Analysis

[Bimmerhead]

Industrial miners have invested enormous capital in order to generate coins. If they can temporarily buy coins for less than it costs to produce them, they rationally will.

Of course not all miners have exactly the same cost per coin. But in a highly competitive market, which this clearly is, that cost tends to converge (more efficient miners drive less efficient ones out of business).

Current cost of mining a coin is not < $600. If it were, while market price has been at least over 20% that for several months, more investment would pour into mining in order to reap that differential, driving up costs.

Miners are not simple enthusiasts anymore, and have not been for a while. They have reserves, and they determine how best to invest their surplus. This is a mature business.

I still don't understand why miners would buy coins instead of simply not mining.

Do carrot farmers buy carrots when the grocery store has a sale and sells them for less than the farmer can produce them for?

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[ImI]

Industrial miners have invested enormous capital in order to generate coins. If they can temporarily buy coins for less than it costs to produce them, they rationally will.

Of course not all miners have exactly the same cost per coin. But in a highly competitive market, which this clearly is, that cost tends to converge (more efficient miners drive less efficient ones out of business).

Current cost of mining a coin is not < $600. If it were, while market price has been at least over 20% that for several months, more investment would pour into mining in order to reap that differential, driving up costs.

Miners are not simple enthusiasts anymore, and have not been for a while. They have reserves, and they determine how best to invest their surplus. This is a mature business.

I still don't understand why miners would buy coins instead of simply not mining.

Do carrot farmers buy carrots when the grocery store has a sale and sells them for less than the farmer can produce them for?

If carrots were durable and the farmer would expect rising carrotprices, why not?

[RAJSALLIN]

Industrial miners have invested enormous capital in order to generate coins. If they can temporarily buy coins for less than it costs to produce them, they rationally will.

Of course not all miners have exactly the same cost per coin. But in a highly competitive market, which this clearly is, that cost tends to converge (more efficient miners drive less efficient ones out of business).

Current cost of mining a coin is not < $600. If it were, while market price has been at least over 20% that for several months, more investment would pour into mining in order to reap that differential, driving up costs.

Miners are not simple enthusiasts anymore, and have not been for a while. They have reserves, and they determine how best to invest their surplus. This is a mature business.

I still don't understand why miners would buy coins instead of simply not mining.

Do carrot farmers buy carrots when the grocery store has a sale and sells them for less than the farmer can produce them for?

If carrots were durable and the farmer would expect rising carrotprices, why not?

A farmer that goes from farming to speculating is probably not that common. But in bitcoinland there might be a healthy % that do but who knows.

Sry for OT

[bohr]

Industrial miners have invested enormous capital in order to generate coins. If they can temporarily buy coins for less than it costs to produce them, they rationally will.

Of course not all miners have exactly the same cost per coin. But in a highly competitive market, which this clearly is, that cost tends to converge (more efficient miners drive less efficient ones out of business).

Current cost of mining a coin is not < $600. If it were, while market price has been at least over 20% that for several months, more investment would pour into mining in order to reap that differential, driving up costs.

Miners are not simple enthusiasts anymore, and have not been for a while. They have reserves, and they determine how best to invest their surplus. This is a mature business.

I still don't understand why miners would buy coins instead of simply not mining.

Do carrot farmers buy carrots when the grocery store has a sale and sells them for less than the farmer can produce them for?

He is talking about something called arbitrage which is taking advantage of the difference in prices between two markets and making profit because of it, this is very common if you can import something from china and resell it for double the price then why not do that instead of producing your own stuff, everyone wins.

[jofus]

It would seem to me that many miners may hold on to their coins if the price fell below cost of production, waiting for the price to rise in order to sell them.  Obviously they could not do this indefinitely, but its pretty obvious they are not going to just shut down their giant mining operation instantly because the price dipped below profit range. 

They are most likely people that believe in, at least, the medium term survival of bitcoin and should be aware of how much the market price can fluctuate in a relatively short period.  They should also be well aware that when supply is limited, price is more likely to rise, and being miners they are a very big part of the supply.

[molecular]

If carrots were durable and the farmer would expect rising carrotprices, why not?

I don't think miners necessarily expect bitcoin price to go up. That's just an assumption.

It would seem to me that many miners may hold on to their coins if the price fell below cost of production, waiting for the price to rise in order to sell them.  Obviously they could not do this indefinitely, but its pretty obvious they are not going to just shut down their giant mining operation instantly because the price dipped below profit range.  

You're correct: they're not going to shut down instantly on a dip below, because shutting down and spinning back up incurs cost in itself. Also maybe they have some kind of fixed volume deal with the electricity provider the negates some of the cost they would save on electricity when turning off.

But in the long run (weeks), they're just not going to keep mining at a loss. If it makes economic sense, they will shut down the gear. If they really do want bitcoins, they will then buy some on the market. But that's not the "miner" in them, that's the "speculator" in them.

