Bitcoin Forum

I have spent the past year perfecting and honing my fundamental bitcoin algorithm. And now, for the first time I am releasing it on Bitcoin talk!

I believe that the largest players in bitcoin are the established miners. These are the whales. Currently they have around $2.5 billion invested in active infrastructure and they spend around $3.5 million/day in electricity. There is no larger player active and invested in bitcoin than the miners.

To monitor their actions, I have designed the Fundamental Price Floor. With this metric you can see the price they pay to make a bitcoin. The price they pay vs. the bitcoin price will surprise you.

My data will be available to the public until May 24 @ Noon EST. After that, only subscribers to my site will be able to benefit from the metrics.

New high efficiency miners are being released by Bitmain soon. Because these miners are so efficient they will make the price floor drop even more than where it is right now. The algorithm will be updated once the page is locked, and my subscribers will know the new price floor and understand how low bitcoin can go again.

Here is the link to my data:

https://www.amsinger.org/subscriber-data (https://www.amsinger.org/subscriber-data)

Please let me know your thoughts. I made this algorithm to understand the risk inherent in bitcoin. I hope that you are able to benefit as much as I have from it.

Aaron

This does actually look interesting, I suggest that you re-organize your post in general I was really sure this was some type of spam  :o

Thank you! And my bad, I am new to sharing it. I just put the finishing touches on my site yesterday, and now I am beginning my major marketing push.

OP, I think this post best fits to be in the  Mining thread (https://bitcointalk.org/index.php?board=14.0) since the topic is focused in mining.

I believe that maybe some of the whales might have some mining farm, but some might be just pure early bitcoin investors who had invested a lot of money in bitcoin since it started, where bitcoin costs less than a dollar.

It is more about understanding how the bitcoin financial market actually works. Miners are the largest active movers in the bitcoin industry. You can't discuss the price without discussing their motivations and actions. If I was talking mining specifics yes, but I am simply explaining the wholesale price of bitcoin.

Just a question, is it still profitable to mine bitcoin even with numbers of rigs and the electricity cost.
I mean will the number of rigs you have compensate and add to your daily profit, or will it just be a huge waste of resources to mine bitcoin.

Thank you for this article and content concerning your new mining information obtained by your code speculation report.
Indeed it might help new investors or miner ones that want to start going further into that business.
Im glad in seeing more people are embrassing the new technologies for such matters.

With a lot of big miners in competition, I don't think I will be choosing it before investing. It is true that earning Bitcoin through mining will be stable but the cost of it is the problem. You can't just buy a mining rig and the fact that not all of the people that use Bitcoin can afford it. Another thing is the electric fees that is a big peoblem for miners. Also, let me remind you that while a lot of BTC are grtting mined, the harder it gets and I think it is too late for us to mine BTC, we can't afford to mine BTC nowadays.

It depends on the efficiency of the machines you are using. If you are using the previous generation of s15's you are almost doubling your money during this time. If you are doing it on a CPU you are wasting your money. Now is a good time to be a miner, January February and March were not so good. The mega miners mine wait for pump cycles like we are in right now, and sell their inventory for profit to FOMOers.

My goal is to help my clients from wasting their money on emotions. Plus I have never seen anyone answer the question of why BTC doesn't go to zero. With my metrics I know why it doesn't go to zero.

obviously when you combine thousands of people together, they become whales! when combined, traders have invested $140 billion in bitcoin!

and how do you calculate that? there is no way you could figure out the cost of mining because there simply is too many variables from the electricity cost to labor costs, cooling cost, rent, and even in some cases bribes. so i am wondering why do you think the numbers you have come up with to build these charts can be correct?

and you would be wrong to rely on that. what you are forgetting is that how much it costs to mine bitcoin (whether it currently is $5000 or $7500) it is determined based on difficulty and that is determined based on bitcoin price itself. so in other words if price fell, difficulty would fall and cost would reduce. similarly it increases with price rise. NOT THE OTHER WAY AROUND!

That is not how market cap works. Market cap is one of the worst methods for understanding the nature of a financial vehicle. Also exchange volumes are massively inflated:
https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca201901-5164833-183434.pdf (https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca201901-5164833-183434.pdf)


Difficulty isn't based on bitcoin price but hash rate. There is a reason professionals exist, they do things other people can't. They do things that are hard. I've spent over a year perfecting my metrics. If you would rather fly blind without instruments that is your prerogative. I will use my altimeter thank you.

difficulty is based on hashrate but affected by the price, it doesn't move as fast as price moves during rises and falls but it moves in accordance with it.
and i am not "flying blind", i am asking what makes you think you could calculate cost of mining and what makes it accurate enough to be considered reliable. you can't expect us to take any data presented to use blindly! specially when you are not the first one to come up with this...

Hash rate is only affected by the amount of miners that are active on it. The hash rate operates independently of the price of bitcoin. When the price increases it gets more profitable to mine, but if the price of bitcoin went to 100k the hash rate even at max capacity couldn't reach anywhere near that right now. Calculating the cost of mining is as easy as calculating the processing speed of a comp. How many cores at how many hertz, it really isn't too complicated.

