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What Happens When 'Bitcon' Goes Below the Cost of Production?

Source: Bob Moriarty for Streetwise Reports

 

February 6, 2018 (Investorideas.com Newswire) It's entirely possible for the price of a commodity to sink below the cost of production, says Bob Moriarty of 321 Gold, but the system isn't so clear for bitcoin.


In all economic systems where the laws of supply and demand function it's entirely possible for the price of a commodity to sink below the cost of production. It happens with all commodities and is perfectly normal. When the price of a commodity drops below the production cost, growers, miners, manufacturers simply stop until the price recovers. For investors it's a great opportunity.

I'm going to take credit for nailing the top of "Bitcon" in December. It's perfectly true dozens if not hundreds of people a lot smarter than I am called it a bubble but that was accurate years ago. Saying something is a bubble is one of those perfectly true and perfectly meaningless statements like saying gold and silver are manipulated. Sure they are but aren't all financial instruments manipulated?

I did a whole series of interviews saying Bitcon was not only in a bubble but it was topping. And when it did clearly top, I also said that as well and I didn't mince my words.

I've been told that the average cost of producing a single Bitcon is about $6,000. Since it's pretty much based on the cost of electricity the price does vary a lot. A fellow writing for MarketWatch has done an interesting article showing what he thinks the cost of production is for each state.

I love being a contrarian and seeing tops and bottoms being created. Investors hate contrarians because most people just want their fantasies fed. That's why the financial industry is filled with con men whining about manipulation and naked short selling in commodities when we all know that's impossible, commodities are a zero sum game with one buyer and one seller for each contract. I even wrote a best selling book that would take about two hours to read and if you understand it, anyone could have called the top Bitcon in December.

But no one has yet to point out the fatal flaw in Bitcon. Yes, when the price to produce goes below the cost people are going to unplug their banks of computers and wait out the drought. As of Monday the 5th of February Coindesk shows a low of $6583.56 for Bitcon. Coindesk shows a high of $19,343.04 on December 16th for a decline of 66%.

So far.

The map from MarketWatch shows a cost of production of $7,059 in Hawaii, $6,951 for Connecticut and $6,674 for Massachusetts so anyone mining in those states is shutting down.

But there is a fatal flaw that I'm pretty sure no one has pointed out yet. The math for the blockchain requires people to mine Bitcon. When people stop mining, the value plunges. And when the price drops below the cost of production everywhere your Bitcon is going to have all the value of a slightly used Fax machine or a wonderful Beanie Baby. (MIBNSH)

Bob and Barb Moriarty brought 321gold.com to the Internet almost 16 years ago. They later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on current events affecting both sectors. Previously, Moriarty was a Marine F-4B and O-1 pilot with more than 832 missions in Vietnam. He holds 14 international aviation records.

Disclosure:

1) Bob Moriarty: I have no investment in any way with any bitcoin, neither short nor long. I determined which companies would be included in this article based on my research and understanding of the sector.

2) The following companies mentioned are billboard sponsors of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services. Click here for important disclosures about sponsor fees.

3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.

4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.



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