Although the halving of BTC production every four years has raised the production costs of miners in disguise, it does not directly affect the price of BTC. The price is of course determined by the market, including macro, sentiment, supply and demand, etc. So after the halving of BTC, is it meaningless to track the mining cost? Not at all! On the contrary, I think that although the cost of miners cannot determine the upper limit of BTC price, it can indeed affect the lower limit of price to a great extent.

Since BTC is a risk asset with global consensus (or an inflation-resistant financial asset), more and more investors, especially financial institutions, are joining in. Once its market price is lower than the production cost, from the perspective of investment psychology, it will trigger a strong buying sentiment. You can get a more favorable BTC without going through the cumbersome processes of purchasing mining machines, building factories, recruiting personnel, and operating management. In other words, the BTC price is "unreasonable" at this time.

In this case, how to correctly measure the mining cost of BTC becomes extremely important. I participated in the establishment of a small mining farm from 2018 to 2020, so I have some understanding of the entire systematic project of mining.

In fact, even for the owners of mining farms, it is difficult to accurately calculate the cost of BTC mining. Because it includes not only the cost of mining machines and electricity, but also the cost of factory rent, power distribution facilities, ventilation and heat dissipation, operation and management, labor, loss and maintenance, machine depreciation, loan interest, etc. For example, mining machines will dissipate a lot of heat when working, so the control of indoor temperature is extremely high. Excessive temperature can easily cause damage to the machine. Once the machine is offline, it will take several weeks or even more than a month to send it back to the manufacturer for repair, which affects production efficiency. Such additional costs cannot be accurately calculated at all.

We can only wait until the computing power is eliminated and the mine is closed, and then use the total investment minus the funds recovered from the sale of old mining machines, and then divide it by the number of BTC mined to accurately calculate the actual production cost of each BTC (this does not include the time cost of the funds). Before this, all our statistics are inaccurate. Including the "shutdown price" that everyone often sees, it only includes the mining machine and electricity costs. The actual cost of miners is far more than this.

Before calculating the cost of miners, we need to understand the mainstream mining machines in the current market. Taking Bitmain's Antminer as an example, there are probably four representative ones:
1. S21 Hyd: The most powerful new mining machine, with a large computing power of 335T and low unit power consumption (16w/T), but it is currently out of stock on the official website.
2. S21 Pro: A new mining machine with a computing power of 234T and low unit power consumption (15w/T). Currently, the official website sells futures. If you place an order now, it will take 1-3 months for the product to be shipped, which means the time and capital costs are relatively high.
3. S19 XP Hyd: This should be the current main mining machine. Most mining farms that upgrade their mining machines after March 2022 will choose this mining machine as the top configuration. It has strong computing power (257T), but the unit power consumption (21w/T) is much higher than the previous two models. It is currently available for sale on the official website.
4. S19 Pro: The main mining machine in the last cycle, with a computing power of 100T and the highest unit power consumption (29w/T). After the halving, this mining machine will also face elimination.

Next, we can roughly calculate the mining cost of BTC through the following set of data:

The price of miner computing power is the USD value or BTC amount (including block rewards and handling fee income) that can be generated per Exahash (1E = 100w T) of computing power per day. As shown in the figure, on May 2, every 1 E of computing power can bring 0.763 BTC to miners.

If calculated based on the computing power of 255T of the current mainstream mining machine S19 XP Hyd, the income of each mining machine on May 2 is (BTC is calculated at $59,000):
0.763/1,000,000*255*59,000=11.48 USD

Assuming that the current average electricity cost for mining is $0.055/kWh, and the power consumption of S19 XP Hyd is 5345w, then the daily electricity cost of one mining machine is: (5345*24)/1000*0.055=7.06 USD

In addition, there is another "other cost" that we cannot accurately calculate. However, according to the latest report from Coinshares, it is estimated that electricity costs account for 70% of the total cost of miners, so the other costs besides electricity costs are:
7.06/0.7*0.3=3.02 USD
(The above is based on Coinshares’ 2024 Mining Report, which evaluates several listed mining companies. The specific content of the report can be found in the following link:
https://coinshares.com/research/2024-mining-report…）

Based on the above assumptions, we can get the data tables of 4 types of mining machines:

It can be seen that when the BTC price is $5.9w, the profit margin of the S19 XP Hyd miner is only 12.8%, and the payback period takes 132 months.
have to be aware of is:
If the electricity price is $0.055 and the BTC price is $51,000, the profit of the main mining machine is negative.
If the electricity price is $0.06 and the BTC price is $56,000, the profit of the main mining machine is negative.

Under the same conditions, the new S21 Pro has better data, with a profit margin of 37%, but the payback period is 54 months. If BTC maintains this price, then in four years, as the difficulty increases and the output is halved, the S21 Pro will also face elimination, which means that 54 months is actually only a theoretical possibility of payback.

If the BTC price rises to $90,000, it will only take about 2 years for all three mining machines to pay back. This is obviously a very cost-effective investment.

Therefore, we can simply assume that when the BTC price is below $56,000 and $90,000, it is an "unreasonable" price. If the price is too low, it will cause "mining accidents". The shutdown of miners will lead to a decrease in the computing power of the entire network, which will bring challenges to the security of BTC. Only when the difficulty is reduced will a new profit and loss balance be generated. If the price is too high, it will bring huge unrealized profits to the overall market and easily lead to concentrated distribution behavior.

Of course, under certain conditions and within a certain time frame, macroeconomics and emotions will play a leading role in BTC prices. We just need to think about what we should do when "unreasonable" prices appear? Should we sell our chips or hold them firmly? I think everyone has the answer in their hearts.

PS: Since I have been out of the mining industry for more than 4 years, many key factors must be different from the situation at that time. Therefore, it is not ruled out that there are omissions or even errors in the content of this article. Friends who are still engaged in the mining business are also welcome to provide valuable suggestions and advice.