BTC Average production Cost Estimate

Bastion_01 said:
I'm mainly using the Cambridge Bitcoin Electricity Consumption Index to do the estimate. Assuming that the Chinese have stopped all production. Current estimate is at about $27K USD per coin.
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I don't doubt the number, but I'm confused as to what you are trying to establish?

There are many factors for a bitcoin miner to consider

hardware - newer ASIC's produce a higher hash rate at a lower power consumption per hash (more efficient)

Source of electricity - renewables hydroelectric/solar are cheaper, some may even be free or possibly get paid to use (flare gases?)

Cost of infrastructure (data center, warehouse building, cooling or lack thereof - cold climate such as iceland getting power from geothermal source)

Riot/Mara may have a cost of production $27K for 1 btc and take 5 minutes to produce 1 btc

A home miner in Hawaii using solar power may have a $20K cost of production for 1 btc but take 6 months
 
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I read your substack web page, with all due respect, your assumptions are incorrect

The price of bitcoin goes up, the incentive to mine bitcoin goes up, more miners want to mine bitcoin, mining bitcoin becomes more competitive, cost of mining goes up

Currently there's a shortage of chips, price of mining goes up, bitcoin price does not care. Bitcoin price can still crash due to an Elon musk tweet, or some other news

Think of last year when the bitcoin halving event occurred, the rewards for all bitcoin miners got cut in half in 1 block, ~10 minutes, so essentially, the price of bitcoin mining doubled in that 1 block, did the miners quit? Did the bitcoin network hash rate go down? The answer is no, bitcoin network hash rate continued to go up

Bitcoin price will not be limited by whatever numbers you deem important on the mining side. Many bitcoiners, including me, predict that bitcoin will hit $100K before eoy

click the play button and watch for 15 minutes. I positioned it where the bitcoin mining is being discussed

 
johnarb said:
I read your substack web page, with all due respect, your assumptions are incorrect

The price of bitcoin goes up, the incentive to mine bitcoin goes up, more miners want to mine bitcoin, mining bitcoin becomes more competitive, cost of mining goes up

Currently there's a shortage of chips, price of mining goes up, bitcoin price does not care. Bitcoin price can still crash due to an Elon musk tweet, or some other news

Think of last year when the bitcoin halving event occurred, the rewards for all bitcoin miners got cut in half in 1 block, ~10 minutes, so essentially, the price of bitcoin mining doubled in that 1 block, did the miners quit? Did the bitcoin network hash rate go down? The answer is no, bitcoin network hash rate continued to go up

Bitcoin price will not be limited by whatever numbers you deem important on the mining side. Many bitcoiners, including me, predict that bitcoin will hit $100K before eoy

click the play button and watch for 15 minutes. I positioned it where the bitcoin mining is being discussed

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i am aware of the short term dynamics, thanks. i didnt quite understand your explanation or suggestion of how to adjust for these variables in the cost estimate quantitatively.
I really want to believe your forecast, can you elaborate a bit on how you came to the 100k eoy estimate? I want to he convinced, haha.
 
Bastion_01 said:
i am aware of the short term dynamics, thanks. i didnt quite understand your explanation or suggestion of how to adjust for these variables in the cost estimate quantitatively.
I really want to believe your forecast, can you elaborate a bit on how you came to the 100k eoy estimate? I want to he convinced, haha.
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I was disagreeing with your cause and effect relationship per your substack that based on the cost of mining (production cost of btc) there's a limit to the price of bitcoin due to the "intrinsic value". Bitcoin has no intrinsic value.

For example, if the price of bitcoin goes up significantly, say over $100K, there will be a higher cost of mining bitcoin due to more miners coming in, increased network hash rate, increased difficulty. Older ASIC hardware that were no longer profitable may become profitable to operate again and will be put into production

But the reverse is not true, for example, due to the chip-shortage, ASIC's may cost higher, cost of mining is higher, but it will not drive the price of bitcoin higher which is dictated by market supply and demand and also news or even a tweet from Elon that started the price crash all the way to below $30K/btc

As far as my price prediction of over $100K, it's based on S2F model (Plan B), on-chain analytics (Willy Woo newsletter paid subscription, Will Clemente newsletter free subscription) news of adoption, i.e. NYDIG along with 5 major partners will allow over 10's (or over 100) of millions customers of 1000 banks and credit unions to purchase bitcoin, El Salvador adoption, JP Morgan, Morgan Stanley, Goldman Sachs, Wells Fargo HNW clients onboarding, Visa, MC, PayPal kpi (over $200M of daily crypto transactions), impressive Coinbase numbers per earnings reports, Robinhood earnings numbers on crypto

Having said all of that, I'm heavily invested in bitcoin so my prediction is biased :D


 
johnarb said:
I was disagreeing with your cause and effect relationship per your substack that based on the cost of mining (production cost of btc) there's a limit to the price of bitcoin due to the "intrinsic value". Bitcoin has no intrinsic value.
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As far as my price prediction of over $100K, it's based on S2F model (Plan B), on-chain analytics (Willy Woo newsletter paid subscription, ... Having said all of that, I'm heavily invested in bitcoin so my prediction is biased :D
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That S2F, i.e. a simply a storage/production ratio, doesn't explain much to me, especially it looks to be just curve fit onto historical price by brute force. I have a postgrad in math, I can come up with an infinite number of polynomial curves that fit historical price real well, and give it a forecast of like $1M by year end, and probably give it a better story than "Plan B" person, lol.
There's no proper valuation method I've seen that gives a credible $100K answer.

Regardless, I hope you're right! haha.
 
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Bastion_01 said:
"
As far as my price prediction of over $100K, it's based on S2F model (Plan B), on-chain analytics (Willy Woo newsletter paid subscription, ... Having said all of that, I'm heavily invested in bitcoin so my prediction is biased :D
"
That S2F, i.e. a simply a storage/production ratio, doesn't explain much to me, especially it looks to be just curve fit onto historical price by brute force. I have a postgrad in math, I can come up with an infinite number of polynomial curves that fit historical price real well, and give it a forecast of like $1M by year end, and probably give it a better story than "Plan B" person, lol.
There's no proper valuation method I've seen that gives a credible $100K answer.

Regardless, I hope you're right! haha.
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I love math, but I do not have higher math education :banghead:

S2F has been used in gold and wrt Plan B S2F on bitcoin price prediction, it has been accurate over the years

Actually, since you're very good with math, the last section where I talked about adoption is missing the most important quantitative metric of them all, Metcalfe's law. I'm sure you're familiar with it

Scaramucci has talked about it in interviews, as well as Willy Woo and Raoul Pal, the exponential growth of users and can be measured in wallet addresses holding a bitcoin balance, taking into account that multiple addresses may belong to a single person/entity through chain analysis

1 Billion users for bitcoin alone is the goal in 2-3 year. We can speculate on what the price of bitcoin will be at that level of adoption, my conservative price is ~$350K, I think Scaramucci thinks it will be at $400-$500K/btc


https://elitetrader.com/et/threads/cryptocurrency-users-reach-an-unprecedented-number.360781/
 
Just to be clear, $100K is not a price limit for bitcoin :D

I am biased, haha

johnarb said:
How about looking ahead of everyone and seeing $100K by eoy, or even $300K by early next year?

Or how about $500K-$1M by the next bitcoin halving in 4 years and next bull market cycle?
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johnarb said:
Completed the purchase of 3 btc's, Total of 18 btc holdings in the crypto pfolio [20 btc's currently]
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