Halving Bitcoin Reward Unlikely to Cause Price Surge

[actmyname]

2. There are roughly 15 million BTC "issued" however that does not mean that they are all for sale at any given time. The miners *need* to sell the majority of their mining revenue to pay their bills, as their bills are denominated and and paid in fiat. This is not true for many other bitcoin related businesses. The last 24 hours of BTC/USD volume on bitfinex is roughly 4,800 BTC, on bitstamp it is roughly 2,400 BTC, on btc-e it is roughly 4,600, so althoughthe miners are not the only ones selling, the likely do make up a very large portion of btc sold every day.

Right. If miners need to sell the bulk of BTC they mine today, there's gonna be a shitshow come Teh Halvening.
Because that "bulc of BTC" gonna be cut in half. Clearly not enough to pay the bills, forget PROFIT!
wat do

That's why I think if that were true, then a lot of miners would drop out [and come back in, due to difficulty changes] and bitcoin would start to become more centralized [even just a little] due to the mighty pools controlling everything. Of course, miners would even things out by going to different places, but maybe the profit there would be worse than the profit in the large one? Who knows what will happen?

But all I know is that the price will not surge. It will increase [imo] but not surge.

[instacalm]

I'm not expecting any significant price increase.

[BitconAssociation]

2. There are roughly 15 million BTC "issued" however that does not mean that they are all for sale at any given time. The miners *need* to sell the majority of their mining revenue to pay their bills, as their bills are denominated and and paid in fiat. This is not true for many other bitcoin related businesses. The last 24 hours of BTC/USD volume on bitfinex is roughly 4,800 BTC, on bitstamp it is roughly 2,400 BTC, on btc-e it is roughly 4,600, so althoughthe miners are not the only ones selling, the likely do make up a very large portion of btc sold every day.

Right. If miners need to sell the bulk of BTC they mine today, there's gonna be a shitshow come Teh Halvening.
Because that "bulc of BTC" gonna be cut in half. Clearly not enough to pay the bills, forget PROFIT!
wat do

That's why I think if that were true, then a lot of miners would drop out [and come back in, due to difficulty changes] and bitcoin would start to become more centralized [even just a little] due to the mighty pools controlling everything. Of course, miners would even things out by going to different places, but maybe the profit there would be worse than the profit in the large one? Who knows what will happen?

But all I know is that the price will not surge. It will increase [imo] but not surge.

It's a really hard thing to model. For instance, if I knew that my major competitor was nearly broke, it would make sense for me to mine at a loss to choke him out, and it would also make sense for me to form consortium/temporary alliances with other mining farms, with (pseudo)enforceable contracts and stuff, to drive out the competition. It gets mindnumbingly complex, and I suspect that it doesn't even work like I expect it does. I mean, all these guys know each other, there's a handful of them. Not a conspiracy theory buff, just one of those "what would I do" things.

http://s32.postimg.org/ygpu36tyd/youtwaifu.jpg

Decentralized, p2p closed door meeting between 80% of the mining power and the ruling dev team

[BTC-Joe]

you are assuming that all 16million coins are ALL on an exchange and ALL being traded to ALL add some significance to the market value..

No, I'm not assuming that all coins are on the market, but the share of coins that are gained by miners are now significantly less in relation to all coins available.

I never said that miners have no influence on the price; just that events tied to mining are a lot less influential now than they were when the total coins available were under, say, 5M.

Miners need to sell their coins to cover the costs of mining. They have an incentive to sell rather than hold-out for some potential price increase...this incentive to sell their coins only increases with halving.

im sorry but on average only 10k to 100k volume(per exchange) is moved per day and is usually based on about 3k-30k of real coins being moved a few times a day to total the daily volume.

Sure, and any price jump on such low volume is going to be a temporary spike and not a new normal. BTC have  gained roughly 50% over the last year, meaning 12 months before today. I don't see halving as a catalyst for any major shift up or down, but if there is a shift due to halving it's more likely to be down than up.

so the reality is that the bitcoin price of all 16million coins is not based on the trades of 16million coins per day.. but usually less then a hundred thousand coins..

remember not all 16million coins are on exchanges.. no where near that many. so when you realise that it is only a smaller amount contributing to the market value, then you see who is hoarding the majority of that market making value.. you will see that pools do have the power to move prices, should they be motivated to.

