ASIC Monopoly Fallacy

There is a theory that Bitcoin ASIC price is controlled by a cartel of miners, making it too costly for others to acquire. This implies that production is restricted by the cartel in order to raise unit price. There is no economic difference between a cartel and a single organization. Changing organizational size is a free market outcome observable as capital seeks optimal economies of scale.

Production is generally set at a level intended to produce a maximum rate of return on capital. The only way for a producer to raise price is to limit production below that optimum. This leaves an opportunity for others to capture customers with a lower marginal utility for the product, as that market would otherwise be unserved. This in turn lowers price until the market clears. In other words, in a free market there is only market price and ultimately a market return on capital.

Unless production is disproportionately subject to anti-market forces, such as tax or subsidy, everyone enjoys the same opportunity to raise capital and compete in production. If this does not happen it implies that returns on this line of business are consistent with average market returns. In other words, monopoly price is only produced by state grant of monopoly power.

A related theory asserts that purchasing ASICs from this cartel increases its hash power. This is invalid on the basis of the above explanation of monopolistic pricing.