Theory: Miners buy bitcoin when they are mining at a loss

[Bitedge]

I heard a theory that sounds unlikely on the face of it but makes perfect sense if you think about it. Do you think this happens? (numbers are for illustrative purposes)

Bitcoin price is $500.
Miner spends $475 per bitcoin he obtains (by mining).
Miner sells bitcoin at a profit.
Bitcoin difficult increases.
Miner now spends $525 per bitcoin he obtains (by mining).
(here comes the controversial part)
For every bitcoin miner mines be buys a bitcoin for $500 making the average cost per bitcoin he obtains $512.

Now miner only has to hope for the price to reach $513 to be able to sell at a profit whereas if he did not buy when he was mining at a loss he would have to hope for the price to reach $526 before he could sell at a profit.

 

[yrral86]

Like most businesses, many miners have debt costs to cover. Additionally, most have very large electricity bills to cover. Unless the are independently wealth and have a long term outlook and are bullish on bitcoin, doing what you suggest wouldn't make sense. However, if they did meet all of those qualifiers and bitcoin does do well they would be in better shape than if they had not reduced their cost. However, even in that case, just buying bitcoin would be the better move.

 

[johnyj]

I heard that the plan is industry miner producer use part of the fund to pump the market price while at the same time sell miners

 

[adamstgbit]

i think for the most part miners and speculator/investors are two different poeple.

 

[go1111111]

OP: that strategy is strictly worse than one where the miner simply stops mining and buys as many bitcoins as he wants at $500. Then his average cost is $500 instead of $512.

 

[Chronos]

OP, you seem confused. A miner who pays $525 in electricity would not bother to mine a $500 bitcoin, which would net a loss.

Here's an interesting scenario twist, though:

1. A miner wants a bitcoin (cost: $500) so he thinks about mining.
2. Oh, no! The cost to mine is $525, so he doesn't mine.
3. He buys the bitcoin for $500 instead.

That's a net demand for bitcoin that wouldn't exist if mining were cheaper. :trollface: