This is really helpful, thank you for the post. If average cost to mine 1 BTC is $17k, what is the long-term case for evergreen miners? They are barely squeaking out a profit now, energy costs are likely to go up, miner block rewards get halved in 2024...it seems that the long-term microeconomics of the miners aren't favorable? Their only saving grace is if BTC price doubles or more every 4 years, which could happen...but if that doesn't happen, and price increases don't outweigh the halving and the increasing energy costs, is there anything stopping a negative feedback loop where miners stop mining b/c there is no economic incentive to mine? And if mining stops being profitable, then what?
17k is the average cost, but the efficient miners who are running the newest rigs and tapping into unique energy resources (ie, Exxon using excess natural gas) that require less electricity payments are mining at a much lower cost.
There was also a lot of miner selling jan 2021-may 2022 which signals many were well capitalized and prepared for this bear market, and prepared to run through these downturns
It will be a tough road ahead for all as profit margins compress and competition rises, negative feedback loops and such are indeed possible and something to be mindful of into the future, but don't appear to be an eminent risk into into q1 2023
Thank you. That's the context I was looking for. As such, a really helpful write up.
I skipped most of the flourish to be honest. Not because it isn't well written. But because my mind refuses to be cluttered by more metaphors and things that are not "the thing".
Thanks for reading Bodhi! I'm glad it helped, and no worries on skipping the flourish - that was intended to make it relatable for readers who may not be as familiar with mining operations and their implications....not just us data junkies, lol!
Sure does. Satoshi's, and other early mined coins which were forgotten about when price was low and sent to dumpster bins...imagine the pain of that XD
This is really helpful, thank you for the post. If average cost to mine 1 BTC is $17k, what is the long-term case for evergreen miners? They are barely squeaking out a profit now, energy costs are likely to go up, miner block rewards get halved in 2024...it seems that the long-term microeconomics of the miners aren't favorable? Their only saving grace is if BTC price doubles or more every 4 years, which could happen...but if that doesn't happen, and price increases don't outweigh the halving and the increasing energy costs, is there anything stopping a negative feedback loop where miners stop mining b/c there is no economic incentive to mine? And if mining stops being profitable, then what?
Hey Trevor!
17k is the average cost, but the efficient miners who are running the newest rigs and tapping into unique energy resources (ie, Exxon using excess natural gas) that require less electricity payments are mining at a much lower cost.
There was also a lot of miner selling jan 2021-may 2022 which signals many were well capitalized and prepared for this bear market, and prepared to run through these downturns
It will be a tough road ahead for all as profit margins compress and competition rises, negative feedback loops and such are indeed possible and something to be mindful of into the future, but don't appear to be an eminent risk into into q1 2023
Ok makes sense, thanks!
Thank you. That's the context I was looking for. As such, a really helpful write up.
I skipped most of the flourish to be honest. Not because it isn't well written. But because my mind refuses to be cluttered by more metaphors and things that are not "the thing".
Thanks for reading Bodhi! I'm glad it helped, and no worries on skipping the flourish - that was intended to make it relatable for readers who may not be as familiar with mining operations and their implications....not just us data junkies, lol!
That 1.75mm bitcoin that miners has, does that include satoshis mined? Must be a big pie.
Sure does. Satoshi's, and other early mined coins which were forgotten about when price was low and sent to dumpster bins...imagine the pain of that XD