kazakstan and Russia's Irkutsk is around 2 cents - the two locations where some Chinese miners have been moving over the last six months. There are also examples of mining farms that are directly connected to power plants like Greenidge Generation. Such companies generally work without intermediaries.
Therefore, bitcoin's cost bottom price is not 15,000 USD at all, but is around 3,000-5,000 USD.
Can the price go below the cost production price?
Undoubtedly! Gold, oil and bonds - all of them had negative yields more than once over the past 60 years. A striking example is 20 April 2020, when the price of WTI crude oil fell below zero to -37 USD. Therefore, bitcoin's short-term drop to 1,500 USD is feasible and may well materialize.
Keep in mind that price action is fundamentally dependent on macroeconomic factors and the expectations of large speculators. Media feeds are always made for the crowd! As the saying goes, what every taxi driver knows - is no longer the news.
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