It doesn't matter if the coins are all traded or not. The point you are missing is the AVAILABILITY. There are plenty of coins available, even if they are not up for sale right this moment. A surge of new bitcoin buyers would drive the price up; but BTC have already reached their critical mass - the point where they can sort of sustain themselves without the need for external promotion.

Gains in bitcoin usage from new users is going to slow as many new users are already participating. A high price per coin will certainly limit the rate at which participants enter the fray, simply based on psychological reasons. The average person is not going to want to pay $450+ for 1 BTC. Even though fractional BTC are available, it's not quite the same as buying 1...there's a reason why companies on the stock market do splits to keep their share prices down.

[franky1]

That's why I think if that were true, then a lot of miners would drop out [and come back in, due to difficulty changes] and bitcoin would start to become more centralized [even just a little] due to the mighty pools controlling everything. Of course, miners would even things out by going to different places, but maybe the profit there would be worse than the profit in the large one? Who knows what will happen?

But all I know is that the price will not surge. It will increase [imo] but not surge.

the main pools own alot of rigs, they wont move to other pools..

the main pools have alot of funds in reserves because their cost of production is dramatically lower than western pools. so not only can they keep mining without worrying about cost, but their reserves can be used to change the price, when they are motivated to do so.

a few of the smaller pools will decrease in their customer base. but the main pools will continue on

if i was to look at the top 3 pools
f2pool
antpool
btcc

i would say the one that would see most effected would be f2pool. (but not as much as the other 15 smaller pools)

[actmyname]

That's why I think if that were true, then a lot of miners would drop out [and come back in, due to difficulty changes] and bitcoin would start to become more centralized [even just a little] due to the mighty pools controlling everything. Of course, miners would even things out by going to different places, but maybe the profit there would be worse than the profit in the large one? Who knows what will happen?

But all I know is that the price will not surge. It will increase [imo] but not surge.

the main pools own alot of rigs, they wont move to other pools..

the main pools have alot of funds in reserves because their cost of production is dramatically lower than western pools. so not only can they keep mining without worrying about cost, but their reserves can be used to change the price, when they are motivated to do so.

a few of the smaller pools will decrease in their customer base. but the main pools will continue on

if i was to look at the top 3 pools
f2pool
antpool
btcc

i would say the one that would see most effected would be f2pool. (but not as much as the other 15 smaller pools)

Then disregard anything happening to the main pools, but if at any point miners decide to try and leave due to unprofitable reasons in those pools, couldn't they just increase the price the miners get and reduce the pool fee? The system would slowly turn to be more centralized and ruin the largest part of bitcoin.

[franky1]

you are assuming that all 16million coins are ALL on an exchange and ALL being traded to ALL add some significance to the market value..

1. No, I'm not assuming that all coins are on the market, but the share of coins that are gained by miners are now significantly less in relation to all coins available.

2. I never said that miners have no influence on the price; just that events tied to mining are a lot less influential now than they were when the total coins available were under, say, 5M.

3. Miners need to sell their coins to cover the costs of mining. They have an incentive to sell rather than hold-out for some potential price increase...this incentive to sell their coins only increases with halving.

1. "coins available".. what if i told you there are 10billion bananas around the world.. but your supermarket only sells 1 box a day.. if half of the box is still there by the end of the day. then demand is not there.. so they put a reduced price on the banana's to get rid of them.
the price of the bananas has nothing to do with what EXISTS in the world, but what is AVAILABLE on the market.

for instance. satoshi has 1million coins stashed away.. kerpeles has 800k coins stashed away.. they are not AVAILABLE on the market. so people do not care about them and dont even think about them in regards to bitcoins price.. BUT if they suddenly appeared on a market.. then the supply mindset would change..

so dont worry about the 16million coins.. all that matters is the supply AVAILABLE ON the market.. not in someones cold store

2. back in 2012-2013 mtgox had 800k coins at any one time, BTC-E had 300k coins.. yet in 2016 the amount of coins AVAILABLE is far far far less. just check out the volumes and you will see..
i remember people moving 10k btc coins every couple minutes on MTGOX.. now its just 10btc orders being moved every few minutes. so although the fiat valuation has risen the BTC volume has dropped.

