Bitcoin's Enormous Energy Costs May Prove to Be Its Biggest Risk
&quot;Even as bitcoin flirts with $8,000, the price required for mining to be marginally profitable stands at a jaw-dropping $300,000 to $1.5 million by 2022 based on current growth trends and electricity use, according to Christopher Chapman, an analyst at Citigroup Inc. At that pace, the implied consumption would match that for the whole of Japan over the long haul.&quot;<p>This Citi analyst either doesn&#x27;t understand Bitcoin or doesn&#x27;t understand economics: because the protocol has difficulty adjustment and because marginal revenue will always approximate marginal cost, the cost to mine 1 BTC will always approximate its value.<p>Therefore, projecting the cost of mining is <i>equivalent</i> to predicting the price of Bitcoin.  If the cost to mine 1 BTC was $1MM USD (and so $1MM&#x2F;BTC), that would imply the network value of the Bitcoin ecosystem would be well over the USD M1 supply (tens of trillions, in fact).  Bitcoin would have effectively replaced fiat in that world and perhaps all the cost it eliminated would be worth the mining.<p>In any event, from what he said, I doubt this (equity) analyst understands that he can&#x27;t project $1MM BTC mining cost without at least $1MM per BTC price.