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BTC price can be forecast by several ways such as technical analysis, financial events and news, or investor’s expectations. In today topic, I will analyze the issue of BTC prices from the relation between market supply/demand and miners interaction. As always, all statements made are from my personal perspective for the purpose of discussion and entertainment.
Let’s start with an old folktale:
By the 1980s, a group of Japanese scientists discovered a type of rock in the mountainous province of Zhejiang (China). They studied it and found out that this type of rock can be used in ischemia treatment. They named it “Bái tiě yěng” (can be translated as White Mental), because it was white and as hard as mental.
At that time, White Mental can easily be found in the mountainous province of Zhejiang and used by local children to play folk games. Only after the Japanese’s study was published, some began to collect White Mental and sold them to pharmaceutical manufacturers. Still, Nothing is worth mentioned until some prestigious newspapers in European and the United States wrote about the effect of the White Mental. The “magic rock” then became a fever that spread widely, pushing its value up over a thousand times.
As the amount of White Mental decreased, more and more people start to mine it. The number rose from one village to the whole Zhejiang Province. Thousands of excavators and rudimentary loaders are brought to Zhejiang with the purpose of mining this stones. Still, White mental is a limited resource and more miners means competition and high cost. However, the profit from quarrying White Mental is still enough for the miners, until it drown. The reduction of profits has led some people to liquidate excavator. Others are more cautious in investing and some are still investing despite how bad the situation is. Undeniably, Many families get rich thanks to the White Mental
Back to BTC, BTC and mining BTC is much more interested and complex than quarrying.
Assuming that the BTC falls below the profitable line (3,500 – 4,500 on average depending on the country), what would happened?
As the cost for mining BTC is unaffordable, some miners would quit mining just like the White Mental story.
However, mining BTC is much different from mining rock. When the number of BTC miner reduces leading to the decrease of transaction, the development of BTC will be limited.
In order to keep BTC alive and grow, transaction has to be improved by using more BTC miner. To do so, mining must be profitable. Therefore, as the number of miners rise, BTC price also does.
So, what is the conflict? It can never be sure that whether investors can make profit or not. But if BTC is not profitable, then what is the point to keep it alive?!
Then, what about BTC price? If the number of miner increased 5 times, does the price of BTC must increase exactly 5 times by default? What if the number is 10 or 20 times?
Will BTC become worthless or priceless? In the short term, the case of price falling is simple.In those cases, the market may cool down for few years and investors are more likely to put their somewhere else. Miners with strong capital and belief in the future of BTC would still continue to invest while the majority will leave until the market rise again. And it is nearly impossible for BTC price to stable in the long run due to the constant changes in the number of miner (except for the case of low-fixed profit leading to fixed number of miners, although this case is against the development of transaction speed).
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