The interest in BTC is still very high which is reflected in the current price that hovers above the $48 000 mark. What it means is that more people are getting into BTC mining. Literally thousands of mining facilities all over the globe and a massive army of unaccounted individual miners are working every day. How does this massive global operation affect the market price of BTC?
- It must be efficient! Right?
- The correlation between production and price is still questionable
It must be efficient! Right?
Forbes published a very interesting study in 2018. The research analyzed compound energy consumption (estimated) and other costs to determine the price of mining a single BTC. The result was quite interesting: at the current stage, a single BTC costs around $5300 to produce. The market price is nearly two times higher meaning that the ecosystem works.
It is hard to determine whether the market is actually affected by mining in general. However, the profitability of mining operations is key to the long term survival of the currency. Without miners, BTC will seize to exist. Miners will never invest in expensive mining operations if their efforts are not rewarded financially. So, on the fundamental level, BTC mining is strongly connected to the price of the currency on the financial market.
On the other hand, energy expenditures have been dramatically reduced by many professional miners. Some experts say that Chinese mining giants managed to reduce their energy consumption by 30% — 40% over the course of the last year yet we didn’t see a sudden price reduction on the market.
- The rising number of miners. The interest to the currency is still being heated up by miners whose numbers grow steadily. With more people interested in mining, more people are interested in supporting and using BTC in general. The popularity of the currency ensures that people trust in BTC and are willing to use it.
- The stabilization of the mining industry. There is a whole secondary market where you can buy mining equipment. Hundreds of guides and manuals have been written by prominent miners to help out newbies. There are standards and general rules to abide by when starting a mining operation. It means that the industry has estimates and some stability ensuring that the crypto currency is protected from a technical crisis.
- Halving does not seem to affect the market. It is hard to correctly evaluate the crypto currency market due to the fact that speculative value of the currency is higher than its actual value since you still cannot use it as freely as established fiat currencies. The increase in production did not affect the price (it didn’t go down) as well as halvings that didn’t really make a dent in the stability of bitcoin.
The correlation between production and price is still questionable
The scale of mining operations should affect the market price of bitcoin, but it does not seem that this is the case. Without additional data and more research, telling whether miners affect the price or not is nearly impossible. We will have to wait to receive a definitive answer.