It is amazing how much push back I've gotten for presenting a logical number to bitcoin people, when they slurp up CMC volume lies on a daily basis. I literally present my data on my site, you can recreate my algo if you really care to.

Indeed, this is very interesting and I am sure there are people who can benefit with this information plus the site is recommending  the optimal time to buy either Bitcoin, Ethereum or Bitcoin Cash. It is good to note that more efficient mining rigs can be coming to the market. I am just wondering if the Fundamental Price Floor can be connected somehow to the so-called intrinsic value of bitcoin...

Dude, I just did a preliminary calc. The number will shock you. It shocked me, but I gotta save it for my clients :O

In my view the Fundamental Price Floor is the intrinsic value of bitcoin. It acts like a professional cash flow assessment by the most experienced players in the bitcoin game. These are the people that secure the investment and sustain the price. They maintain the infrastructure and the entire bitcoin network. I just want to monitor what they are doing. Radar for the whales (maybe I can beach one and eat their blubber! It's chewy!).

The cost of mining depends on the price. It is not the other way around as you suggest.

It is easy to understand. If the price goes up, miners will spend more to mine the same amount of BTC. If the price goes down, they will spend less. Regardless of how much they spend, they produce the same amount of BTC. The idea that "they will only sell their BTC at a profit" defies reason as they must sell their BTC to pay for their operating costs (whether they sell at a profit or not).



It seems to me that switching to new minering equipment will increase infrastructure costs simply because miners must pay to replace their current equipment. Also, more efficient hardware doesn't lead to lower costs. It leads to higher difficulty as miners increase their hash rates.

In my opinion, if you can't get these right, there is no reason to believe that any of your analysis is correct.

Your first point is patently false the cost of mining depends on the hash rate not the btc price. That is like saying the cost of farming is based upon the price of corn. No farming corn is based on the cost to make corn. Mining bitcoin is based on the cost to make bitcoin not the price of bitcoin.

Your second point is also patently false. That is like saying buying a tractor that can till 50% more land that costs 10% more than the old tractor did (but is 50% more efficient) increases infrastructure costs because you have to pay for a new tractor. You sell the old tractor and buy a new tractor and then you can till 50% more land and make 50% more produce. With more produce on the market the spot price of produce goes down. Mining is no different.

Just to refute both points with logic: you assume miners are altruistic buddhist monks who throw their money away every day just so people like you can have a bitcoin? Do you also think Mcdonalds/google/facebook doesn't make a profit off of you?

You would be greatly helped by my site:

https://www.amsinger.org/subscriber-data (https://www.amsinger.org/subscriber-data)

Those statements show your lack of understanding about the economics of mining. The cost of growing corn may not be dependent on the price, but mining BTC is different. Unlike corn, the total amount of bitcoin that is mined is fixed at 1800 per day, and that number does not depend on the cost or the difficulty. Corn farmers can spend more to produce more corn, but if miners (as a whole) spend more, they do not increase the production of BTC. They simply increase the difficulty.

I agree that the cost of mining depends on the hash rate, but the hash rate depends on the price. Assuming that a miner is rational, they will increase their hash rate in order to take as much of the total BTC production as they can, but they will not pay more than the price of a bitcoin to mine a bitcoin. Thus, if the cost of mining a bitcoin is less than the price, a miner will increase their hash rate, and if the cost is higher they will stop mining. The overall effect is that if the cost of mining a bitcoin is less than the price, miners will increase their hash rates and raise the difficulty until the cost approaches the price, and if the cost of mining a bitcoin is greater than the price, the least efficient miners will stop mining and lower the difficulty until the cost of mining is below the price. There you have it. The cost of mining depends on the price.

My friend, this is a really difficult concept. It took me 6 months since Nov 2018 (a time I lost a hearty chunk o cash) to really grasp how miner efficiency upgrades can tank the bitcoin price. I even was an s9 miner in 2017. Now I am trying to make others aware of what I learned.

The total amount of bitcoin blocks mined is limited to 2016 per fortnight (1800btc/day). The competition to mine blocks is intense and, when the hash rate is growing, it keeps getting more intense. The bitcoin miners are on a treadmill that is continually going faster. The reason no one can mine on a CPU anymore is because the introduction of ASIC miners made it too difficult for a CPU to mine btc. The ASIC eradicated the CPU competition.

With the advent of more efficient ASIC miners they are eradicating previous generations of ASIC miners just like they eradicated CPU miners. When S9's originally came out they costed 2k/unit. After Nov 2018 an S9 costed as low as $200/unit. With the release of the new S17's it will make S9 mining completely obsolete just like CPU's.

If I could make a magical ASIC that could seize 100% market share of the hash power of the network for $100 and get free electricity. I could create bitcoins for near zero cost, and I could dump 1800 bitcoins per day on the markets for PURE profit until the price of bitcoin goes to near zero.

These new efficient machines will make it so their owners can make bitcoin for VERY low prices even at higher hash rates than now. When efficiencies are not able to be increased a higher hash rate means a high bitcoin price, but when efficiencies increase a higher hash rate does NOT mean a higher bitcoin price, and depending on the degree of efficiency upgrade it can and will incentivize new miners to tank the price for greater MARKET SHARE of the 1800 bitcoin.

