Thanks for taking the time to explain. A whole new financial vocabulary to digest. A few concerns I'm wondering about. Given the huge amount of energy required and shared resources going into mining (water and electricity), it seems like the folks in the commons have the burden of financially supporting this new system with NO benefit to themselves. Will rate payers of the local utility blithely take on the additional costs of supporting an enterprise (mining) that does not benefit them? Hmm. It seems that this new system likely requires another look at nuclear energy, just to keep the thing afloat. I live within a 15 min walk to Lake Michigan--water concerns?
It seems the doors close to all that are not "early adapters". I'd liken it to Prop 13 in California where a certain class of home owner derives a tax benefit that closes to others...affecting how RE transfers likely become constrained. In other words, a distorted RE market, if only on a local level.
I'm curious as to how the "gold bugs" feel about this new reality. It seems crypto is inherently inflationary, in a sense, not because of fiat based money printing (cf USG presently) but rather a shortage of coins and entry entry points because the whole system favors the "first in" rather than my one year old granddaughter who likely gets priced out forever. I've always wondered about the "gold exuberance"...sure you can buy at market prices but what happens when everyone or a large percentage of "holders" wants to sell? Supply...meet demand.
Again, thanks for the help in understanding this business. I think of the '49ers in CA digging like moles (mining) and buying Levis, bacon, cook pots and hookers at inflated prices. The real money then was not really the shiny yellow but ancillary services supporting the enterprise. Qui Bono...
One of my fave financial quotes: "A man is rich in proportion to the things he can live without."
Has the ring of Thoreau but I'm too lazy to look up for attribution.
Harry, for a selfdeclared-crypto-illiterate, you've nailed the fundamental problem. At U.S. grid average electricity prices, mining costs are $111,072 per Bitcoin. Large industrial operations with ultra-cheap power can get that down to around $27,000-34,000, but that's only accessible to those with private energy deals. For regular people trying this at home, costs can exceed $500,000 per Bitcoin in expensive electricity markets. Meanwhile, mining a single Bitcoin now requires 854,400 kilowatt-hours - enough to power 81 average U.S. homes for an entire year.
And than we're not even talking about the water needed to cool those data centers!
You're spot on about nuclear too. Mining operations are literally buying power plants. But when crypto crashes, guess who will get stuck with the stranded energy infrastructure costs? Taxpayers...
Your California Prop 13 analogy is perfect. Early Bitcoin adopters got coins when they were worthless and mining was easy. Now the rest of us subsidize the infrastructure through higher utility rates while watching the wealth gap widen. Network difficulty has hit 126 trillion - that's 126 trillion times harder than when Bitcoin started.
I'm not really laughing (I consider myself a gold bug). According to history, gold should be having 4 zeros already if it's even -adjusted for inflation- compared to when it was delinked (or compared to the M2 money)... Anyway, our time will come - and then we will be forced to pay "windfall tax". I'm sure.
I digress. There is not really a shortage of coins. More than enough junk out there. So that's what people do. They hear "crypto" and go to see: BTC: 100k... Too expensive. ETH: 4k, damn... And then they go down the rabbit hole of lower quality junk coins. Hoping for a greater fool to take it off their hands for more money. Still thinking in USD, not in this.
I switched my mindset about 20 years ago into gold/silver. Sadly, I earn less and less silver every year. Even though my wage goes up!
When everyone wants to sell, the price will dive, but will jump right back up. I see gold as an investment in my retirement funds or my inheritance to my kids. I don't sell. I swapped it a few times for the other metal, but I don't sell. And you can always take a loan on it. And if the price in USD goes down: I'll default on the loan. They can take the coins. If not, I'll pay them back.
But at least us bugs aren't burning energy that are worth as much as small countries!
Your granddaughter isn't just priced out by market forces - she's priced out by design. The whole system is structured to reward whoever got there first, not whoever brings the most value. (ie: ponzi scheme!)
If she wants a good tip: check PM miners. I'm in nano-cap myself, but that's a wild west (daily swings of 20% -- but potential gains in the thousands). But you have bigger more established ones. And I'm expecting we're on the verge of a HUGE multi-year breakout to the upside (going for the next 8-10 years). And in a bull market, all boats are lifted by the waves (or how did Buffet say that?).
Anyway, the real winners, as you noted, are selling shovels to the miners. NVIDIA made billions, power companies are thriving, and the infrastructure providers get rich regardless of whether Bitcoin succeeds or fails.
It's always been like this. During the goldrush, now... History might not repeat, but it certainly rhymes.
