HOW Bitcoin Reaches $1 Million | Hashpower Academy

Video Transcript:

hello there and welcome to the hash power Academy today’s topic is how will Bitcoin get to a million dollars and in some senses how will it sustain that sort of price without it being a blowoff top and crashing back down what would actually sustain a multi-million dollar bitcoin price and that is to say that we need to understand what is the hot air underneath the Bitcoin price and the second step down from price is production and that’s the direction that we’re going to take this of understanding that difference between the exchange rate of Bitcoin from electricity Bitcoin mining and Bitcoin to Dollar which is this million doll price and every single cycle the production cost which is aggregated by the difficulty adjustment which is the amount of hash rate coming online and the amount of block Rewards the amount of Bitcoin per day being distributed to that entire pole of compute power of that entire deployment of miners all across the planet and these pieces are important because it’s understanding what is underneath this dollar to bitcoin price premium because that’s what bitcoin’s purchase price is it’s a premium you’re logging into a platform and clicking a button to acquire your Bitcoin but a minor is deploying energy and compute infrastructure scar scaling it up and it’s very technical electrical and there’s lots of financial frictions to that in terms of scale of economy and all those pieces come into play but the key gist of this conversation is to say well if we look at previous Cycles when the price of Bitcoin shot up and we had bull market peaks in when looking back what was the production cost at that time and typically it’s about four to eight times production so the price of Bitcoin would rise to a point in which miners were producing at one4 to 1/8 of the of the market price and so if we suggest that same Dynamic here well if the price of Bitcoin were to shoot way above that even 10 times production the production cost of bitcoin for the average Miner on the network would have to be about 100K which is about double from what it is today so that would be suggesting that if there’s not too much change with the fee Market and uh the efficiency of compute probably does improve it continually improves over time but essentially hash rate would have to double for us to reach a sensible price of Bitcoin even being 10 times production the network right now would have to double in size the amount of hash rate deployed which is an insane number the the the complexities of doubling the network underneath versus the comp complexities of bitcoin’s price doubling well price doubles a lot more easier than scaling out energy infrastructure Transformers switch gear and all the other pieces related to the infrastructure and the red tape and the power contracts and it goes on and on and on and yeah to to have a sensible uh price to production ratio the Bitcoin um production cost average for the total Network would have to be about 250k which should be about here so imagine that one let half it half it again I’m being sensible though that’s one two three four there we go that’s insane the network would have to double quadruple ax it’s not feasible and that feasibility of how much hash rate would have to come online in reference to the Bitcoin price it would mean that the price would be trading at an insane value if the hash price right now uh under under 80k can be about 10 cents of Bitcoin per kilowatt well that price going to a million miners would be earning a dollar per kilowatt and buying five cents of Bitcoin if they’re buying the energy at 5 Cent a kilowatt and started crazily earning a dollar per kilowatt for every $1 of electricity that they spend they would be earning $2 of Bitcoin in return that is a lot of hot air and I like to call it hot air because that would suggest that the price has a long way down to go because what we see every single cycle is the price of Bitcoin typically um have its bare Market where it just Trends all the way down down to about the production cost where say uh a portion of the network reaches a point where they’re switching off their machines and at those crucial moments when hash rates coming offline the difficulty adjustment comes down a couple weeks later and those are the most crucial moments to be buying Bitcoin so it’s not just about the point in which you sell but it’s about your acquisition cost that’s more fundamental to the majority of people looking to uh buy Bitcoin and never sell which is a completely different topic that would be very interesting to discuss next I hope this was a different sort of video another way to visualize this price to production comparison would be that if a miner is spending say $100 on their energy and a healthy peak of a ball Market of a typical Asic that’s consuming that power and that’s their monthly bill peak of the full Market they should be earning about $400 so that that direct comparison between how much their monthly cost is to power that machine versus the monthly output of Revenue you can multiply that up to the price of Bitcoin to get your your production cost of Mining and just like the new versions of iPhones continually come out the most efficient mining machines are the most expensive the least efficient the least expens expensive and what it does is it creates an entire scale of different production costs for different Miners and then also you would include if you’re dollariz it you would include the price of energy as well and so what you get is this entire range of maybe a bell curve of different efficiencies and energy prices all coming together so that when the price does drop from these crazy Heights um yeah you’ll see hash rate coming offline if it reaches points of unprofitability but what’s most interesting about these points in time is those crucial moments where others are switching off the the volume and the quantity essentially of Bitcoin being distributed from the global monetary Network to the local mining level well if other miners are switching off that’s the moment to be mining to accumulate a greater quantity of Bitcoin because it’s a difficulty adjustment comes down retrospectively you’re going to start earning more SATs at those crucial prices because when price deviates really high as a multiplier from production there’s too much premium related to the Bitcoin and when bitcoin price is trading close to production when the dollar to Bitcoin exchange rate is close to the energy to Bitcoin exchange rate that is when the most value is within that purchase so it’s almost like the psychology of going into the supermarket when you see your favorite thing on a discount it’s time to buy it and when it’s really expensive um yes it could go higher but you know trading psychology gets the better of most people I hope this was an interesting video I’ll do some more price videos but I’m going to give it a mining and hash rate and energy sort of twist so that it’s different to all the other weird and wonderful price predictions out there that have no substance of discussing these underlying fundamentals as part of you know the importance of you need something to compare this price too because price is just arbitrary and it’s a premium and as I said Michael sailor’s got shares of Bitcoin and he Cycles the uh the share premium into more Bitcoin as its value layer but miners do the same because they’re nuts they cycle dollar to bitcoin premium into to more computer hardware to produce more Bitcoin and raise the production floor so the next time you you meet a Bitcoin minor you give them a big hug and thank them for plugging their machines in because it’s raising the value of your Bitcoin and in another video we will discuss that the Haring is actually the doubling which is to say that if subsidy Cuts in half and your energy bill stays the same and now you’re only getting $200 a Bitcoin where your production cost just doubled so the Haring for miners is actually the doubling but that’ll be for another video I hope this was interesting like subscribe all that fun stuff and I’ll see you in the next one goodbye