In thought experiments that involve mining, I usually model the miners as always selling all their production. A miner who doesn't sell is simply modeled as a miner who sells plus a speculator who buys coins.

(sorry for the OT escapade)

[600watt]

the big new mining farms were calculated for profitability at least a year ago if not longer. no sane investor pours out millions without calculating. price was around $400 a year ago. it was not clear if downtrend was really over by then. i assume they did not assume price would double in a year. imho mining is very profitable at the moment for some miners.

[Wexlike]

You can't mine Bitcoin at a loss if you're mining with excess electricity.

[Globb0]

There are still hardware and infrastructure costs

[sportis]

You can't mine Bitcoin at a loss if you're mining with excess electricity.

There are still hardware and infrastructure costs

Of course miners have many expenses as all we know but they are entrepreneurs. And what is the meaning of 'entrepreneur'? According investopedia http://www.investopedia.com/terms/e/entrepreneur.asp like as many other similar sites is a individual who must take risks in order to be rewarded for his idea, good or service. That means if he (miner) believes that its work is not profitable anymore and cannot do anything to keep it viable must change job.

[prophetx]

You can't mine Bitcoin at a loss if you're mining with excess electricity.

There are still hardware and infrastructure costs

Of course miners have many expenses as all we know but they are entrepreneurs. And what is the meaning of 'entrepreneur'? According investopedia http://www.investopedia.com/terms/e/entrepreneur.asp like as many other similar sites is a individual who must take risks in order to be rewarded for his idea, good or service. That means if he (miner) believes that its work is not profitable anymore and cannot do anything to keep it viable must change job.

that's not how fixed costs and long term real estate contracts work.  there is also a cost to ripping out all the miners and finding a new viable business that can use some warehouse in a remote part of the world where they have practically free electricity.

people will keep it running knowing that getting 90% that has the ability to go to 150% is better than 0% that can only stay at 0%.

[Okurkabinladin]

When did this thread become mining topic, guys? 

Seriously, lets return to Technical analysis. Are we hitting the top, yet or is retesting all time high still in the play?

By the way, I see mining discusisons again and again, when there is lack of decisive movements. All of four years, I watch bitcoin price movement. None of these debates had any influence on actual price.

[prophetx]

When did this thread become mining topic, guys? 

Seriously, lets return to Technical analysis. Are we hitting the top, yet or is retesting all time high still in the play?

By the way, I see mining discusisons again and again, when there is lack of decisive movements. All of four years, I watch bitcoin price movement. None of these debates had any influence on actual price.

don't get your panties in a bunch i'm just trying to help him out with some basic rational economic actor logic

[CoinBurner]

According to the latest posts in Masterluc's russian thread (thanks google translator!  ) the current upward move is almost certainly an after bubble-pop correction - aka "sucker's rally" - let's see how it unfolds! 

[Millionero]

Would you post a link to his Russian thread, please?

[Fakhoury]

Would you post a link to his Russian thread, please?

https://vk.com/bitcoin_vanga

[Millionero]

We need a Russian speaker on this thread.  I look at those translated Russian postings and see discussion at a higher level than bitcointalk.  But half of it is incomprehensible because of the language barrier and the peculiar idiomatic usage.

[RoadTrain]

We need a Russian speaker on this thread.  I look at those translated Russian postings and see discussion at a higher level than bitcointalk.  But half of it is incomprehensible because of the language barrier and the peculiar idiomatic usage.

There is one. To be honest, the chart he posted is self-explanatory.

He says that it's a good idea to exit current mini-buble at 1000. He then expects mid-term turnaround from 1000 towards 700 or, if it manages to reach 1100, towards 900.

[Millionero]

We need a Russian speaker on this thread.  I look at those translated Russian postings and see discussion at a higher level than bitcointalk.  But half of it is incomprehensible because of the language barrier and the peculiar idiomatic usage.

There is one. To be honest, the chart he posted is self-explanatory.

He says that it's a good idea to exit current mini-buble at 1000. He then expects mid-term turnaround from 1000 towards 700 or, if it manages to reach 1100, towards 900.

I got that.  There's a lot more on bitcoin vanga, other posts, replies.  Have you read it?

[RoadTrain]

We need a Russian speaker on this thread.  I look at those translated Russian postings and see discussion at a higher level than bitcointalk.  But half of it is incomprehensible because of the language barrier and the peculiar idiomatic usage.

There is one. To be honest, the chart he posted is self-explanatory.

He says that it's a good idea to exit current mini-buble at 1000. He then expects mid-term turnaround from 1000 towards 700 or, if it manages to reach 1100, towards 900.

I got that.  There's a lot more on bitcoin vanga, other posts, replies.  Have you read it?

Somewhat. The most important is that he expects the great 3rd wave to reach about $9588.