3.
lets say you got 1 block an hour..
if you were a western pool. you would want to cash out about 80% of coins to cover the electric at the end of the month. and 10% to invest in more equipment. and 10% profit (if lucky)
but if you u are an asian pool where you also manufactured the rigs.. you would withdraw 20% of coins to cover electric. and ZERO for eqipment investment. leaving you 80% profit. to do with as you please. remember when asian pools sell rigs to the west, the west is literally giving the asian manufacturers a few free rigs due to the large retail markup.

so dont assume major pools are cashing out all of their coins.. to pay bills

[Razick]

Will bitcoins ever sell for $1,000 USD or more again? Possibly, but it's not likely to happen as a reaction to halving. The supply of bitcoins in circulation is not changing, and if miners jump ship that is a strike against bitcoins not something that would warrant a price increase.

The only thing that halving the reward to btc miners will do is make mining half as appealing. In fact, if you think about it, it's not a very good system because the more people using bitcoin, the more you need miners...but the miners get paid less and less as time progresses.

At the very least, as compensation from mining decreases, a minimum network transaction fee should be imposed and it should increase proportionally to difficulty to ensure that all miners receive a predictable and steady flow of bitcoins for the resources they provide.

Fees are intended to replace block rewards as transaction volume increases and Bitcoin matures. It's worth noting that miners have already invested in millions of dollars of capital (mining equipment) for the purpose of mining. From an economic perspective, as long as miners receive enough to cover electricity and any other variable costs (such as time requirements, maintenance, etc), those miners should continue to operate.

Higher block rewards served to compensate miners for investing in the capital needed to enter the market, but they are very expensive for the network long term. Fees will help set a fair market compensation for miners over time.

[franky1]

Then disregard anything happening to the main pools, but if at any point miners decide to try and leave due to unprofitable reasons in those pools, couldn't they just increase the price the miners get and reduce the pool fee? The system would slowly turn to be more centralized and ruin the largest part of bitcoin.

in 2012 there were less then 10 pools.. 2016 there are atleast 18.. just because they are not in america, should not be a reason to say tall tales of centralisation.

infact there are pools in iceland, china, and other places around the world.
i am not so worried about the reward halving causing issues.. its more so the manufacturing of asics that has a deeper and more long term cause/effect on the whole distribution of decentralization.

many simple pieces of code can be written to rectify this.
EG (reject solution if solved by IP address range that has solved within the previous 10 blocks)

that way there would always be 10 different pools..

but as long as there are no rejection rules. and the western pools cannot get their hands on cheap rigs(at cost or free due to selling at massive margin to competitors) then that will be the more long term cause of lessening the distribution.

but as i said.. there are more pools now than in 2013. (yes i know in both cases it is not as distributed as the good old solo mining days of 2009-2012)
but its not doomsday just yet

[franky1]

Higher block rewards served to compensate miners for investing in the capital needed to enter the market, but they are very expensive for the network long term. Fees will help set a fair market compensation for miners over time.

fee's are a 20-100 year game theory.. not really part of the 2016 debate. because fee's are not to be considered a needed income stream, but more so a nice bonus right now

[ahpku]

in 2012 there were less then 10 pools.. 2016 there are atleast 18.. just because they are not in america, should not be a reason to say tall tales of centralisation.

Not at all...



[spoiler] If 3 pools control over 70% of the hash rate and are on first name basis with another 20%, the number of ways remaining 10% are divvied up between pools makes little difference. [/spoiler]

[Quickseller]

@BitconAssociation

1 - I am not sure there is enough information to describe the elasticity of Bitcoin, so the demand may or may not go down in the event that the price of bitcoin were to go up, however simple economics says that when the supply of a commodity goes down, then all else being equal, the price will go up.

Right now the demand for Bitcoin at $450 is ~3,600 BTC per day. When supply goes down, causing the price to go up to say, $460 then the demand for bitcoin might fall to 1,800 BTC per day and the market will be back in equilibrium.   

BTC  supply is not going down, it's increasing by 25 BTC, every 9 or 10 minutes. It's the rate of increase that's going to be lower, the supply is going to continue increasing.

Supply of new coins is going to go down. Like I said before, right now three is demand for 3,600 additional bitcoin that were not previously owned. On a net basis, people are wanting to (and are willing to pay for) buy 3,600 additional BTC every day.

And, of course, BTC is not a typical commodity.  BTC is never consumed/destroyed (not like oil/consumables, or even durables)

One use case of Bitcoin is proof of burn, although it is not used in very large amounts nor very frequently. When compared to trading volume and total amounts in circulation, both gold and silver are very rarely consumed/destroyed, and the same is true for diamonds.

Other currencies like Dollars, Euros, British Pounds and Yen are also never consumed/destroyed.

