What is Bitcoin Shutdown Price? Risks and Scenarios

Bitcoin mining is what keeps the Bitcoin network as highly secure as it is right now. For Bitcoin enthusiasts and believers, mining Bitcoin might be the easiest yet most profitable business. 

For any business to thrive, the profit has to outperform the cost. In this case, the business of mining Bitcoin can fail if the operation cost exceeds the potential profit, which threshold we define as “Shutdown Price”. Let’s find out about Bitcoin Shutdown Price in this article!

What is Bitcoin Shutdown Price?

Bitcoin Shutdown Price refers to the price of Bitcoin (BTC) that is low enough to make the net profit of mining Bitcoin less than the operation cost to mine it. As a result, miners will probably have to shut down their Bitcoin mining machines to stop incurring losses.

Bitcoin Shutdown Price does not consider the amount of money spent on the hardware and machines to begin with. Therefore, the actual Shutdown Price is most likely to be higher than that in theory, in regard to other costs like service fees or maintenance costs. 

The operation cost to mine Bitcoin mainly comes from electricity expenses. Depending on the country you are living in, this number can vary, making mining Bitcoin in some countries cheaper and hence more profitable than in others.

Bitcoin Shutdown Price can be calculated by using the formula:

Shutdown Price = (Electricity price * power consumption) / Daily mining profit * 24

In which:

Daily Mining Profit = (Hashrates * 86,400) * (block rewards + miner fees) / (Mining difficulty * 232)

If you are not familiar with these terms, you can refer to our 100+ Blockchain & Crypto Terms And Definitions article.

For example, considering: 

• An Antminer S19 machine with a power consumption of 3,250W and a hashrate of 95T.
• The electricity price of $0.1 per kilowatt-hour (varies between countries).
• The latest BTC mining difficulty equals to 28.17T.
• Latest Bitcoin network’s hashrate equals to 195.61.
• Bitcoin block reward equals to 6.25.
• Bitcoin miner fee equals to 0.08125.

By using all these data and the formula above, we can calculate:

Daily Mining Profit = 95 * 86,400 * (6.25 + 0.08125) / (28.17 * 232) = 0.00042951674 (BTC)

Shutdown Price = 0.1 * 3.25 * 24 / 0.00042951674 = $18,159.9

Considering how many variables exist within the formulas, this number will be constantly changing. Here are the approximate shutdown prices of various mining machines, which can be used as a reference:

Risks when Bitcoin miners shut down

There are some risks associated with Bitcoin when its miners shut down their machines. The most important of all is Centralization: The more miners there are, the more decentralized the Bitcoin network is. If these miners stop working, Bitcoin’s network will become more centralized.

At the same time, when Bitcoin miners shut down, this can actually be permanently rather than temporarily. If these miners want to actually stop this “mining business” and sell all the hardware & machines along with it, the hardware market will be affected heavily, especially when these items are so worn-up and sold at an incredible discount.

This is the reason behind the instability of the hardware market recently: sometimes the price just surged up dramatically due to miners’ high demand while other times, the market just crashed considerably within a short timeframe. 

As a result, hardware prices depend strongly on that of Bitcoin. This makes the hardware market unhealthy, especially for non-crypto technology enthusiasts that badly want to own high-quality hardware for their computers.

What happens if all Bitcoin mining machines are shut down?

In practice, this can hardly happen. In theory, however, this case may occur at any time.

The reason why this cannot become reality in practice is that when a bitcoin mining machine is shut down, the total hashrate and mining difficulty of the network will reduce, resulting in a decrease in mining costs. 

Without a doubt, other miners will take advantage of this change to earn more profits. At the same time, realizing this cost reduction, numerous new miners will show up as well. So, it can be understood that the demand and supply of the mining industry will be kept at equilibrium.

However, in theory, all bitcoin mining machines can just stop working simultaneously at one point. As these miners help validate blocks and confirm transactions on the Bitcoin blockchain, the network cannot function without them. Since there is no one verifying the ongoing transactions, the network will be frozen and stop working with no new blocks.

With just some miners start going online again, the blockchain will continue to operate from where it was left off with no problem.

FAQs about BTC Shutdown Price

Can Bitcoin go to zero?

Theoretically, Bitcoin can go to zero. Anything can go to zero. Nevertheless, regarding the current situation and status of Bitcoin, it is hard to say this billion-worth asset, as well as its industry, can disappear easily.

Can crypto disappear?

Crypto has grown into a pretty mature industry with practical applications. Looking at the technologies that crypto is developing right now, it can clearly be the base for future technological advancements.

Hence, the disappearance of crypto, although possible, is very improbable. 

Can Bitcoin just shut down?

As mentioned above, if all Bitcoin mining machines are shut down at the same time, the Bitcoin network will also be shut down. However, this is highly unlikely to happen.

Conclusion

Bitcoin Shutdown Price refers to the price of Bitcoin (BTC) that is low enough to make the net profit of mining Bitcoin less than the operation cost to mine it. As a result, miners will probably have to shut down their Bitcoin mining machines to stop incurring losses.

When Bitcoin miners shut down their machines, it will affect the decentralization of the Bitcoin network, as well as the possibility of hardware price downfall.

Theoretically, all Bitcoin miners can shut down their machines simultaneously. As these miners help validate blocks and confirm transactions on the Bitcoin blockchain, the network cannot function without them. Since there is no one verifying the ongoing transactions, the network will be frozen and stop working with no new blocks.

With just some miners start going online again, the blockchain will continue to operate from where it was left off with no problem.

Read more: What Is Bitcoin Stock-to-Flow Model?