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Title: Price cannot go less than $40.41 Post by: Elwar on April 13, 2013, 06:16:21 AM Current mining:
Difficulty: 7,672,999 62,172.58 GH/s 969.89 megawatt hours $145,483.85 / day 3600 bitcoins created / day $145,483 / 3600 = $40.41 If you want fundamentals. You cannot charge less for a product than it takes to produce. But for every product you buy you have to consider: cost of production + cost of distribution + cost of retail + cost of marketing at the very least. Price rarely dips below difficulty for this reason. https://i.imgur.com/uSKsM.png Title: Re: Price cannot go less than $40.41 Post by: flyhouse on April 13, 2013, 06:23:41 AM Don't forget that if prices fall below that, mining resources will be taken offline, hence the difficulty will drop.
That's the amazing thing about BTC- it's a self-regulating system in its design! Title: Re: Price cannot go less than $40.41 Post by: wojtek on April 13, 2013, 06:24:48 AM you are wrong, because most of bitcoins that exists today were mined very cheaply. more likely difficulty will drop after price fall.
Title: Re: Price cannot go less than $40.41 Post by: Technocrat on April 13, 2013, 06:31:20 AM WHat?
Title: Re: Price cannot go less than $40.41 Post by: arepo on April 13, 2013, 06:32:50 AM this has been discussed many times before. price and difficulty are decoupled, but modulate each other. if the price drops below the difficulty due to decreased confidence, it will cause the least efficient rigs to suffer losses. theoretically, these rigs leave the network and the difficulty adjusts with the price. similarly, as demand for btc increases, rigs become more profitable, pushing the difficulty up with the price.
Title: Re: Price cannot go less than $40.41 Post by: Crypt_Current on April 13, 2013, 06:38:00 AM this has been discussed many times before. price and difficulty are decoupled, but modulate each other. if the price drops below the difficulty due to decreased confidence, it will cause the least efficient rigs to suffer losses. theoretically, these rigs leave the network and the difficulty adjusts with the price. similarly, as demand for btc increases, rigs become more profitable, pushing the difficulty up with the price. my rigs are generally very inefficiently run and extremely small compared to competition, yet I continue them running as much as humanly possible, even to the detriment of the quality of my life. This is serious: This is real revolution; this is Bitcoin. Title: Re: Price cannot go less than $40.41 Post by: manfred on April 13, 2013, 08:08:34 AM @ Elwar
There are people paying far less per kilowatt hour for the electric. They still make a profit selling a bitcoin for $ 20 The real power is with who controls energie. It does not matter what u produce (salat, steel, bitcoins...) if u produce for a lower cost you have an advantage. Title: Re: Price cannot go less than $40.41 Post by: zby on April 13, 2013, 08:29:50 AM It only means that if the price gets under 40 then people will switch off mining rigs. If that happens too quickly - then the algorithm will not adjust and the confirmation time can grow threatening the whole bitcoin network. This can have a feedback spiral - but I don't see that very probable.
Title: Re: Price cannot go less than $40.41 Post by: manfred on April 13, 2013, 09:45:19 AM No they wont switch off. You dont spent x amount on a rig and Imagen the price of bitcoin rises to the stratosphere and then just turn it off because it t falls temporary below operating cost. the last staple price was $13 everyone was happy then. In the long run the price will settle somewhere around cost of production + cost of distribution + cost of retail + cost of marketing everything else is just speculation. Yes i know supply and demand. Well, there is unlimited supply of crypto currencies the limited number of bitcoins are as with meaningless. I hear it is so hard to get traction. In the long run traction is not a factor. Not every snowball gets enough traction to start an avalanche, but look at the devastation it leaves behind if it gets going.
