Bitcoin Forum

I found this article and it is so much convincing, check it out

http://insidebitcoins.com/news/the-bitcoin-halving-deflating-the-hype/35014

I don't think he was trying to say that it is inevitable for bitcoin's price to be deflated because of the halving... He's just saying that bitcoins price won't necessarily sky rocket like some people think that it will due to a shortage of supply... all in all though that was a pretty good article, thanks for sharing.

Yes supply will never be short as bitcoins will always be mined and the bitcoins will always increase in number.
To increase their prices we should use them in our daily lives and not just hodl them, by hodling bitcoins we will never se their prices sky rocketed.

No one knows how bitcoin price will react to block reward halving best not to make plans on hope.

It would be odd if the price would drop considerably or stay about the same some time after the halving (say... 10 months afterwards). I think that the article is flawed in saying that the expected rise in price is because of reduction in the circulating bitcoin. That is wrong. Right now, there is a production of bitcoin, some part of which needs to be sold off to pay for mining cost (electricity bills cant really be paid in bitcoin). They have to sell, and that sale pressure holds the price down somewhat. Once the production of bitcoin goes down, that sale pressure will be less, because they'll have only half the available bitcoin to sell for the cost of mining. Those producing bitcoin will have to sell at about double the price if they want the same profit (assuming the cost of mining doesn't really go up). The only way is up after the halving. Maybe not immediately, but I'm pretty sure the price will double (from what the price will be at about the halving), in about a year after the halving.

I see your point, but there are actually other sides of the argument that makes sense too.  Take for example, if some wealthy person took all the money out from their banks (lets say 1 million $) and stored it into a safe for safe keeping, this wouldn't necessarily mean that the dollar would lose it's value because someone with a lot of money hoarded away their money.

It's a very complicated issue, with multiple theories of what could or couldn't be right; but in actuality there is no set scheme in economics that if "A" happens, this is going to cause "B" to happen... this regards to bitcoin and bitcoin prices as well... It will definitely be interesting though to see how this all plays out in the long run though.

I see your point. But as in your example $ is the most widely used currency, so everyone is using it so it has value and a person holding it will not matter that much.
But Bitcoin is child as compared to $ and it's user base is also very small.

besides on the current demand, it will increase at 100%, just not skyrocket

but it won't remain at the same exact price as it is right now, this is simple math, less dumping = more value unless someone think that miners, right now, are not dumping at all...

Seeing the price get a 100% increase from today to Juli 2016 isn't that unrealistic. Less minted Bitcoins will do the demand incredibly good. The only question is for how long? I hope we won't fall back to the $250-$299's after the halving as that would be extremely sad. Dumping the price to the ground takes less than a day, but regaining everything cost plenty of months as we've seen.

They will have to sell. Since their earnings will be twice as less (without any economic reason behind) while they still have to pay the same bills, they will have to sell more. Most likely, much more, thereby emptying their stashes. I don't see how the price could double in these circumstances...

So, I'm afraid, the sell pressure may actually increase

One of the assumptions of the view that price will double after the block halving is miners are currently selling ALL of their mined coins. If they do sell all of their coins now, they will have less coins to sell. Hence selling pressure will ease and price could go up if demand remains the same.

What if miners aren't selling all their mined coins now? If they are only converting just enough coins to cover their fiat running costs, then they will convert exactly the same amount of coins to fiat because running costs will not suddenly jump after halving. So, neutral effect on price.

Who has inside information on what miners are doing now? Are they selling everything?

They can't be selling everything, you don't need insider information to understand this. Miners are not aliens, they are just like you and me. Do you have some bitcoins in your wallet? If you don't, then I do...

Further, you don't take into account that halving means that the miners' revenue will also be halved. But revenue is not profit, so, after the halving, they may actually begin suffering losses...

What will they do, and what will they do even before what you think they will do?

imo the price will increase becuase less coins will get produced and have high demand for btc in the future
maybe it will increase but not skyrocket that fast

OK. Now, how can you make a profitable trade having that info?

In all honesty, nobody knows what a hell will happen! Maybe a halving price increase is already calculated in today's price, we don't know this. Also, maybe it will come to a price decrease as it won't be as profitable for miners to mine as before halving.

Look at the Litecoin halving this year, nothing happened. We will find out this in June-July of the next year will the same thing happen to Bitcoin.

