First of all, you regularly consume items where the price is determined by demand, not production cost. Cars, housing, and premium products regularly sell for multiples of what they cost to produce.
Secondly, just because something’s expensive to produce doesn’t mean that it’s valuable to anyone else. This is a common problem in customized products, but also happens when market demand either fails to materialize or collapses. Your ultra premium buggy whip might be incredibly expensive to produce, but if nobody wants buggy whips you can’t sell it high enough to make a profit.
Mining is public evidence that someone is willing to burn $X in electricity to acquire a Bitcoin. For an intrinsically worthless monetary asset with no government support, social proof is the only real source of data on possible valuations. See also: Mises’ regression theorem.
many multiples! this is incorrect. the luxury versions of those products you listed certainly have higher margins, but id be surpised if you could find anything with 100% proft margin, much less 3x and beyond.
Price is a function of supply and demand and because most markets are fairly competitive, the market-clearing price can be predicted roughly from the cost of production.
'Cars' do not sell at multiples they cost to produce, once you factor in all of the overhead of sales and distribution, margins are fairly thin. Those are 'real costs'.
Almost every single good ever produced is commoditized on some level, and therefore market prices are predictable from the cost of production.
BTC is no exception: if it costs $1 to make $2 in BTC, you can be sure a lot of people will be 'making' BTC until the cost of making BTC and it's market value start to merge.
The remaining demand for BTC ... given the fact it has no use, it's not a currency or a generally accepted store of value ... is speculative in the purest sense. It's whatever a bunch of dudes holding it want to buy and sell them as. Like baseball cards.
What’s interesting is that you reinforced my point at the very end. Baseball cards are a fantastic example of a product that’s sold in a way that’s completely disassociated from the cost of production.
Bitcoin is weird though because no matter how many miners there are, it's still minted at the same rate globally. If it cost a miner $1 to make $2 in Bitcoin, what would not happen is new miners joining and flooding the market with more Bitcoins until the price of Bitcoin falls. Instead, new miners would keep joining and the miners would be cutting into each other's profits until it cost them all approximately $2 to make $2 in Bitcoin.
Miners engaged in mining before I arrived would have the same costs they had before, but now with fewer BTC to cover them, this would force them to sell at a higher price or operate at a loss until they drown the competition.
There are two ways to look at it.
My dreams of being a millionaire are forcing me to sell this orange for a million dollars. Ergo, oranges will now retail for a million dollars.
Nope.
Miners have costs to cover, mining unprofitably and holding makes no sense whatsoever (you're literally better off turning off your rig, buying on the market and holding at that point)
There's a Reddit comment here[0] with links to them, but it's up to you to decide if they're worthwhile or not. I have some doubts, but I would not go as far as to throw the word "discredited" in so casually. The comment also includes links to research against the "LTV".
[0] https://www.reddit.com/r/badeconomics/comments/fht0ti/marxs_...
Edit: it’s literally the second sentence in the Wikipedia article:
> LTV is usually associated with Marxian economics
The irony is in a Bitcoin investor and Marxists sharing some economic common ground for their beliefs, since otherwise those groups rarely have much in common.
(Or we are both wrong)
They can be mined at a loss temporarily, in order to drive out competition, but at some point, a miner operating at a loss will go bankrupt. This is no different from the oil industry, where capital outlays so high that most players continue to produce at a loss, temporarily. But long-term, the price must at least match costs of production.
Bitcoin is minted at a predefined global rate; the amount minted doesn't depend on the number of miners. Miners compete with each other for a share of the predefined minting action, so some dropping out does not decrease the minting rate of Bitcoin, but instead makes it more profitable for the remaining miners.
Given this feedback loop, how do you establish what's the proper equilibrium? What's the total amount of hardware bitcoin is supposed to stabilize on? As a thought experiment, if BTC stabilizes at $30k, that means that the total value of all bitcoins will be about half a trillion dollars. How can that work if Bitcoin becomes the new dollar? Clearly the entire world ecomony is more than that.
Normally I'd assume that I'm missing something and the people who came up with that model know more than I do, but then again we're talking about cryptocurrencies so...
If people overall wanted to purchase enough Bitcoin to have more than half a trillion dollars in Bitcoin, then demand would outpace the supply and the price of Bitcoin would go up, making it possible to have whatever amount of value in Bitcoin. It's nonsense to presuppose the price of Bitcoin staying still while demand outpaces the supply. No one sets the price of Bitcoin but supply and demand.
If the price were somehow fixed at $1000, the difficulty would eventually be adjusted so that miners would barely break even.
Same if the price were somehow fixed at $100,000.
Remember, production is built right into the protocol. 10 miners could keep the network going at the same pace.
A network with only 10 miners could easily be attacked with minimal effort. The only thing stopping the attacker would be the fact that it's a waste of time, because a cryptocurrency with only 10 miners is worthless.
Wiping out too many miners at once is dangerous business.