Thanks for taking the time to explain. A whole new financial vocabulary to digest. A few concerns I'm wondering about. Given the huge amount of energy required and shared resources going into mining (water and electricity), it seems like the folks in the commons have the burden of financially supporting this new system with NO benefit to themselves. Will rate payers of the local utility blithely take on the additional costs of supporting an enterprise (mining) that does not benefit them? Hmm. It seems that this new system likely requires another look at nuclear energy, just to keep the thing afloat. I live within a 15 min walk to Lake Michigan--water concerns?
It seems the doors close to all that are not "early adapters". I'd liken it to Prop 13 in California where a certain class of home owner derives a tax benefit that closes to others...affecting how RE transfers likely become constrained. In other words, a distorted RE market, if only on a local level.
I'm curious as to how the "gold bugs" feel about this new reality. It seems crypto is inherently inflationary, in a sense, not because of fiat based money printing (cf USG presently) but rather a shortage of coins and entry entry points because the whole system favors the "first in" rather than my one year old granddaughter who likely gets priced out forever. I've always wondered about the "gold exuberance"...sure you can buy at market prices but what happens when everyone or a large percentage of "holders" wants to sell? Supply...meet demand.
Again, thanks for the help in understanding this business. I think of the '49ers in CA digging like moles (mining) and buying Levis, bacon, cook pots and hookers at inflated prices. The real money then was not really the shiny yellow but ancillary services supporting the enterprise. Qui Bono...
One of my fave financial quotes: "A man is rich in proportion to the things he can live without."
Has the ring of Thoreau but I'm too lazy to look up for attribution.
Harry, for a selfdeclared-crypto-illiterate, you've nailed the fundamental problem. At U.S. grid average electricity prices, mining costs are $111,072 per Bitcoin. Large industrial operations with ultra-cheap power can get that down to around $27,000-34,000, but that's only accessible to those with private energy deals. For regular people trying this at home, costs can exceed $500,000 per Bitcoin in expensive electricity markets. Meanwhile, mining a single Bitcoin now requires 854,400 kilowatt-hours - enough to power 81 average U.S. homes for an entire year.
And than we're not even talking about the water needed to cool those data centers!
You're spot on about nuclear too. Mining operations are literally buying power plants. But when crypto crashes, guess who will get stuck with the stranded energy infrastructure costs? Taxpayers...
Your California Prop 13 analogy is perfect. Early Bitcoin adopters got coins when they were worthless and mining was easy. Now the rest of us subsidize the infrastructure through higher utility rates while watching the wealth gap widen. Network difficulty has hit 126 trillion - that's 126 trillion times harder than when Bitcoin started.
I'm not really laughing (I consider myself a gold bug). According to history, gold should be having 4 zeros already if it's even -adjusted for inflation- compared to when it was delinked (or compared to the M2 money)... Anyway, our time will come - and then we will be forced to pay "windfall tax". I'm sure.
I digress. There is not really a shortage of coins. More than enough junk out there. So that's what people do. They hear "crypto" and go to see: BTC: 100k... Too expensive. ETH: 4k, damn... And then they go down the rabbit hole of lower quality junk coins. Hoping for a greater fool to take it off their hands for more money. Still thinking in USD, not in this.
I switched my mindset about 20 years ago into gold/silver. Sadly, I earn less and less silver every year. Even though my wage goes up!
When everyone wants to sell, the price will dive, but will jump right back up. I see gold as an investment in my retirement funds or my inheritance to my kids. I don't sell. I swapped it a few times for the other metal, but I don't sell. And you can always take a loan on it. And if the price in USD goes down: I'll default on the loan. They can take the coins. If not, I'll pay them back.
But at least us bugs aren't burning energy that are worth as much as small countries!
Your granddaughter isn't just priced out by market forces - she's priced out by design. The whole system is structured to reward whoever got there first, not whoever brings the most value. (ie: ponzi scheme!)
If she wants a good tip: check PM miners. I'm in nano-cap myself, but that's a wild west (daily swings of 20% -- but potential gains in the thousands). But you have bigger more established ones. And I'm expecting we're on the verge of a HUGE multi-year breakout to the upside (going for the next 8-10 years). And in a bull market, all boats are lifted by the waves (or how did Buffet say that?).
Anyway, the real winners, as you noted, are selling shovels to the miners. NVIDIA made billions, power companies are thriving, and the infrastructure providers get rich regardless of whether Bitcoin succeeds or fails.
It's always been like this. During the goldrush, now... History might not repeat, but it certainly rhymes.