Quote from: LMGTFY on February 17, 2016, 10:25:07 AM

Quote from: panton on February 17, 2016, 10:03:30 AM

Quote from: LMGTFY on February 16, 2016, 12:29:53 PM

I suspect your guesstimate for production costs is incorrect, but perhaps more importantly - production costs vary with producer. A large miner in China may well have lower production costs than a small miner in Arkansan. A miner who invested several years ago in solar power will have amortised that fixed cost over several years. A miner reliant on the local electricity generation company will be looking at ongoing and possibly increasing variable costs.

When people say "the halving is priced in" what they mean is - traders know the block reward reduction is going to happen. So do miners. The halving isn't going to take most people by surprise. Most traders selling BTC now are aware of the impending block reward reduction, and will trade accordingly - and that includes taking into account the reduced supply of BTC post-halving (i.e. in the future). Miners make decisions in advance - they decide to purchase mining gear in full knowledge that the return from that new equipment will almost certainly diminish over time (due to difficulty increasing) and that there will certainly be a 50% reduction some time later this year. They'll have been selling the coins they generate while being aware of all this, and hoping to cover their costs and make a profit over time, specifically over the lifetime of their mining equipment.

When the block reward reduction happens, we won't see miners or traders being caught out. They knew the halving was going to happen, and they've been targeting what they consider to be a good price - taking what they know will happen into account.

This doesn't mean that nearly 4 years ago price increased dramatically to reflect the 2016 halving - the relevance of the halving to price obviously increases as halving approaches. But equally it doesn't mean that the halving will, in and of itself, cause price to dramatically increase. Any dramatic increase is far more likely to (a) be caused by less sophisticated traders hoping to trade off "FOMO" ("fear of missing out" - i.e. when the price goes up they worry it'll continue to go up, and buy in too late), and (b) be short-lived.

I refer to production cost as the average between all mining costs everywhere. Ofc a large mine will have significantly lower power costs versus the average Joe.

If the average power cost for bitcoin mining is representative of bitcoins bottom value// then when halving kicks in all the miners in the world will be -50% less effective at the same cost as when they were before the halving

If price is 500$ and the cost for producing that bitcoin is 400$ , or 350$ , miners wil pay 800$ or 700$ for the production of one bitcoin the first month after the halving occurs. And i dont believe the difficulty will halve also, rather the price will rally.

All the miners in the world will be marginally 50% less effective. But their mining equipment will have been purchased before the block reward reduction, and they will take the overall cost of production into account - which will vary by miner, and by mining gear. Consider a hypothetical sole miner with one solitary ASIC - they purchased it in November 2014, and it reached ROI in October 2015. Their concerns are now the cost of electricity - as difficulty increases will the 12.5 BTC they receive per block cover the cost of the electricity they use in the (lengthening) period of time it takes them to find a block? Contrast that with another (also hypothetical) miner with the same ASIC, but purchased later, in Summer 2015, say. They haven't reached ROI, and need to consider amortisation of the ASIC's purchase cost as well as difficulty and electricity costs.

My point is that this is a calculation that deals with the overall cost of production, i.e. the cost over the life-time of their mining gear. Looking solely at marginal production costs is not what sensible miners are doing. They have a pretty good idea how much they need to sell their BTC for, over the life-time of their mining gear.

I'm not sure why anyone would believe that difficulty would fall 50%, that's just bizarre. I wouldn't be surprised if there was a reduction in difficulty post-halving, but I'd expect it to be consistent with previous reductions (in size and duration).

I reckon that miners with the least mining power will sell their hardware 1 or 2 months before the halving because if many miners sell their hardware at the time which the halving is happening then the price of the hardware will go down because there is more supply and less demand for the old mining hardware.