It may turn out that many peeps will be quite happy just to jump the ship in time. But you can always try to short if you are that type of a person. But beware, in the case of total collapse exchanges may start to fall like dominoes...

If it had to do something with trading then it would have been in the trading section. Don't you have that info?

Yes we do. Or price will raise or half miners will close their farms. Or electricity price will halve. Or, ...

Or a bit of everything listed above.

Nice post. +1
But electricity prices will never go down just merely for Bitcoin miners. And miners closing their mining rigs and giving up Bitcoin mining is also close to truth possibility.

Reading the article i don't find any word about the deflating. So i don't understand the title of article. His article end with this phrase which is and the conclusion of it:

"What we can tell from this purely theoretical analysis, though, is that aside from speculative price fluctuations, Bitcoin’s approaching halving will likely be anti-climactic at best, and very troubling at worst."

So nothing new under the sky. I think that the article is a good analyse but without end. Must annalists can enumerate the facts which he wrote in its article. The problem is that are few or no one which at the end write if the price will be deflated or not. This is important for the people and above all for us bitcoiners. Maybe the price will go high because will be produced less coins but this can be discussed. People can lose its interest for bitcoin exactly for this fact. So this fact can go dawn the price. In few words: the author of the article has right in one thing. We might wait trouble.

While there are few possible scenarios with accompanying facts to support each of it pointing to either a price increase or price decrease which we can't possibily predict for sure...one thing that will be good for bitcoin would be that volatility will start to tone down. With less supply getting generated for every block solved, whether the miner decides to hold on to it longer or dump it immediately to the open market, at least after the halving, the guy now has less amount of coins on hand to influence that.

It doesn't matter if it there is a logical argument for or against a price devaluation, at this point the halving is on everyone's mind and make no mistake, there will be movement upwards with the price. Market = psychology game.

Market sees the future... And it sees nothing in it

As long as the demand does not increase I don't think halving will have a big effect on the price.

Especially considering most miners are not even selling that much of their coins, the supply won't also magically be cut in half.

Twice as less?... Don't you mean... half? Anyways, their production will be half, not their earnings. The bitcoin price isn't going to remain the same before, during, nor after the halving. Imagine there is a shortage of oil, and some of the oil producing giants have a stash of oil for themselves, what's more likely to happen, that they sell at  higher price (bringing the price up somewhat proportionately to how much the production reduced) or that they sell everything they have at pre-shortage price? You're talking nonsense if you think the miners are going to sell at about this price after the halving. You're talking nonsense if you think they're going to sell at below $500 (about a year) after the halving.
Time will tell. I would make a bet of some sort, but that proves meaningless in these anonymous forums.

Okay, let it be half as much, but I still don't understand what you mean by halving the production (not reward), and how their earnings won't be two times less (shame on you!)...

Look, the blockchain reward is bitcoin production/distribution. There are new bitcoin coming into the miner's hands every single time they solve a block. Like with anything else (oil, coffee beans, gold, etc), when the production goes down and production prices remain, the price tends to go up. If we use a farmer as an example, say there's a drought... he sells less product, but he still has to make a living; sure, he may have to sell some of his grain stored up in a silo, but (assuming a purely local market) that's not going to affect the price all that much as it continues.
Let's assume the miners are going to have to sell their stashes... are their stashes 25BTC per block mined? Think about it, that is a huge number, and quite ludicrous. How long would their stashes hold the price down?
Look, here's a little timeline of what happened last time the halving took place. Jan-June 2012, prices were bouncing around $7 and $3 (mostly around $5-$6). Aug 2012, price goes up to $16, drops to $7 and bitcoin trades for a price under $9 one last time. Halving day 2012, price doesn't really move from $11-$13, the regular price. March 2013, bitcoin is sold for under $43 one last time.
I'm confident that whatever price bitcoin is at on Jan 2016, we're going to be trading it at double that price (at least) in march 2017. But only time will tell.

I still don't see logic in your reasoning. You seem to be confusing cause and effect, which is crucial here (as elsewhere). It is not the production that goes down in the first place, but the revenue flow that drops first (twice as much, wtf)...

Unlike you, I can't possibly ascribe the price increase that happened through 2013 to the halving in 2012, if that was your point, by any means...

