Friday, May 18, 2018

Gold vs. Bitcoin: Price in relation to energy costs for both show an interesting dichotomy that bodes badly for the crypto

Steve St. Angelo over at SRS Rocco published an interesting article on May 18 that led us to wonder if in the long run, gold may always be more economical than Bitcoin.  And by this we mean that despite the fact that the gold markets are severely manipulated through the paper futures trading, the price always remains above its cost of production.

Graphic courtesy of SRS Rocco

However as the supply of Bitcoins being mined decreases, or rather extends the amount of time required to 'dig out' each new one, the cost of production severely increases.  And with the current price of a Bitcoin stagnating in a range of between $8000 and $9000 over the past week, how soon will a combination of energy and overhead costs become greater than the actual value of the cryptocurrency?


This chart shows the difference in energy costs around the world for the mining of a single Bitcoin.  And while many remain below the current value of Bitcoin here on May 18 ($8100), several nations, including South Korea ($25,000), are well above that value which doesn't include overhead costs such as hardware and cooling facilities.

Cryptocurrencies that rely upon mining may soon become hard pressed to be viable if the cost of production grows higher than the value of the currency.  But for gold that will never be the case since the natural laws of the market will always win out. Because if they manipulate the prices too low, then mines will simply cease to produce, and cause a backlash from not having enough supply.

1 comments:

Ken,

On a slightly different track:

https://www.zerohedge.com/news/2018-05-17/china-oil-futures-thundering-action-after-trump-exits-iran-deal

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