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> As I argued, once Bitcoin’s price falls below its cost of mining, the incentive to mine will deteriorate, thrusting bitcoin into a death spiral. When bitcoin appeared it's price was zero, yet people still mined it despite being a clear "worthless" activity.
Bitcoin's price drop might look bad enought to warrant sensational articles, but if you take any bitcoin price chart over the last years (like [1]) and switch it to logarithmic price, it doesn't appear exceptional. The same thing happened in 2013. 1: https://coinmarketcap.com/currencies/bitcoin/#charts
If you take any time series asset of the price of any asset, and switch it to logarithmic, none of the drops will appear exceptional either. That’s what logarithmic scale does.
Alternatively you can look at [1] which uses linear scale, but as you look at different parts of the timeline it rescales the chart. Sure, the recent drop looks dramatic. But it looks less dramatic than when in 2011 the price rose from $0.80 all the way to $30 and fell back to $2.20. Or the 2013 event where the price rose from $15 to $100 to $1000 in the span of a few months, only to crash down to a devastating $230.
There is a whole industry depending on Bitcoin. If mining becomes unprofitable, there will be players that pay for the mining to continue until the difficulty adjusts. To keep their companies alive.
There is also another counterargument. One that does not only apply to the problem of mining but to any problem with Bitcoin in general: If a hard problem occurs, it is very likely that the industry would collectively switch to a fork.
For me, the value of Bitcoin is mainly rooted in that fact. Bitcoin is widely spread. So it will probably be the seed for future currencies that one day will be more valuable then the original.
The key argument seems to be: > Third, the futures markets have changed the game, enabling miners to estimate their mining losses and profits at the outset — if you can buy in a futures market at a price below my mining costs, why mine for a sure loss?
There is only so much you can buy in a futures market before it starts pulling the spot market up.
The article is misinformed: I am the first one to jump on Bitcoin's flaws, but this here just reeks of somebody not understanding the protocol: > As I argued, once Bitcoin’s price falls below its cost of mining, the incentive to mine will deteriorate, thrusting bitcoin into a death spiral. The cost of mining adjusts depending on the hash rate , so if nobody is mining the cost of mining goes down until people start mi…
This has been addressed in the article: > So, it appears bitcoin is now entering a death spiral: If the price continues to drop and the cost of mining does not fall correspondingly (the cost of mining will algorithmically decrease, but not necessarily to same extent as the decline in prices), bitcoin will quickly go to zero.
The article is misinformed: I am the first one to jump on Bitcoin's flaws, but this here just reeks of somebody not understanding the protocol: > As I argued, once Bitcoin’s price falls below its cost of mining, the incentive to mine will deteriorate, thrusting bitcoin into a death spiral. The cost of mining adjusts depending on the hash rate , so if nobody is mining the cost of mining goes down until people start mi…
The cost of mining only adjusts after a set number of blocks. It's possible for there to be a sudden drop in price, meaning the majority of miners shut down unprofitable rigs, and then it takes essentially infinite time to mine the required N blocks to adjust the difficulty.
I'd guess it would get very spiky as people tried to buy up preempting the "rescue" efforts.
Bitcoin's price drop might look bad enought to warrant sensational articles, but if you take any bitcoin price chart over the last years (like [1]) and switch it to logarithmic price, it doesn't appear exceptional. The same thing happened in 2013. 1: https://coinmarketcap.com/currencies/bitcoin/#charts
True, but I think this time around, people are realizing that no one is actually using for purposes other than speculation.
Earlier quoted context omitted.
This has been addressed in the article: > So, it appears bitcoin is now entering a death spiral: If the price continues to drop and the cost of mining does not fall correspondingly (the cost of mining will algorithmically decrease, but not necessarily to same extent as the decline in prices), bitcoin will quickly go to zero.
Which won't happen since the 'cost' of mining is electricity and hardware costs which for some miners is probably very close to zero. All this is going to do is shuffle out the miners who have no efficiency.
Bitcoin's price drop might look bad enought to warrant sensational articles, but if you take any bitcoin price chart over the last years (like [1]) and switch it to logarithmic price, it doesn't appear exceptional. The same thing happened in 2013. 1: https://coinmarketcap.com/currencies/bitcoin/#charts