Bitcoin and the Cost Fallacy

Source: American Institute for Economic Research
by Joshua R Hendrickson

“Price theory is about supply and demand. Why is the price of good Y equal to $X? Well, it is just supply and demand. That sounds simple, but people often get this wrong. A prime example can be found in the discussion about bitcoin. The price of bitcoin has fallen about 70 percent from its all-time high in less than one year. One common refrain is that the price cannot go much lower because of the cost of mining bitcoin. It is common to hear people claim that the energy cost of producing bitcoin puts a floor under its price.” (08/04/22)