Bitcoin price fluctuations matter to miners more than they do to almost any other demographic of bitcoin investors because of the price’s effect on mining hardware markets. Regularly checking the price can often be counterproductive for long-term, diamond-handed HODLing, but the dollar value of bitcoin is important to any mining operation, especially for miners that are planning to acquire more hash rate.
A lower bitcoin price usually means slightly discounted prices on mining hardware for reasons explained in this article. With bitcoin still sitting nearly 40% off its latest all-time price high[1] at the time of this writing, the prices for mining hardware have started to drop. This article explains the idiosyncrasies of the mining hardware market and its relationship to bitcoin, and it summarizes the mining market’s status quo amid a generally less frothy cryptocurrency market and the opportunities cheaper mining hardware could present.
Mining Hardware Market’s Relationship To The Bitcoin Price
Understanding how bitcoin’s price affects mining hardware prices isn’t complex. For one thing, since hash rate generally follows[2] or lags behind bitcoin’s price movements, prices of ASICs — the source of hash rate — similarly lagging behind is not surprising. During downward price trends for bitcoin, the decision by some miners to unplug and even liquidate their hardware followed by the accumulation and deployment of new hardware during bullish periods tracks with (and somewhat intuitively explains) hash rate’s relationship to price.
In short, when the bitcoin price starts going up, sidelined miners are incentivized to plug in old machines and/or to buy new ones since the dollar value of the bitcoin they mine is higher. This price appreciation triggers higher demand for mining machines, which pushes hardware prices up, and eventually results in higher levels of network hash rate. When the
