 The price and cost of bitcoinJohn E. Marthinsen and Steven R. Gordon The Quarterly Review of Economics and Finance, 2022, vol. 85, issue C, 280-288 Abstract: Explaining changes in bitcoin’s price and predicting its future have been the foci of many research studies. In contrast, far less attention has been paid to the relationship between bitcoin’s mining costs and its price. One popular notion is the cost of bitcoin creation provides a support level below which this cryptocurrency’s price should never fall because if it did, mining would become unprofitable and threaten the maintenance of bitcoin’s public ledger. Other research has used mining costs to explain or forecast bitcoin’s price movements. Competing econometric analyses have debunked this idea, showing that changes in mining costs follow changes in bitcoin’s price rather than preceding them, but the reason for this behavior remains unexplained in these analyses. This research aims to employ economic theory to explain why econometric studies have failed to predict bitcoin prices and why mining costs follow movements in bitcoin prices rather than precede them. We do so by explaining the chain of causality connecting a bitcoin’s price to its mining costs. Keywords: Bitcoin; Mining costs; Value; Price; Causation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:85:y:2022:i:c:p:280-288 DOI: 10.1016/j.qref.2022.04.003 Access Statistics for this article The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty More articles in The Quarterly Review of Economics and Finance from Elsevier |
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