/if/ everyone was getting more bitcoins than they should, the difficulty would adjust... and the faster people get bitcoins, the faster the difficulty adjusts to set it to 1 block every 6 minutes.
over time, the average will stay around 1 block every 6 minutes, though short term there will be fluctuations. This round you might earn more than average, then if thats true, next round you will earn less than average. That is how difficulty works.
That is not my point, I understand that. My point in simple English is this. Miners that have high electricity cost will leave, that will take down the difficulty, that will make miners as me with zero or low electricity cost able to sell more bitcoins at A LOWER PRICE because we have a MAJOR ADVANTAGE. Still don't get it? If not maybe you will get it when we hit new lows. As long as difficulty don't get a fair amount higher from the last all time high, the price of 10 dollars are very high. |
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Right now Bitcoin economy is in high inflation environment, later in maybe in 2013 (bitcoins mined is halfed) the price of creating a bitcoin isn't that important, because that in correlation to total amounts of Bitcoins is far smaller. But today this is not the case, still the amount of bitcoins in comparison to what is created are relatively big enough that it is very important to understand the price of one bitcoin created.
Get to understand the price of creating one bitcoin and do your due dilligence. So you don't get hustled at the exchanges by the traders that put up fake buy orders and also by the miners that make money on your dollars when YOU as a direct buyer are taking the majority of the risk by putting in money in this economy.
The miners have always two options. Stop mining (no cost). Sell the rig. The direct buyer has pretty much no options if someone wants to sell 100 000 bitcoins within a short time frame. Then you have lost 50 %.
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You don't get it? Why is it that so many here don't get easy math or easy economics. It should not be that hard. If difficulty goes down then I can mine more bitcoins with my "1,4 GHash/s rig" / day, when i do so, I will be able to sell MORE bitcoins / day, and because of that I don't need it to be at 5-6 dollars, I'm happy to get 3-4 dollars and I STILL make a good profit at the last line, that is in dollars / day. Get it now? If not please stop commenting.
YOU might get more BTC when the difficulty goes down, but the TOTAL amount of BTC paid to miners is THE SAME. That's the WHOLE POINT of difficulty. I think it's you that "don't get easy math or easy economics." And what happens if I get more Bitcoins, and everyone else that are STILL mining also does so? Do you think that our incentives to sell at a lower price would be higher? Do you think that everyone else that has bitcoins would see that and understand economics, see the opportunity to sell high (before the miners) and buy back cheaper? |
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Another thing, don't think that because miners are leaving that is a sign that the prices are to low, that is only a sign that miners that shouldn't be mining in the first place mined bitcoins, the ones with high electricity bills. The Bitcoin economy as whole is big enough that you should see what you see in the real world, that is major advantages, so who are we that have them and will mine at pretty much any cost and are happy to see miners leave the market? The group of us miners that mine for free or with low electricity cost, and I know that we are a pretty big group. Some people actually do their due diligence.
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If the 10 dollar price should be sustainable, we should start to see an increase in the difficulty soon. It is like the market of Bitcoins prices in a difficulty increase, at the same time miners are leaving (not in a hurry but you can see that it is going down) and are showing the market that they have for different reasons stopped mining. My bet is on that it will continue going down for a while. And once again the direct buyer is feeding the beast, that is the miners, without having done their due diligence.
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Blocks per hour now down to 4.88
Next difficulty 1,841,634
Difficulty down -> More bitcoins for the miners that are left mining (and are profitable) -> more bitcoins to sell to the direct buyers -> more pressure on the exchanges Same bitcoins per day to miners Same bitcoins to sell to buyers Same pressure on the exchanges that's kinda what the difficulty does. You don't get it? Why is it that so many here don't get easy math or easy economics. It should not be that hard. If difficulty goes down then I can mine more bitcoins with my "1,4 GHash/s rig" / day, when i do so, I will be able to sell MORE bitcoins / day, and because of that I don't need it to be at 5-6 dollars, I'm happy to get 3-4 dollars and I STILL make a good profit at the last line, that is in dollars / day. Get it now? If not please stop commenting. |
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Blocks per hour now down to 4.88
Next difficulty 1,841,634
Difficulty down -> More bitcoins for the miners that are left mining (and are profitable) -> more bitcoins to sell to the direct buyers -> more pressure on the exchanges |
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This was the equilibrium posited by Satoshi in his paper, and you have it wrong. In fact, price drives mining, not the other way around. Whether there are 5 miners or 5000 the supply will be the same. The large moves in the market make plain that speculators, not miners, are the ones setting prices.