There is nothing that could convince me otherwise

Firstly, I don't see what bitcoin miners are producing other than bitcoin. Heat, perhaps? Bitcoin can be part of their revenue, but it is their production of it that pays their bills. Let's get this in order: first, their production (they are producing bitcoin and heat, nothing more) drops by 50% on the bitcoin front. Then their revenue is reduced if they keep selling the bitcoin at pre-halving prices (if the halving has not already been priced in, as I think was the case when bitcoin was selling at about $12).
Supply and demand. Supply will be reduced 50%, their demand will possibly increase, probably stay the same... unless something really bad happens, I don't see Bitcoin's price trading at below [insert the double of Jan 2016 price here] March 2017. My point is that I believe that bitcoin will follow a similar patter of a leap in price before the halving, followed by a crash, then a rise again (trading at some prices for one last time).
Litecoin has replicated this pattern, a pre-halving pump to about $8, followed by a dump all the way down to $3. It's remained under $3 afterwards, but I'm confident it's traded for under $2 for the last time.
Here's what I think will happen. We'll start 2016 at about $300, there will be a pre-halving pump all the way back to $600, then back down to $400. Afterwards, the price will change in some manner (ether stable or not), until we reach $700-$900 by march 2017. And that price will be the new norm.

Why do you continue to persist when it is evident that it is their revenue that would fall first? Not until then miners have any reason to cut production (effort and time wise), since that would mean losing profits. They don't care so much about the amount of coins they produce per block as about the revenue they get per same block...

OK, we have a misunderstanding based on semantics. Revenue is the money they make. Production is what they make in order to sell and make money. You're confusing production as in "how much they produce" with production as in "how many resources are put into producing bitcoin". Assuming that their efforts at producing bitcoin (time, hardware, maintenance, etc) does not change, what will drop first is how many bitcoin they produce, it will drop 50%. Then their revenue (the money they make) will be affected by what they do with their reduced reward.
What makes more sense for them is to raise the price they sell at, because what they have to sell is a lesser amount, despite the fact that the cost of producing what they sell remains the same.

So the amount of bitcoins produced (production) is reduced by 50% first, and their revenue is affected in some manner, one which I am not comfortable speculating upon.

Under production I mean the number of new blocks found per unit of time

Nevertheless, now I see your point, though I still find it misguided at best. Miners will produce only half the amount of bitcoins after the halving, but this doesn't in the least mean that the total supply of coins will diminish accordingly since they don't sell all their coins even now (when reward is high), and they are not the only ones who sell bitcoins. Given that a) they can't increase production (i.e. the number of new blocks found per unit of time, which could potentially offset the drop in reward), and b) they may actually begin suffering losses due to lower reward per block (I don't expect their profit margins to be high due to tight competition), I see it as mostly inevitable that they will have to sell more coins than they sold before the halving (i.e. now sell), in order to cover their expenses (which remain the same per block)...

In short, it is not as linear as you think it is

OK, cool. How do you think the price will behave between now and 2017? What role do you think that the halving will play during that time?

I have two scenarios (provided that Bitcoin halving is not canceled or otherwise meddled with, of course). The first (let's call it an optimistic one, lol) assumes that nothing substantial changes in the long run after the halving (beyond the usual short-lived paroxysms of pumps&dumps), the second (a pessimistic one, wtf) assumes that miners actually begin suffering heavy losses, mining is paralyzed (until the difficulty drops a few times), panic sell sets in (started by miners liquidating their stashes and jobs), price collapses to below $100 and levels off at about 50 dollars per coin...

Yikes.. that pessimistic view is a very dire one.

Let's say that were to happen, how much of the bitcoin community will completely fall off in your opinion? I think if bitcoins price were to drop to $50 and the debate of block size still rages on, I would think probably at least over 25% of the community would sell all of their bitcoins, mining hardware, etc. and just move on...

But at the same time I could see that some people would want to stay in the game and hope that the core dev team can implement something which would ease the blocksize debate and give miners more reason to mine even harder... These next couple years are going to be absolutely ridiculous to watch bitcoin prices fall and rise.  Personally I would just be happy if the price would stay at $230 lol.

Great article.  It's convincing and I agree with most of the points.  One thing it unfortunately doesn't address is the XT versus core debate and how that will affect everything.  I'm worried about that and it's a big issue.

Check out this article...

http://wallstreettechnologist.com/2015/08/19/bitcoin-xt-vs-core-blocksize-limit-the-schism-that-divides-us-all/ (http://wallstreettechnologist.com/2015/08/19/bitcoin-xt-vs-core-blocksize-limit-the-schism-that-divides-us-all/)

Honestly, I don't know and don't want to speculate. I say only what I actually consider as possible, to the extent that I take measures to prevent losses and earn some profits by this, if it ever comes to that...

