How Do Changes in Interest Rates Indirectly Affect a Miner’s Profitability?
Changes in interest rates indirectly affect a miner's profitability through several channels. Higher rates increase the cost of capital for debt-financed hardware purchases, making expansion more expensive.
They also increase the discount rate used to value future cash flows, reducing the present value of future block rewards. Finally, interest rate changes can influence the overall market sentiment and the price of the cryptocurrency, which is the primary driver of revenue.
Glossar
Interest Rates
Rate ⎊ The prevailing cost of borrowing funds, expressed as an annualized percentage, fundamentally influences asset valuation across cryptocurrency derivatives, options trading, and traditional financial markets.
Cost of Capital
Valuation ⎊ Cost of capital within cryptocurrency, options, and derivatives contexts represents the theoretical rate of return a firm must earn to satisfy its investors, factoring in the risk profile unique to these nascent asset classes.
Interest Rate Changes
Influence ⎊ Interest rate changes exert an influence on options pricing, primarily through the cost of carry component in valuation models like Black-Scholes.