Is BTC price sustainable with mining & electricity costs leaving the ecosystem?

[colinistheman]

If you truly believe this is what is happening right now then you should be buying as many bitcoins as you can.


If this much money is leaving the ecosystem each day and the price is still maintaining its relatively steady state, then next year when the mining reward is halved that would mean that the money leaving the ecosystem that is currently maintaining stability will be cut in half.

That is a lot of money not leaving Bitcoin. Thus it is certain that the price will rise by that much money every day.

So consider these low prices as a great thing. You get to buy more bitcoins between now and the halving.

I like your optimistic viewpoint of it. However, If we're going to factor in this halving then I feel that when the halving occurs the price of bitcoins will probably roughly double accordingly (because they are twice as scarce now. It may not be an immediate reaction. Probably a bit delayed, but I feel this will equal out), so while the number of bitcoins being sold to pay for mining and electricity costs will be half as many in quantity, the total value exiting the bitcoin ecosystem will be roughly the same. So, I don't see the halving as a saving grace to my concern of money exiting the bitcoin ecosystem.

I could be missing the bigger picture, or other factors, which make this not something to worry about. And that is what I am seeking by the purpose of this thread.

I think the answer is that it does cost money to secure the network when it is based on a proof of work algorithm which expends energy as the proof that work was executed. If it were free to do the work, then there would be no stopping anyone from doing unlimited "proofs of work". But then it would be worthless.

With that being said, the reason I have a difficult time grappling with the workability of all the bitcoins being sold and the money exiting the system is best explained by doing a comparison: If you all of a sudden stopped mining gold, the value of gold would not go down. It would probably go up in fact (being scarce). But if you all of a sudden stopped mining bitcoin (pretend for sake of argument that the network still continued to confirm transactions so it actually had value to people), then the value of bitcoin would slowly drop lower and lower as the value of the entire network gradually leaves in the form of payments to electricity bills.

[colinistheman]

it have last almost 2 years since winter of 2013, the price over $220, so at this price, it is sustainable.

Yes, it is true.

But it's been requiring almost a million dollars per day entering the bitcoin ecosystem just to maintain this $220~ value. I agree it has been working like this so far.

But if the money stopped entering the system, the value of bitcoins would actually drop continually until the value was worth closer and closer to $0 because all the money went out toward electricity bills. (again this is hypothetically if no new money was entering the bitcoin ecosystem).

Now contrast that to gold and if no new money was entering the gold ecosystem, does the value of gold go lower? No, it stays the same without some kind of daily cash inflow just to keep it at the same value.

So it seems bitcoin has an upkeep cost and gold does not, when it comes to maintaining the value the same. And if that upkeep cost isn't paid (in bitcoin's case) then you get a gradually eroding price.

And let it be known I own bitcoin and am a complete supporter. But I like to play devil's advocate when trying to understand something, and especially something as dear to me as bitcoin is.

[alh]

It's really hard to see what value people assign to a Bitcoin. It's value is entirely dependent on what someone else is willing to trade for it, be it merchandise, or some other currency. In that regard, it doesn't seem all that different than the value of a US dollar. It's value clearly isn't derived from the paper and printing. While you can burn dollars for heat, that's pretty much it.

I don't see a cost associated with actually holding Bitcoin. The only cost I see it's volatility. But for the most part Gold has some level of volatility as well, doesn't it? When you put that Gold coin into your safe deposit box it was worth X dollars. When you take it out and try to "spend" it, it might be worth more or less than when it went in. The biggest difference is that Gold (and most precious metals) have alternate uses that put some kind of "floor" under the price, Jewelry, plating, dental work, and so forth have a real value outside of it's monetary exchange value.

Bitcoin has none of that. There is no "alternative use" for a Bitcoin, besides it trade or exchange value.

Eventually we'll see how well it pans out. At the present moment, the big driver of all the mining hardware is the 25BTC "reward" contained within. When that falls to 12.5 and then 6.25, there will be less incentive to have Petahash mining farms sucking down megawatts of electricity. I don't see any way "transaction fees" can support the current huge investment in mining hardware.

The problem is that I think this will take decades, unless Bitcoin collapses in value first.

[Elwar]

I could be missing the bigger picture, or other factors, which make this not something to worry about. And that is what I am seeking by the purpose of this thread.

Bitcoin is meant to be inflationary in its first years. We are going from $0 worth of bitcoins to billions. The initial goal was to try to hit that sweet spot where new money coming into bitcoin matched the mining costs going out.

One example of money coming into Bitcoin is something like bitwage. I am currently converting all of my paychecks to bitcoins every 2 weeks through bitwage. Let's say that I am bringing in 10 bitcoins worth of pay every 2 weeks (it's actually a bit more but we will go with 10 for ease). That is fiat currency being converted to bitcoins. Essentially money flowing into the bitcoin economy.

With 3600 bitcoins being created each day, that is 50400 bitcoins created every 2 week pay period.

If only 5040 people do the same as I do with their pay, then all mined bitcoins leaving the bitcoin ecosystem have an equal amount of bitcoins entering the ecosystem. That one action cancels out the mining costs.

At the current price, there are about $25 million worth of bitcoins "leaving the ecosystem" (if you go with the horrible assumption that bitcoin miners have no interest in bitcoin whatsoever) monthly.

That is peanuts in the world of finance. That amount of VC money flows into Bitcoin companies regularly. I know they are not buying bitcoins but they are investing in the technology which then makes Bitcoin better and encourages even larger amounts of funds to flow into Bitcoin.

And think of all of the people who say that Bitcoin is used just for drugs. The world drug trade is currently over $300 billion per year. If Bitcoin made up just .1% of the world drug trade, all mining costs would be paid for (just from that one industry).

The remittance market made over $600 billion last year. Gold value is in the trillions, e-commerce, currency exchanges, etc. etc...

Worrying about the tiny cost of Bitcoin mining compared to the incoming flow of money is like complaining that the cost of paper for $100 bills is going to tank the dollar.

Will the mining cost prevent Bitcoin from being worth $1 million/BTC any time soon? Sure. That is the built in inflation of about 12% (next year, 6% and 4 years later 3%...). But the money flowing in is why we are not at $1/BTC anymore.

[s1gs3gv]

no

[Biodom]

I could be missing the bigger picture, or other factors, which make this not something to worry about. And that is what I am seeking by the purpose of this thread.

At the current price, there are about $25 million worth of bitcoins "leaving the ecosystem" (if you go with the horrible assumption that bitcoin miners have no interest in bitcoin whatsoever) monthly.

That is peanuts in the world of finance. That amount of VC money flows into Bitcoin companies regularly. I know they are not buying bitcoins but they are investing in the technology which then makes Bitcoin better and encourages even larger amounts of funds to flow into Bitcoin.

I agree. People are talking about at most $25 mil (in reality, i don't think that miners sell more than 50% of mined bitcoin) per month in negative flow, maybe less.
For a planet with 7 bil people this is not just miniscule, but microscopic or, to be specific, less than 0.4 cents per mo per each earth inhabitant.