Bitcoin s plunge bites miners state
It drives both the price and quantity down. The only way that the price of bitcoins will go back to making it financially viable to mine for them is if enough people stop their mining efforts.
The supply has to decrease in order to raise the price of bitcoins again as demonstrated in Graph 2. This is how bitcoins success has lead to its own demise. Another potential solution would be to increase the demand for bitcoins. Increasing the amount of places that accept bitcoins, making bitcoin a more viable option to cash, could do this. This will require breaking up the monopoly that governments currently have over currencies.
As more places start to accept bitcoins, and as bitcoin becomes more than a safe haven for criminals, this will increase the demand for bitcoin, thereby driving price back up. The traditional notions of supply and demand are still relevant in modern economy. Demand, supply and their interactions often determine price and the most efficient means of production in a market. A low supply and high demand typically indicate that there will be a high price in equilibrium.
Conversely, a high supply and low demand should lead to a low price. In an ideal world, suppliers and demanders will work in equilibrium to avoid any significant dead weight losses.
The traditional notions of supply and demand are still relevant in modern economy. Demand, supply and their interactions often determine price and the most efficient means of production in a market.
A low supply and high demand typically indicate that there will be a high price in equilibrium. Conversely, a high supply and low demand should lead to a low price. In an ideal world, suppliers and demanders will work in equilibrium to avoid any significant dead weight losses.
Applying these fundamentals to a real-world situation, we can look at the iron-ore industry. Iron-ore, typically utilized in the production of steel, is a large industry and the big 3 are the 3 companies currently leading it. Hoyle suggests that this expansion has been because they see China needing more steel in the future to build its industries.
Providing more steel to a place that will likely utilize is it is a competitive advantage in this supply-demand model where there are multiple suppliers. Ideally, you want to be the only supplier in order to make the most profits.
By being there and producing record amounts, they are able to over-supply China with this resource so they do not seek it from elsewhere. This increased supply while the demand in China has not changed too much drives the price down. This lower price could mean that other suppliers, particularly small mingling companies, may not be able to continue in this market without losing money.