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Bitcoin miners are losing on every coin produced as difficulty drops

coindesk.com

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Re: Bitcoin miners are losing on every coin produced as difficulty drops

#51

Post by pessimizer »

helsinkiandrew wrote: post #2

> When miners can't cover costs, they sell bitcoin to fund operations Surely they should stop producing until its profitable again, or am I missing something?

You're not missing anything. As you can see if you read through the thread, they rely on bitcoin miners being heavily invested into bitcoin and bitcoin equipment, so those people will operate unprofitably to prop up their holdings. It's a moron's economy. A system that relies on externalities and corruption, and produces nothing of value. It's the art market with no art.

If bitcoin miners are smart enough to have anticipated this, and decided not to hold onto bitcoin and just let it drop; and also to have repurposed their equipment, sold it to bigger fools, or have just run it into the ground, none of these ideas make any sense.

Why would they, though? The real answer is that governments and monopolists are propping up bitcoin through simply handing tax money to bitcoin holders, and in the case of the latter (also government tit-suckers) leveraging themselves to pump up bitcoin markets when they are down. I'm sick of humoring this because it was once mildly interesting technically. It's a criminal scheme and everyone involved needs to go to prison. When I hear a politician say the word bitcoin, I'm going to do everything in my power to damage that politician.

Re: Bitcoin miners are losing on every coin produced as difficulty drops

#52

Post by reenorap »

If bitcoin miners are losing $19k for every bitcoin they mine, why would they sell bitcoin to continue funding their mining operations. That just makes it even less profitable because they are driving down the price of their remaining bitcoin. It makes more sense to shut their rigs off completely and wait for the price to rise.

The funny thing about bitcoin is that the rate of bitcoin discovery doesn’t change when they shut off their rigs so it won’t change supply. It would actually make more sense to sell all their bitcoin, flood the market with coins to do the price, wait for large miners to collapse and then restart mining at hopefully lower prices.

Re: Bitcoin miners are losing on every coin produced as difficulty drops

#53

Post by arter45 »

illiac786 wrote: post #32
Snoozus wrote: post #13

Earlier quoted context omitted.

If everyone stopped mining transactions couldn't go through anymore and the value of bitcoin would drop. If you're heavily invested in bitcoin that's bad. Also miners try to squeeze in their preferred transactions which they can't do when they're not mining. Finally the costs dont drop to zero when you turn the miners off, so the loss from mining might be less than the loss when not mining.

Isn’t mining and transactions separate? Sure you need to have online participants, but they don’t have to actively mine, right?

You can generate transactions but ultimately transactions are validated and written in the blockchain by miners. Mining is essentially a way to select voters based on their ability to solve puzzles, ensuring that if you are selected once you have no particular advantage next time. Without miners this whole system doesn’t work.

Re: Bitcoin miners are losing on every coin produced as difficulty drops

#54

Post by JKCalhoun »

dmk wrote: post #7

The headline is dramatic but this is literally how bitcoin is designed to work. Miners leave, difficulty drops, costs go down, mining becomes profitable again. The interesting part isn’t the loss per coin, it’s how long the lag between unprofitable mining and difficulty adjustment keeps forced selling pressure on the market.

If "difficulty drops, costs go down" so ought the price? Isn't that basic economics? Or are they chasing the "phase difference", lag, between supply demand?

Re: Bitcoin miners are losing on every coin produced as difficulty drops

#56

Post by haakon »

vscode-rest wrote: post #8
suryajena wrote: post #5

Isn't AI the new hot thing, why are the miners still going after Bitcoin, when they can probably just use the same infra for AI and make more money, stay profitable.

Hash mining asics don’t work well for AI

This is true, but large miners also have beneficial electricity contracts and data center capacity, both suitable for AI workloads.

Re: Bitcoin miners are losing on every coin produced as difficulty drops

#57

Post by expedition32 »

dmk wrote: post #7

The headline is dramatic but this is literally how bitcoin is designed to work. Miners leave, difficulty drops, costs go down, mining becomes profitable again. The interesting part isn’t the loss per coin, it’s how long the lag between unprofitable mining and difficulty adjustment keeps forced selling pressure on the market.

A perpetual boom bust cycle? Sounds healthy.

Re: Bitcoin miners are losing on every coin produced as difficulty drops

#58

Post by maxerickson »

JKCalhoun wrote: post #54
dmk wrote: post #7

The headline is dramatic but this is literally how bitcoin is designed to work. Miners leave, difficulty drops, costs go down, mining becomes profitable again. The interesting part isn’t the loss per coin, it’s how long the lag between unprofitable mining and difficulty adjustment keeps forced selling pressure on the market.

If "difficulty drops, costs go down" so ought the price? Isn't that basic economics? Or are they chasing the "phase difference", lag, between supply demand?

The mining reward isn't a direct transaction that has a price.

Competing for it is more of a game that has a cost to participate in.

Re: Bitcoin miners are losing on every coin produced as difficulty drops

#59

Post by klodolph »

reenorap wrote: post #52

If bitcoin miners are losing $19k for every bitcoin they mine, why would they sell bitcoin to continue funding their mining operations. That just makes it even less profitable because they are driving down the price of their remaining bitcoin. It makes more sense to shut their rigs off completely and wait for the price to rise. The funny thing about bitcoin is that the rate of bitcoin discovery doesn’t change when th…

> […] why would they sell bitcoin to continue funding their mining operations […]

There are usually some fixed costs involved and you need cash flow. Without cash flow, your business can shut down pretty damn fast. With cash flow, your business can stay around longer, maybe long enough for the economics to shift.

This sort of thing happens with oil. There are oil producers which sell at a loss. There was even a brief moment when the price of an oil barrel went negative, which meant that if you gave somebody a barrel of oil, you had to pay them for the privilege of taking that oil off your hands. Oil producers did not all shut down when that happened.

I am a little doubtful of the $19k figure anyway.

> It would actually make more sense to sell all their bitcoin, flood the market with coins to do the price, wait for large miners to collapse and then restart mining at hopefully lower prices.

This kind of market manipulation is not so straightforward.

Re: Bitcoin miners are losing on every coin produced as difficulty drops

#60

Post by tromp »

eru wrote: post #37
tromp wrote: post #35

Earlier quoted context omitted.

Turn off their mining rigs.

Or use it for other coins.

As you can see on https://www.f2pool.com/coins other coins using SHA256 as PoW algorithm only amount to about 1% of Bitcoin's daily dollars of Pow Produced, so if any nontrivial amount of hash moves there, then those will soon become unprofitable too.
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