There are a lot of speculators in bitcoin, however there are real world applications for Bitcoin that is not dependent on it's price. Although it would not be quite as trivial, it would be possible to stop buying oil and to instead buy alternatives when the price of oil gets to be too expensive.

Yes, it is possible to stop buying oil, but not_buying_oil only becomes practical if the prices are ~x5 the current.
Not buying BTC, OTOH, is trivial & would create problems for shutin bath salts enthusiasts & pedos only

There are many use cases of Bitcoin that do not depend on the price of bitcoin other then the fact that the price is somewhat stable. I would say that most use cases of bitcoin involve saving time/money over using traditional payment channels like credit cards, so if someone wanted to use bitcoin to buy a plane ticket somewhere over using their credit card, they would simply buy less.

2. There are roughly 15 million BTC "issued" however that does not mean that they are all for sale at any given time. The miners *need* to sell the majority of their mining revenue to pay their bills, as their bills are denominated and and paid in fiat. This is not true for many other bitcoin related businesses. The last 24 hours of BTC/USD volume on bitfinex is roughly 4,800 BTC, on bitstamp it is roughly 2,400 BTC, on btc-e it is roughly 4,600, so althoughthe miners are not the only ones selling, the likely do make up a very large portion of btc sold every day.

Right. If miners need to sell the bulk of BTC they mine today, there's gonna be a shitshow come Teh Halvening.
Because that "bulc of BTC" gonna be cut in half. Clearly not enough to pay the bills, forget PROFIT!
wat do

I am not exactly sure what you are trying to say, however if a miner cannot pay their bills with their mining revenue then they will stop mining, which all else being equal, will cause the difficulty to decrease.

[richkellj]

I'm not expecting any significant price increase.

BTC will shot up to $1200 during that halving. just see that

[Rubberduckie]

of course the halving automatically doesnt translate into a price surge but...


If it doesnt go up then all these farms that mine bitcoin will have to shut down
unless they have little to free energy and even then their profit cuts in half

the only way to counter act the halving for miners is the price of btc doubling

what will happen remains to be seen but I dont see how it doesnt make the price
rise

[franky1]

in 2012 there were less then 10 pools.. 2016 there are atleast 18.. just because they are not in america, should not be a reason to say tall tales of centralisation.

Not at all...

[spoiler] If 3 pools control over 70% of the hash rate and are on first name basis with another 20%, the number of ways remaining 10% are divvied up between pools makes little difference. [/spoiler]

you are worried about 3 pools.. out of 18??

well in 2013
7 of 10 were american. and guess what.. GHASH had 50% of the hash power to itself..
thats right only 10 pools and of which 1 pool had 50%..

so now we are in 2016 with 18 pools and the top hashrate of 30%... to me.. i see that as better.. but.. as i said before. not as good as the good old days of solo mining of 2009-2012.
however solo mining has its own security risks due to such a low difficulty.

so please dont turn the distribution debate into a racial debate. because it is meaningless if X number of pools are in china. or any other country. and picking on a pool and trying to suggest that they are colluding purely because they are in the same country.. then my friend. i must deem that you are having an affair with all the women within 500 miles of where you live.. after all your all close together in a certain area so you must have lots in common with each other purely because you use the same fiat currency, speak the same language, soobviously there must be some secret relationship yor having with all of these women

[raphma]

When people talk about china farms is not a racial debate but energy price debates...


That's why most miners are there...

[franky1]

When people talk about china farms is not a racial debate but energy price debates...

That's why most miners are there...

iceland and ukraine are cheaper and acceptable climate.. but try thinking about the delivery cost and the 14 day shipping to get it moved out of chinese manufacturers.. to europe (those 2 weeks are alot of lost potential earnings)

if i was to start a ASIC manufacturing business id go for ukraine(low labour/low electric) and have the mining (running rigs) facility within 30 minutes of the manufacturing facility.

i would never start a business in the western world(higher costs) or in hotter countries(extra power needed for climate control), even if they do have slightly cheaper electric.

most of the big players in china have their mining farms within an hour of the manufacturers, that alone makes a difference.
the other difference is retailing out some rigs. and using the profits to build a few rigs (virtually free) for themselves.

[betohell]

I'm not expecting any significant price increase.

I think it will give the effect on the price of bitcoin. bitcoin unless demand decreases when halving certainly will have no effect on the price of bitcoin
but if the same request or enlarged necessarily high prices will rise

[BitconAssociation]

,,,
Supply of new coins is going to go down.