If you are using a horse to pull a plow it may cost 3k for that horse and all you need to feed it is hay (or grass or whatever) it may cost 50$/bushel of corn. But if your neighbor gets a 200hp tractor to till his field he would get 200x more area and it may only cost him $5/bushel of corn. He will very quickly cost you out of the market by selling his corn for $10/bushel.

Accordingly, the people in the city that were buying corn futures based on your farm at $50/bushel will also be screwed when your neighbor starts dumping his $10/bushels on the market. Bitcoins are basically futures contracts on the bitcoin mining network. People are currently buying $7800 dollar bitcoin futures contracts, not knowing that your neighbor is gassing up his tractor RIGHT NOW.

I made a post on my site explaining the floor price better here:

https://www.amsinger.org/writings (https://www.amsinger.org/writings)

I hope you find it interesting :)

to get to some peoples points as it seems this topic is about some principles that go back as far as hal finney and his understanding of the economy. and something i mentioned in other topics

1. it does not matter if 10 people can mine for $7500 and 10 people can mine for $5000. the price for the OP is expressing is the guys that can mine for $5000. because thats the floor (bottomline cheapest/most efficient).

2. the guys at $7500 wont sell (unless stupid) for less than $7500. so if the price dropped to $6k the $7.5k guys would just hodl

3. however if the price was say $6k then the guys with the most efficient asics and the most cheapeat electric (the floor) can still sell at a profit. so they will..
this means the price can still go below $6k.

4. but when the price gets down to say $5k (the floor) literally all miners are not making profit. and so all miners are hodling and so the price begins to plateau at $5k and refuse to go lower.

5. as for the 'market' participants of the last 10 years. some have/did buy below $5k. and so able to profit below $5k. but the thing is. while the price for the last year has been $20k-$3.5k-$5k-$8k if thy have not sold yet, thus they dont want to sell for less than X thus making the price floor a 'bottomline support'

6. majority of ASIC farms do not react to the price. they preplan their hashrate months/a year in advance. they have special contracts with electric companies for best electric cost deals. they have special deals with ASIC manufactures to buy/reserve XXXXXX amount of asics of the next newest batch. they dont simply see a price rise and magically get delivered thousands of extra rigs within half an hour to respond to temporary speculative FOMO price rises.

7. you will notice
when the first major asics hit the market late summer 2013 the price moved up as a response to mining
when asic farmers sold off their old S9's dirt cheap in october 2018 and started using more efficient asics but less of them to cause the october hashrate drop.. in november the price dropped as a response to the floor drop
now the hashrate is rising. the cost floor is rising people are less inclined to sell for less and as such the price is rising

you will be surprised how in the mining/market dynamics. mining influences the market more than the market influences mining.

tl:dr; there gets to be a bottom floor where the general community all reach thier points they refuse to sell below. and eventually a plateau is reached where no one can profit when they sell. this is the OP's 'floor'

8. the OP is showing a chart of the difference between the price floor of the cheapest way to get coins right now, vs the current market price. thus this can be used for people to view how much of a gap there is between the bottomline value of bitcoin and the speculative FOMO price of the markets.

for instance if a miner could create bitcoin for $2k last year. but the market was $20k. thats $18k of speculation/hype FOMO/bubble, which is an obvious indicator that a large correction is impending.

however
in august 2018 if the miner could create bitcoin for $5.8k and the price was $6k then there is not much speculation occuring
in october 2018 if the miner could create bitcoin for $4k and the price was $6k then there is speculation occuring and expect a correction to be impending
in november 2018 if the miner could create bitcoin for $3.5k and price was $3.6k then there is not much speculation occuring

Correct as usual Franky ;) Much love and respect

To me this is looking more like a post better suited to the Service Announcements (https://bitcointalk.org/index.php?board=84.0) section. A signals service perhaps? It seems more suited somewhere under the Marketplace (https://bitcointalk.org/index.php?board=5.0) section than under Mining, unless it was free and then it could go into Mining speculation (https://bitcointalk.org/index.php?board=81.0).

The subscription to get this type daily analysis, is about 10 USD per month:


https://i.ibb.co/yhWHBcQ/image.png

Thank you for the advice, I will repost there soon :)

$3.5 million a day? Are you really sure about that?
Ain't your government will question you about that? That is like 3,500 houses if they got $1,000 bill a day. But that is still high for a day only. That is a bill for a month in just one household.
Even malls dont have that large amount in electricity to pay with all the air conditioning they are using.

Maybe the electric company will be forced to limit you for using a lot of electricity already.  

Credits to franky1 for the effort explaining the mining profits, methods, etc...  ;D

Miners are already dumping 1800 BTC on the market every day. Nothing changes if you do it instead of other people.


Of course, some people choose to sell only at a profit (despite it being a poor strategy), but there is no reason believe that all or even most miners behave that way. Do you have any information that documents this kind of behavior?


I would be surprised. 1800 BTC are mined each day. That's only 1.2% of the 150k BTC traded each day (which assumes that 95% of the reported volume is fake). Could you point me to information that supports your claim?