  Explaining changes in bitcoin's price and predicting its future have been the
foci of many research studies. In contrast, far less attention has been paid to
the relationship between bitcoin's mining costs and its price. One popular
notion is the cost of bitcoin creation provides a support level below which
this cryptocurrency's price should never fall because if it did, mining would
become unprofitable and threaten the maintenance of bitcoin's public ledger.
Other research has used mining costs to explain or forecast bitcoin's price
movements. Competing econometric analyses have debunked this idea, showing that
changes in mining costs follow changes in bitcoin's price rather than preceding
them, but the reason for this behavior remains unexplained in these analyses.
This research aims to employ economic theory to explain why econometric studies
have failed to predict bitcoin prices and why mining costs follow movements in
bitcoin prices rather than precede them. We do so by explaining the chain of
causality connecting a bitcoin's price to its mining costs.
