Dynamics of mining markets: Equilibrium implications for professional and casual miners

Luca Pezzo, Lei Wang, Seungho Shin, Duygu Zirek

Research output: Contribution to journalArticlepeer-review


We design a simple equilibrium model to analyze the dynamics of the mining market in the presence of professional and casual miners. The model endogenously recovers two major unobservable drivers: the supply of computing power, and the dynamics of the fixed costs of mining. We calibrate the model to the market of Bitcoin and Ethereum and find that positive shocks to the supply of computing power (technological enhancements) translate into positive price shocks, and the benefits of these hikes are creamed off by professional miners. We also find that fixed costs are inversely related to technological enhancements, decrease at an exponential rate (which is twice as big for Bitcoin), and are the smallest during periods when professional miners have a monopoly.

Original languageEnglish
Article number100866
JournalGlobal Finance Journal
StatePublished - Aug 2023


  • Computing power
  • Crypto-currencies
  • Equilibrium model
  • Fixed costs
  • Kalman filter
  • Monopoly
  • Professional versus casual miners
  • Technological enhancements


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