As paradoxical as it may seem, because bitcoin is nothing more than a digital object, its construction requires industrial production facilities, but this has not always been the case.
When bitcoin started, a home computer was enough. Then someone realized that if they connected the graphics cards, it would increase the computing power. Later another made a special machine that improved performance as he did this work exclusively. Constantly improving productivity, we have reached the point where the computing power required has made it a purely industrial activity.
Huge facilities have been set up, crypto-language farms, with specialized staff competing with each other to be the first to solve a difficult mathematical problem based on a cryptographic fragmentation algorithm. The winners of this process come out every 10 ‘and receive the “freshly printed” bitcoin as a fee.
The equation of expenditure consists of mainly two variables. Investing in mechanical equipment and the cost of electricity. Of course, there are operating costs, but these are usually a small percentage of the total. As a rule, the stronger the processor (so more expensive or new), the more calculations it performs, so the more cryptocurrencies it gains. In terms of energy costs, it depends mainly on two parameters: The country in which the facilities are located, because the pricing policy of the providers also differs from the use or not of renewable energy sources, which are usually less expensive.
It is estimated that 65% of miners are in China. It is followed by the US and the Czech Republic with 10%, Russia with Ukraine with 7%, Georgia with 3%, India with 1% and the remaining 4% with other countries. The average cost of electricity in the US is 0.12 cents per kilowatt hour, in India and Georgia 8 cents. Russia, Ukraine and the Czech Republic have electricity costs of 0.06 cents. In China it costs only 0.04. Estimates are estimated per country, as each individual producer is supplied with different forms of energy.
With bitcoin prices below $ 6,000, they have a problem in Georgia and India. Why; Because they have the oldest machines. Americans have more modern machines, but they start at the same price and go in, because they have more expensive electricity. The same can be said for other countries. The total production capacity that is not profitable to have its machines open under $ 6,000 is 18%. Those with profits, albeit small ones, are in Russia, Ukraine and the Czech Republic.
We are now coming to the beast, China. There, not only are energy costs cheaper than competitors, but access to the best machines is easier. The largest manufacturers of mechanical equipment are Chinese. But with this price, even the old motorcycles of 2017 are profitable.
At the site, https://www.asicminervalue.com/ (link is external)one can calculate for oneself which types of machines are advantageous, as at the bottom of the page it is possible to set the cost of electricity yourself.
The effect of halving on price
As we have mentioned many times, in a month from now the phenomenon of halving will occur. This means that the amount of bitcoin production will be reduced by half. From 1,800 new currencies that appeared daily, 900 will be created. As if half of the production facilities are closed.
How much will this affect the price? We do not know for sure, but we can make some assumptions. For example, we all know that in the case of oil, when the quantity offered decreases, the price goes up. And vice versa. That’s why its price has plummeted in recent weeks, when Russia and Saudi Arabia failed to reach an agreement and opened the taps. Bitcoin, from a rare asset, will become even rarer.
Another fact that we have to keep in mind is that the previous 3 times that the halving effect occurred, the bitcoin price skyrocketed a few months later. Of course, this does not necessarily mean that the same thing will happen now. It may have been discounted by the market this time around. The reason is that many now know the process and the peculiarities. In previous years, it concerned and was monitored by fewer.
However, it is extremely unlikely that it will stay below cost, at least for a significant period of time. Many of the so-called “whales” are also miners, they will hardly let it fall under it, without attempting an intervention. However, it is not unlikely that they will let it fall low in the beginning, because in this way miners with non-competitive costs are taken out of the market.
It would be an understatement not to admire the genius of the way bitcoin is designed, which manages to adapt to all situations. Even if half of the miners are closed, there will be no problem. It will be less difficult to find the puzzle, so you will need less energy. So some of those who turned off the switches will turn on their machines again. It will be in their best interest to produce again.
What many people don’t know is that in order for bitcoin not to lose value in the daily trading of its price in the exchanges, it is not enough for the sellers to be equivalent to the buyers. This is the case in traditional stock markets.
Let’s do a rough calculation. Having 1,800 new bitcoins generated daily means that there will be a new inflow of $ 400 million a month (30 days x 1,800 new bitcoin per day x $ 7,000, which is the average price for the last 2.5 years), only so that the price of Bitcoin does not fall even one cent. Halving onwards will require half! In other words, if we assume that the same 400 million fresh dollars will continue to enter the crypto market, in the tug of supply and demand, buyers will start with an advantage of 200 million, which will logically raise the price.
As we have said, however, it remains to be seen whether it will be verified in practice.