Bitcoin Mining Prohibitive

Note from the CEO: Costs are going up which leads to consolidation for economy of scale that leads to (ultimately) reduced supply. Which industry is this? Bitcoin mining. Bet that’s a surprise and just solidifies the acceptance and ‘new found’ credibility of the digital currency. Hmmmmm, reduced supply and strong demand. Just thinking.

Over the last several years as cryptocurrencies have gained a strong, albeit small, passionate following a lot of small “basement miners” sprung up. Now costs are increasing and consolidation is well under way in the mining sector making bitcoin mining too expensive for many small operators. Ultimately, increased demand and consolidation because of higher costs means reduced supply. This is a great read, especially if you are bullish on bitcoin.

“For all the fluctuation in bitcoin pricing, the year of 2014 is looked as a year when bitcoin started to shift past the proof-of-concept phase and towards mainstream markets. More than 6 million bitcoin wallets were set up in 2014, as stated by Coindesk, which is a huge increase over 2013, while around 75,000 merchants are now accepting digital currency, including Expedia, Dell and Overstock.

However, one area of the bitcoin economy is maturing much quicker than the others, even to the point where profits are getting increasingly difficult to come by and diversification and consolidation are already taking place: the bitcoin mining. For years, bitcoins had been mainly a far-flung network of the desktop hobbyists. However, a small group of businesses developing big data centers is ready for the sole task of mining the new bitcoins….The dual pressures of increasing mining investments and declining bitcoin prices have pushed some of the smaller players out of the economy, since it has become a capital intensive business. The cost of bitcoin mining now surpasses the benefits for many miners, and so people are exiting…..

Read Full Article by Bryant Nelson at Linkedin Pulse