Is Mining for Bitcoins Profitable? by Alfred PangIn his blog post, Alfred gives a good overview of Bitcoin mining and why there is a relationship between the price of bitcoins and the amount of mining activity that will result.
He makes the argument that those mining are speculators. The decision to enter mining or to increase mining capacity involves not just speculation on the future exchange rate but speculation on the difficulty level at some future points in time.
At the same time, a miner’s risk is protected on the downside as there is salvage value in the mining hardware should future results not meet expectations.
Written on 18 Apr 2011.