Bitcoin Price Crash: Don’t Ignore the Cost of Production

Bitcoin mining

Bitcoin (BTC) price grew in the second half of 2017. The digital currency peaked above $19,000 at the end of last year but, lost nearly half of its value in the new few weeks. Bitcoin continues to trade in a narrow range over the last two weeks is currently trading around the $11,000 mark. Traders blame the lack of regulation for the huge plunge in prices, however, they are ignoring the growth in bitcoin miners and the decline in the cost of production.

Bitcoin Prices>> Hackers are Mining Cryptocurrency using Video Websites

Mining is a lucrative business that doesn’t require intellectual property or specific knowledge, so it is now advantageous for arbitrageurs to easily mine bitcoin.  And thanks to low regulatory requirements, several new players are entering the mining markets.

For instance, CryptoWatt, LLC, recently announced the purchase of MSE Technologies’ grounds and buildings in order to transform them into a mining operation likely to begin this March. Moreover, technology companies are making mining easier by developing chips for specifically for it.

The low entry barrier will allow more arbitrageurs to start mining and this will substantially increase supply, beginning the decline of bitcoin miner’s profitability. The result will be modest profits against the cost of mining.

Chairman and CEO Thomas Peterffy said, “a sharp bitcoin price decline could cause liquidity issues for the clearinghouses that could spread across financial markets and lead to a Lehman-style collapse.”

>> The Next Global Hotspots for Bitcoin Mining

Energy consumption is the major cost. Mining a single coin is eventually determined by how much the electricity spend is on operating a mining rig.

Based on an Elite Fixture survey, South America has the potential to mine a single coin for $531. Venezuela is among those countries that offer the cheapest cost to mine altcoins. On the other hand, South Korea, driven by higher electricity costs, is the most expensive country to mine bitcoin.

Featured Image: twitter

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