Shouldn't the price per coin be closely related to the cost to mine them?

[Anatol Kir]

I think in most efficient and established markets the cost to mine are closely related to the cost to buy. Take two big examples, gold and oil.

I'm not saying that wild spreads don't sometimes occur but they tend to realign. If the price of either of those commodities increase, the amount one would spend to extract new oil or gold usually increases in-line.

I'm a finance guy, not an engineer. Can someone help me understand the true cost to mine 1 BTC? That more than China news or any other metric should help me peg a more accurate current value. At least that's my hypothesis.

[BlockChainLottery]

Simply said, it's the price of the mining gear and the cost of electricity.
The speed of mining 1BTC depends on your hash rate compared to the total hash rate, and of course the difficulty.
For example:
current difficulty: 908,350,862
nowadays you can rent hashing power, should include appr. the price of device + electricity: 10 dollars/GH/year
hash rate: 1825GHz
1BTC/day

So that's 18,250 dollars / 365 = 50 dollars/BTC

edit: 10dollars/Ghash/year is a pre order product expected in February 2014, so with the difficulty changing fast calculations won't hold for long.

[odolvlobo]

The costs of mining gold and bitcoins have very little effect on their prices because the supplies of newly mined gold or bitcoins are very small compared to their total supplies.

Oil is different because it is consumed. The supply of oil is the amount that is pumped out of the ground (plus the stored amount).

[murzik]

Simply said, it's the price of the mining gear and the cost of electricity.
The speed of mining 1BTC depends on your hash rate compared to the total hash rate, and of course the difficulty.
For example:
current difficulty: 908,350,862
nowadays you can rent hashing power, should include appr. the price of device + electricity: 10 dollars/GH/year
hash rate: 1825GHz
1BTC/day

So that's 18,250 dollars / 365 = 50 dollars/BTC

edit: 10dollars/Ghash/year is a pre order product expected in February 2014, so with the difficulty changing fast calculations won't hold for long.

So, mining should be extremely profitable? Why would anyone buy BTC for $1400 if he could mine one for $50?

[BlockChainLottery]

So, mining should be extremely profitable? Why would anyone buy BTC for $1400 if he could mine one for $50?

That's for the next generation, 28nm products.
If you buy a 250Ghash/sec ASIC miner which consumes about 1000W and costs 11,875 dollars (65nm product) it's different.
Than you can mine 0.138BTC/day.
That costs 1000*60*60*24/3600000=24kWh
That's 174kWh per Bitcoin.
Electricity costs 20cents/kWh => 34.8dollar
Harder is to determine how much BTC you can mine, before your ASIC is written off. Not to mention the increase in difficulty.
But it's a whole lot more than 50dollar/BTC.

And of course, the renting product I mentioned can only be pre-ordered, and not everybody can invest in such an ASIC.

[Anatol Kir]

Simply said, it's the price of the mining gear and the cost of electricity.
The speed of mining 1BTC depends on your hash rate compared to the total hash rate, and of course the difficulty.
For example:
current difficulty: 908,350,862
nowadays you can rent hashing power, should include appr. the price of device + electricity: 10 dollars/GH/year
hash rate: 1825GHz
1BTC/day

So that's 18,250 dollars / 365 = 50 dollars/BTC

edit: 10dollars/Ghash/year is a pre order product expected in February 2014, so with the difficulty changing fast calculations won't hold for long.

So, mining should be extremely profitable? Why would anyone buy BTC for $1400 if he could mine one for $50?

It's obviously a lot more complicated than he is alluding to. He's also assuming that equipment that would get  1BTC/day in February would still be able to do it in February 2015 365 days later. That's not even remotely likely.

From what I can tell, the bulk of the harvest comes in the first few months and then as difficulty increases it slows substantially.

I don't think most people are mining coins at $50 a pop. I'm not sure that anyone is right now. That sounds incredibly low. I was expecting to hear something closer to $300

[freakying99]

So, mining should be extremely profitable? Why would anyone buy BTC for $1400 if he could mine one for $50?

He has to buy mining device first, these cost serious money

[DoubleMyCoins!]

There are a lot of things that go into it like electricity cost, hardware cost and type of hardware too. If you order hardware from a supplier like Butterfly labs which has major shipping delays that's also a consideration since by the time your order arrives the difficulty and value of the coin may be vastly different.

[Anatol Kir]

There are a lot of things that go into it like electricity cost, hardware cost and type of hardware too. If you order hardware from a supplier like Butterfly labs which has major shipping delays that's also a consideration since by the time your order arrives the difficulty and value of the coin may be vastly different.

Ok but surely someone can give a range. The average mining operation is spending how much per coin?

Whatever the number is, is theoretically the lowest the price of a coin should go. Or at least the risk of it going lower gets low enough to not worry me so much.

[Colin Miner]

Ok but surely someone can give a range.

Something is only worth what someone else is prepared to pay for it.

If no one wants to buy, it effectively becomes worthless on the open market.

Its got nothing to do with the cost of production, its the desirability and the quantity of those for sale and those wanting to buy.

[jongameson]

So, mining should be extremely profitable? Why would anyone buy BTC for $1400 if he could mine one for $50?

He has to buy mining device first, these cost serious money

not if u pre-order it form Butterfly Labs 

[honky1492]

So, mining should be extremely profitable? Why would anyone buy BTC for $1400 if he could mine one for $50?

He has to buy mining device first, these cost serious money

not if u pre-order it form Butterfly Labs 

True, but not worth the stress waiting for delivery

[allotech]

As soon as AV manufacturers become better at ridding computers of BTC miner malware, expect the number of miners to drop sharply.  The cost of electricity makes it a not very good investment for legitimate miners.