RIOT earnings disclosed that 53% decrease in power credits directly affects miners’ operational costs, leading to higher Bitcoin mining costs.
In the broader economic context, this ties into energy market dynamics and inflation control in several ways.
Preventing upward pressure on industrial energy prices.
Power credits or subsidies previously given to miners have kept their costs artificially low, allowing them to consume large amounts of energy without fully bearing the market rate.
By reducing these credits, miners are exposed to real energy prices, discouraging excessive energy consumption and reducing competition for energy resources with industrial sectors (like manufacturing or logistics) that are critical to the economy.
Why it matters
When Bitcoin miners compete with industrial users for power, it can push up energy prices. Since energy is a major input cost for many industries, rising prices can ripple through supply chains, increasing the costs of goods and contributing to inflation.
Aligning with Energy allocation priorities
In many regions, energy regulators aim to ensure that critical industries, those tied to job creation, exports, or essential services, have priority access to affordable energy. Bitcoin mining, often seen as non-essential from a macroeconomic standpoint, might be deprioritized to keep energy-intensive sectors from facing higher costs that could contribute to consumer price inflation.
Market correction & miner attrition
With actual energy costs now directly impacting miners, many less efficient operations (those with older equipment or higher power costs) will struggle to remain profitable and may shut down. This natural market correction helps reduce overall energy consumption by the mining sector, easing pressure on the grid and stabilizing prices for other users.
Survivors:
Only miners with low energy costs, high-efficiency hardware, or renewable energy sources will remain competitive.
The reduction in power credits is a policy lever to discourage energy-intensive activities that don’t directly contribute to broader economic stability. In doing so, it helps control energy costs for industries tied to GDP growth and job creation, ultimately working as an inflation management tool.
For Bitcoin miners, this shift creates a survival-of-the-fittest environment, where only the most efficient operations can withstand real market conditions, while others may exit the market.
As the cost to mine each Bitcoin rises, it establishes a new economic floor for the market. Miners are less willing to sell below their production cost, especially large-scale miners who can influence market liquidity. Historically, when mining costs increase due to factors like halvings, energy price hikes, or network difficulty, Bitcoin tends to gravitate toward or above these higher cost bases over time.
Example: After the 2016 and 2020 halvings, mining costs surged, but Bitcoin’s price followed with significant upward movements in the months that followed, leading to new all-time highs.
In the broader economic context, this ties into energy market dynamics and inflation control in several ways.
Preventing upward pressure on industrial energy prices.
Power credits or subsidies previously given to miners have kept their costs artificially low, allowing them to consume large amounts of energy without fully bearing the market rate.
By reducing these credits, miners are exposed to real energy prices, discouraging excessive energy consumption and reducing competition for energy resources with industrial sectors (like manufacturing or logistics) that are critical to the economy.
Why it matters
When Bitcoin miners compete with industrial users for power, it can push up energy prices. Since energy is a major input cost for many industries, rising prices can ripple through supply chains, increasing the costs of goods and contributing to inflation.
Aligning with Energy allocation priorities
In many regions, energy regulators aim to ensure that critical industries, those tied to job creation, exports, or essential services, have priority access to affordable energy. Bitcoin mining, often seen as non-essential from a macroeconomic standpoint, might be deprioritized to keep energy-intensive sectors from facing higher costs that could contribute to consumer price inflation.
Market correction & miner attrition
With actual energy costs now directly impacting miners, many less efficient operations (those with older equipment or higher power costs) will struggle to remain profitable and may shut down. This natural market correction helps reduce overall energy consumption by the mining sector, easing pressure on the grid and stabilizing prices for other users.
Survivors:
Only miners with low energy costs, high-efficiency hardware, or renewable energy sources will remain competitive.
The reduction in power credits is a policy lever to discourage energy-intensive activities that don’t directly contribute to broader economic stability. In doing so, it helps control energy costs for industries tied to GDP growth and job creation, ultimately working as an inflation management tool.
For Bitcoin miners, this shift creates a survival-of-the-fittest environment, where only the most efficient operations can withstand real market conditions, while others may exit the market.
As the cost to mine each Bitcoin rises, it establishes a new economic floor for the market. Miners are less willing to sell below their production cost, especially large-scale miners who can influence market liquidity. Historically, when mining costs increase due to factors like halvings, energy price hikes, or network difficulty, Bitcoin tends to gravitate toward or above these higher cost bases over time.
Example: After the 2016 and 2020 halvings, mining costs surged, but Bitcoin’s price followed with significant upward movements in the months that followed, leading to new all-time highs.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.