Supply of new coins? Because people don't care for used ones, they only like to buy new ones?
My understanding is that bitcoins are fungible. I'm not even seeing an option to bid on fresh bitcoins, instead of those worn-out ones that are probably on their last legs and missing bits

Like I said before, right now three is demand for 3,600 additional bitcoin that were not previously owned. On a net basis, people are wanting to (and are willing to pay for) buy 3,600 additional BTC every day.

No. There is no "demand for 3,600 additional bitcoin that were not previously owned." To put it in simplest, grossest terms, there is "demand for 3,600 additional bitcoin that were not previously owned @ current price."  Double your price, and you won't sell a single one of your coins. Because your coins are not unique. They're the same as the ocean of (roughly fifteen and a half million) coins which are likely to undersell you. Please tell me if this is unclear, because much of the "let's artificially limit the supply to make our Beanies more valuable" thinking is rooted in this very misunderstanding.

... One use case of Bitcoin is proof of burn, although it is not used in very large amounts nor very frequently. When compared to trading volume and total amounts in circulation, both gold and silver are very rarely consumed/destroyed, and the same is true for diamonds.

By saying that "bitcoins do not get destroyed," i meant "destroyed through normal use." As opposed to commodities like oil (which gets turned into other stuff until it's all gone, and then you have to buy more) and food (which gets turned into heat and poop until it's all gone and then you have to buy more)
Bitcoin is not like that, it doesn't get destroyed through ordinary use, it only changes hands.

This is an important difference, the difference between getting destroyed through regular use vs. not getting destroyed.  The reason being that if we stopped making food today, the world would run out of food, and food prices will skyrocket until everyone tries to feed on each other and dies.

On the other hand, if no more new bitcoins were issued (e.g. when/if the final of 21 mil are mined), we could go on using bitcoin indefinitely, as intended. No one starves to death, world doesn't end.
Again, I've forgotten how everything needs to be spelled out here, so do forgive me for failing to type all this out in my previous post. Now that I did tho, please try to understand this. Don't just try to impress me with your ace knowledge of 6th grade physics, like your "you can burn diamonds" factoid.

Other currencies like Dollars, Euros, British Pounds and Yen are also never consumed/destroyed.

Yes, you are right, money is not consumed/destroyed, excellent point.
That's why when I'm printing money by the boatload/day now, and reduce my issuance to mere truckload tomorrow, it would be grossly disingenuous of me to suggest that I'm "reducing the money supply." And, when people call bullshit, adding "well, I mean I'm reducing the supply of new money" would only make me sound like an ass grasping at straws, no?

[Quickseller]

,,,
Supply of new coins is going to go down.

Supply of new coins? Because people don't care for used ones, they only like to buy new ones?
My understanding is that bitcoins are fungible. I'm not even seeing an option to bid on fresh bitcoins, instead of those worn-out ones that are probably on their last legs and missing bits

I think I might have used a poor choice of words. Maybe I should have used "additional" instead of "new". The growth of additional supply will shrink, however the growth of demand will not.

Like I said before, right now three is demand for 3,600 additional bitcoin that were not previously owned. On a net basis, people are wanting to (and are willing to pay for) buy 3,600 additional BTC every day.

No. There is no "demand for 3,600 additional bitcoin that were not previously owned." To put it in simplest, grossest terms, there is "demand for 3,600 additional bitcoin that were not previously owned @ current price."  Double your price, and you won't sell a single one of your coins.

This is a correct statement. However we are discussing if the halving will result in an increase in price of bitcoin. I am arguing that there is some price point above the current price at which there is demand for 1,800 additional bitcoin that were not previously owned that is above the current price.

Other currencies like Dollars, Euros, British Pounds and Yen are also never consumed/destroyed.

Yes, you are right, money is not consumed/destroyed, excellent point.
That's why when I'm printing money by the boatload/day now, and reduce my issuance to mere truckload tomorrow, it would be grossly disingenuous of me to suggest that I'm "reducing the money supply." And, when people call bullshit, adding "well, I mean I'm reducing the supply of new money" would only make me sound like an ass grasping at straws, no?

Maybe it would be more accurate to say that you are "reducing the money supply growth".

When compared to other currencies, the US Dollar increased in value when QE was scaled back and when QE was stopped. Yes there were other market factors at play when this happened, however I believe that this was primarily the result of lower (additional) supply of dollars into the market.