Be wise only spent what i easy can afford. Have to go plane to catch. Title: Re: Price cannot go less than $40.41 Post by: ex-trader on April 13, 2013, 09:45:56 AM If you want fundamentals. You cannot charge less for a product than it takes to produce. Thats correct, you do not generally create a business based on selling below cost, but you still need to find someone to buy it at that price. There's plenty of businesses that have gone bust over the years because customers would not buy their products at the price they needed to sell them at based on cost. Also, not that I'm suggesting it likely, but if the code was ever cracked then Bitcoins would become worthless and the cost of electricity or other factors would be meaningless. We are beyond the point where mining is the major driver of price. Title: Re: Price cannot go less than $40.41 Post by: NikolaTesla on April 13, 2013, 09:56:26 AM Given the fundamentals then, the price should be only a little higher than 41, somewhere in the 50's. $114 is a little high if I can mine myself for a long term average of $41 per coin.
Title: Re: Price cannot go less than $40.41 Post by: zby on April 13, 2013, 11:23:29 AM No they wont switch off. You dont spent x amount on a rig and Imagen the price of bitcoin rises to the stratosphere and then just turn it off because it t falls temporary below operating cost. If they were rational then they would switch off the rigs - If they still wanted bitcoins - then buying them would be cheaper then running the rigs.But yeah - maybe rationality is not a good assumption here. Title: Re: Price cannot go less than $40.41 Post by: ruski on April 13, 2013, 11:32:07 AM I've got a sizable mining farm, and I'm mining at a loss (albeit slight) under the criminal Australian power prices and as-of-this-second BTC price.
Why? Because I've dumped all the capital I'm willing to into buying/trading them, and I'm looking forward to sky-high prices and awesome trading opportunities in the months and years to come. I can't be bothered forwarding every paycheck into my Gox account every week, so this is a good second choice. Plus, it's fun to maintain and the house is never cold. ;D Bottom line, I'm getting them any way I can. :) Title: Re: Price cannot go less than $40.41 Post by: Gabi on April 13, 2013, 11:35:19 AM That argument is nonsense. Hash power follow price, NOT the inverse!
How much do you spend to make something means nothing, if no one want to pay for that price then what do you do? Title: Re: Price cannot go less than $40.41 Post by: w00t on April 13, 2013, 01:27:31 PM No they wont switch off. You dont spent x amount on a rig and Imagen the price of bitcoin rises to the stratosphere and then just turn it off because it t falls temporary below operating cost. If they were rational then they would switch off the rigs - If they still wanted bitcoins - then buying them would be cheaper then running the rigs.But yeah - maybe rationality is not a good assumption here. The problem with this is if you invest a few thousand USD into a mining rig it's very difficult to really turn it off as the hardware inside would be worthless after a few months. Title: Re: Price cannot go less than $40.41 Post by: BitcoinAshley on April 13, 2013, 01:38:25 PM Given the fundamentals then, the price should be only a little higher than 41, somewhere in the 50's. $114 is a little high if I can mine myself for a long term average of $41 per coin. What you said is true if you're someone who has no idea what he/she is talking about and you assume that the only fundamental to be taken into consideration regarding Bitcoin's price is the hashing power, which is absolutely 100% a false assumption. The most important factor is - how many people want bitcoin compared to how many people want to get rid of it. And a lot of people want bitcoin. Title: Re: Price cannot go less than $40.41 Post by: mestar on April 13, 2013, 02:01:16 PM If you want fundamentals. You cannot charge less for a product than it takes to produce. Sure you can. Let me just copy paste from another thread https://bitcointalk.org/index.php?topic=173699.msg1814860#msg1814860 (https://bitcointalk.org/index.php?topic=173699.msg1814860#msg1814860) While the "endowment effect" is certainly real, it is not a law. You might not want to sell below costs, but others will, and the price can go down. Especially in markets where you have many producers (and bitcoin mining is a perfect example of that), and their costs are different. What might be your cost of production, might be twice expensive as others can produce them, and they will certainly sell bellow your costs. It might also work if you are a monopolist, and you have the power not to sell below costs. And again, this is definitely not the case in the bitcoin mining market. So, yes, bitcoin can go to $0.50, no problem. Title: Re: Price cannot go less than $40.41 Post by: sgbett on April 13, 2013, 05:00:05 PM No they wont switch off. You dont spent x amount on a rig and Imagen the price of bitcoin rises to the stratosphere and then just turn it off because it t falls temporary below operating cost. the last staple price was $13 everyone was happy then. In the long run the price will settle somewhere around cost of production + cost of distribution + cost of retail + cost of marketing everything else is just speculation. Yes i know supply and demand. Well, there is unlimited supply of crypto currencies the limited number of bitcoins are as with meaningless. I hear it is so hard to get traction. In the long run traction is not a factor. Not every snowball gets enough traction to start an avalanche, but look at the devastation it leaves behind if it gets going. Be wise only spent what i easy can afford. Have to go plane to catch. Agreed. In the first instance I would stop selling and accumulate. even if its a 50/50 split supply will be reduced, price gotta go up. I don't think either follows the other, i think its a much more complex feedback loop. With further chaos introduced by speculators. Title: Re: Price cannot go less than $40.41 Post by: AlgoSwan on April 13, 2013, 08:37:25 PM Following words (written in bold) will become vital for future BTC/USD rates:
1. Deflation of hardware (ASICs, etc.) prices, 2. Innovation of new hardware (something more powerful than current ASICs) and/or energy innovation for GPUs, 3. Manipulation (made by fiat creators). My prediction of this year BTC/USD rates: I'm expecting a range-bound market (low channel: $40 upchannel: $260) this year. In the long run, I'm very bullish. Title: Re: Price cannot go less than $40.41 Post by: pretendo on April 13, 2013, 08:39:53 PM The labor theory of value is incorrect. If I hire A-list celebrities to use diamond-encrusted crayons to scribble on paper all day, it doesn't make the scribble worth the input.
Title: Re: Price cannot go less than $40.41 Post by: DeathAndTaxes on April 13, 2013, 08:43:46 PM Nonsense. Mining has in the past (and potentially will in the future) operated at negative profitability. When that happens some miners drop out and the difficulty will adjust. Bitcoin mining can be profitable at $1,000 per BTC or $1.00 per BTC. Due to dynamic difficulty it is not like any other industry.
If gold prices fall then marginal miners will become unprofitable, they will stop mining (or scale back) and that WILL REDUCE PRODUCTION. Lower production = lower available supply = drives prices higher. As prices rise marginal miners add production. More production = more available supply = drives prices lower. With Bitcoin as marginal miners (the least profitable miners) stop mining, difficulty adjusts and the production remains the same. There is no feedback loop like other industries. TL/DR price drives difficulty, difficulty never has and never will drive price Title: Re: Price cannot go less than $40.41 Post by: dree12 on April 13, 2013, 08:46:17 PM Indeed, it seems OP has fallen to the sunk costs fallacy (https://en.wikipedia.org/wiki/Sunk_costs). If one cannot regain already-lost costs, the best action is to regain as much of it as possible, not to wait whilst the amount that can be regained dwindles.
TL/DR price drives difficulty, difficulty never has and never will drive price There is actually a minor effect that many fail to notice. An adjustment to a higher difficulty generally decreases miner profits, and with decreased profits comes deflation. This, however, makes very little impact. Title: Re: Price cannot go less than $40.41 Post by: ||bit on April 13, 2013, 09:02:31 PM Current mining: Difficulty: 7,672,999 62,172.58 GH/s 969.89 megawatt hours $145,483.85 / day 3600 bitcoins created / day $145,483 / 3600 = $40.41 If you want fundamentals. You cannot charge less for a product than it takes to produce. But for every product you buy you have to consider: cost of production + cost of distribution + cost of retail + cost of marketing at the very least. Price rarely dips below difficulty for this reason. Doesn't this presume that only miners are selling bitcoins? 11 million coins out there. Miners find 3.6 thousand per day - i.e. miners find a minor (pun intended) .032%/day of what already exists. In a month, they still only find a mere ~1% of what already exists. There seem then plenty of bitcoins subject to selling pressure by those not incurring the expenses of mining. So, I'd think that it could drop below $40.41 I will assume forex follows most of the price patterns of stock trading. What did Jesse Livermore - trader extraordinaire - say about how low something can go? "Remember that stocks are never too high for you to begin buying or too low to begin selling." |