I also deem it possible that the halving will really be changed

I don't think price will go down because of halving but I am sure we won't see the big hype as we seen in 2013 after halving

As I think bit coin price will rise after reward get halved. If miners even can't get the money they invested in mining then they won't mine bit coin and if they do they try to sell it in higher prices than the present price. You may say the other traders who are holding will sell it in normal price but I think after they see lots of selling bid at higher price they also like to get that price for their bit coin. Thus I will store bit coin to enjoy that rise in bit coin price. I am not a expert and this is my personal view.

I can't agree with that. Mining farms are built with fiat. That includes building costs, hardware purchases, and backup generators. The infrastructure could be financed with loans. Loans have to be repaid, or owners may want to sell mined bitcoin to offset initial investments until the fiat breakeven point.


They will not suffer losses once the mining farm is operational. As long as the farm is mining, I can safely say that mined coins will always cover operating costs. Contribution to invested capital will be slower after the halving, but it is still profitable to continue mining.

Backup generators, lol. You don't even see that your post is self-contradictory (this part, and especially the next part). Miners mine for profit (I guess this won't be a matter of dispute). That means once they hit break-even they don't need to sell all their newly minted coins but only a fraction to compensate for operating costs...

I guess you have to decide for yourself whether miners earn profits or not. If they do, they don't need to sell all their mined coins

I'm singularly curious if you argue just for the sake of argument. Once the Bitcoin halving occurs, miners will get half as much what they earned before the halving. If their profit margins are not high enough to cover their operating expenses with twice as less (yeah) revenue, they will bear losses and will have to cease mining. But if, nevertheless, their profit margins are high (and they already got back their capital expenditures), then they don't need to sell all their coins in the first place...

You are granted an opportunity to choose where exactly you fail

if we take as an example gold or diamonds, are their price deflates when less gold or diamonds reach the market? NO

why will it happen with bitcoin then? we can see this every time that happens with an alt coin, take as example what happened with LTC few time ago. IMHO i don't think that price will be deflated quite the opposite, bitcoin price will grow and will bring to miners what they need to continue mining, a high price for bitcoin.

They would need twice the price and need it fast at that (to keep their profits unscathed). Given that they are not the only ones who are supplying coins to the market, this is not possible just because their supply of coins is halved...

You don't seem to think things through before you reply.

Not all mining farms are built months or years ago, newer farms may not have reached break-even point. You have said so yourself, "once they hit break-even". How about before the "once"? Before the farm break-even, owners could sell all their mined coins. There are many farms out there built at different times. Yet, you seem to believe each and every one of these farms "can't be selling everything (bitcoin)".

I am serious with "Backup generators". I have seen photos from here of Chinese mining facilities with backup generators.

If you have problems with proper understanding, I can explain it to you. "They can't be selling everything" means that some of them (or just one) don't sell all the coins they mine. In other words, that some newly mined coins won't be sold. If I wanted to say what you are trying to ascribe to me, I would have said "None of them can be selling everything". But nevertheless, show me here (https://blockchain.info/pools?timespan=24hrs) a mining pool which was not "built months or years ago" that would have a significant share of hashing power...

Or just any new mining pool that would be of relevance, for that matter

You are deflecting. Business model of mining pools and mining farms are very different. Initial investment of a pool is so much lower than mining farms. Pools do not need to sell a large portion of mined coins to replenish initial investment (to break-even) while mining farms do.

Edit (Responding to the comment below):
That is what I was thinking, mining pools are not very relevant to the discussion. Why did you bring it up in the first place??

It seems that you are distinguishing between mining pools and mining farms. No problem. But in this case the mining farms you are talking about are massively irrelevant to the question discussed, since 1) we (you (https://bitcointalk.org/index.php?topic=1190951.msg12526158#msg12526158) and me (https://bitcointalk.org/index.php?topic=1190951.msg12526195#msg12526195)) are talking about miners (not just farms or pools), and 2) they (farms) don't supply even a few percentages of the mined coins (as you separate them from pools). Thereby you volens-nolens confirm that miners (which are mostly pools in terms of new coinage) don't need to sell (a large portion of) their coins (as you said yourself)...

Quod erat demonstrandum