You are right "sometimes". The problem is this, when the mining sector of the Bitcoin economy gets to big, the direct buyer starts feeding the beast (the miners), they want and need to have their money back from their investment, and the only way to do this is to attack the direct buyer at the exchanges. You could say that it is a constant fight between the direct buyer and the miners. My belief right now is that the miners are in desperate need to get their money back and that is the reason we see the price hit new lows. If the direct buyer were smart, we would already have hit equilibrium, but the direct buyer is greedy and don't understand economics. The heavy investments was all made in May and June of this year. Before the money of those investments are not taken home from the direct buyer we will see a continued downturn and pressure on price. That was the reason I said it will hit 5-6 dollars when it cost 12 dollars a couple of weeks ago. |
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I've been reading this thread https://bitcointalk.org/index.php?topic=36687.0 [Reddit] The Real cost of Bitcoin? - Breaking Down the Math I agree with a few of the posters that the numbers are manipulated in the fact that the bitcoin system can handle many more transactions than what is currently used, without any increased overall cost, resulting in a decreased cost per transaction. This highlights a problem with 'miners' though. Their supply far exceeds the demand. They have to consume massive resources in order to obtain the 50 BTC reward and in order to become profitable they need to sell BTC at gouged rate on the markets. The plain fact of the matter is that BTC is not worth that much, and that much power is not necessary to sustain the system. It's expected that after the mining pool is tapped at 21,000,000 BTC that the miners will hemorrhage unnecessary miners as supply falls to meet demand levels. The current situation though is that as 'miners' pump more processing power into the pool, they will have to gouge the price of BTC to keep running at a profit. Quite simply I don't think it's ethical to be purchasing BTC at these rates unless you have a legitimate need for them. I also speculate that this will catch up with miners, they are essentially pegging the bitcoin to the electricity and equipment involved (not unreasonable) and then throwing in as much electricity and equipment as they can get their hands on (in essence, the decentralized bank can do stupid shit too when the buyers let it.) Welcome to the game, I have been saying this for a month now. The direct buyer at the exchange are feeding the miners fat and happy. The problem is that the direct buyer doesn't understand economics. My tip is to start reading the mining sector of this forum. |
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The price actually reached under 6 dollars (mt.gox), look up your figures.
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Look at this link as proof: http://bitcoin.sipa.be/Difficulty is plummeting. This is as I see it the strongest indicator of the price of bitcoin, the cost of creating bitcoins. If the average Joe leaves then what is left is all the investors with heavy investments in 6990 GPUs etc. , they WILL want to have their money back asap, and they have invested massive amounts of money in May and June off this year. And they WILL sell at the market at nearly any price or a bit above electricity cost. If the difficulty continues to go down (could be even just a modest drop), I have a new price target of 3-4 dollars. My last price target took 9 days (I said it will reach 5-6 dollars within 1-2 months when it was at 12 dollars), lets see how many days it takes for this one. |
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Monday was a bloodbath. Tuesday was recovery. Looking today, stocks open 2.5% lower than yesterday, which basically erases all gains made yesterday. IF this continues for another 7 days the dollar and the good ol USA is toast.
Gold and Silver on the other hand soars to extreme heights as everyone seeks safe havens. WHEN my god do they finally realize Bitcoin is a safe haven too!!!
Want to hear something interesting, everyone is investing in US Treasury bonds right now as a safe haven, that is equal to investing and believing in the USD. US Treasury haven't been this high in price EVER (All time high). |
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Golds foundation is primarily that its scarce and that it has been used as money for thousands and thousands of years.
Fiat currencies primarily foundation has been the power of government to tax it and "force" the people of each and every country to use it. Also that they say in the open that fiat currency has inflation goals that are important etc. (not that this has been the case the last years).
So what can be Bitcoins foundation? Realistically it should be in a way where fiat currency can't compete with it. I'm thinking like online gambling in US should be a strong foundation. It's not a shady business (legit in EU etc), but US has opened the doors to give Bitcoin a strong foundation. Beside really shady business as selling drugs etc. what good and strong foundation do you see that can make Bitcoins get to the mass (without speculation)?
I think this question is REALLY important. When this question in answered, this should be the primarily goal to act on. Because getting more and more merchants that sell through internet isn't enough, because I don't see that as a strong foundation. Or getting more exchanges online or even getting more media attention. In the end this wont make the currency strong, I hope that the bitcoin community understands this.
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You might want to contact Keyur at CampBX. They have short selling and margin trading capabilities (however I think they need volume to increase before they can enable those features). That would be a safer alternative for the lender if you trust CampBX (and I think CampBX themselves will lend the bitcoins). And of course they have collateral requirements & margin call rules.
CampBX is a option. But I think that Mt.Gox should enable this as soon as possible. I think that the mining sector of the Bitcoin economy is interested to be able to know their cash flows in advance. |
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I'm not willing to do this trade, risk is just too high. I think you're crazy to take that up.
Why is that crazy, I know that miners needs to get back their money (the ones that invested in May and June - just have a look at the amazing up swing in Hash levels those months), I know that 7200 bitcoins are mined per day. I guess that at least half of that is sold at the exchanges every day. That is more than 3600 bitcoins at 10 dollar (36 000 dollars) that will work towards making my position gain in value per day. |
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I too would take up this deal with 1, maybe 2k BTC, but even with currently equivalent USD collateral I can’t be sure to get back 100% of the BTC in case it rallies hard.
Yep it would need 3x USD collateral, with margin call option. That is way to much. |
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I too would take up this deal with 1, maybe 2k BTC, but even with currently equivalent USD collateral I can’t be sure to get back 100% of the BTC in case it rallies hard.
You can have a stop loss a good bit under zero collateral. This market is open at all times. |
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let me understand better, if you already have your position in USD, what is the difference with shortselling btc ?
if you hold that position, it's the same as shortselling, or not ?
I don't have any position in bitcoins. I have USD that equals 3000 bitcoins or more at 10 dollar/bitcoin. understood that, so what's the need to shortsell, if your position already in USD ? if you are betting on a lower future rate, you can keep the dollars and buy btc later. Making money both ways. |
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I'd love to give such a loan. Unfortunately, though, I see no practical way for me to do so and mitigate all the risks involved to my satisfaction. Only with sufficient collateral maybe.
Maybe Mt.Gox can take care of that? |
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let me understand better, if you already have your position in USD, what is the difference with shortselling btc ?
if you hold that position, it's the same as shortselling, or not ?
I don't have any position in bitcoins. I have USD that equals 3000 bitcoins or more at 10 dollar/bitcoin. |
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