what happens over the next 6 months when the miners try to recoup their $?

[jasonjm]

by my calculations there has been about $40 to $50 million ordered in mining Equipment that is now supposedly going to come online.

pretty much 99% of those miners will try to recoup their investment immediately.

can the bitcoin market handle sustained selling of that magnitude for months on end?

that assumes that every single holder of bitcoins who sees the price stop moving up decides to hold bitcoins, rather than taking profit, which does not seem realistic - all 11 million coins!

lets assume 95% are "believers", and 5% are speculators - which is nonsense, I would guess up to 50% are speculators, but lets say 5%. that means 500 000 coins approx need to be sold if the price stops moving up. That is $50 million, plus $50 million in miners recouping their money, for a total of $100 million, at minimum - assuming bitcoin has the strength to hover at around $100 per coin.


Has anyone considered the current bitcoin price increase has more to do with miners technology switch than anything else? think about it, we are at a generational change in mining tech, no one is buying GPUs and cashing out, because ASIC is the next thing. So at the moment there are no miners attempting to recover their money just yet as the ASIC wave has yet to hit. So right now the miners are actually exerting the opposite of a downforce on the market, because none are cashing out as the new equipment has not arrive yet, but more importantly some ASIC makers such as AVALON are requiring payment in bitcoins. they sold 1000 units at approx 100 bitcoins each, which means a demand for 100 000 bitcoins all in a few days.

Mark this post, mock this post, if you believe in bitcoin and want to buy in, you will get a much much better opportunity before this year is out.

[Frequency]

Only the ones that depend on fiat will be reversing there bitgold back to papermoney, the rest will buy new gear and keeps updating some wallets and a small% will exchange but it wouldn,t be a problem because a lot people are waiting to buy in from miners and the weak hands..just my opinion..!!! 

[jasonjm]

unless whatever you buy accepts bitcoins directly, it will ALWAYS be converted back into paper money

even if say AMAZON accept a bitcoin directly, they would still then convert that coin back to fiat to pay the supplier. So that coin would become a sell at some point.

the whole supply chain would need to accept bitcoins for bitcoins to truly just circulate without ever hitting the fiat wall.

BTW that weak hands statement is a terrible phrase to use, kind of like in sports when you say "man up" to someone before they do something totally beyond their skill level and mess themselves up.

Any market needs buyers and sellers to function

[Manstef]

Yes Jason, that;s the current state of affairs.

But I doubt your assumption that all the orignal miners will "cash in" after $100.

The goal is to continue popularity until the whole supply chain can be traded through BTC. The thing that got me into BTC was speculation but now I have a vested interest in keeping the system going, and the way to do that is to first publicise, then engage.

Bet plenty of original miners WILL sell after further rises for sure, but look at what happened a few days ago with the abrupt price raise and correction. For any large holder willing to sell, there will be new adopters ready to pick up their coins.
I doubt miners who had made a massive gain in fiat terms would trade away all their coins.


The more pressing issue would be to ensure governments don't class BTC trades as fraudulent or a money laundering scheme.
The best way to do this on a personal level is to engage as much as possible in using BTC by accepting it as a trader, or buying stuff. If you can time it correctly with the fluctuations in the value, you can get some really good deals.

[advanced]

I like the reasoning of jason, but there are quite a lot of assumptions in the way! Thank you anyway for bringing it out!

[jasonjm]

my assumption is the vast majority of miners will relentlessly sell at any price until their capital outlay is recovered.

If the BTC price moves down that is even worse because the selling will be much longer as it will take many more bitcoins to recover the fiat outlay.

If this were a stock, I would classify what I am seeing as more than bubble behavior, more like "mania" behavior.

Mining rigs that people don't even have possession of yet selling for 15x what they paid for them!

[zamazama]

I don't think the guys who will be mining at the Terra level will look to sell immediately.

The way I see it regardless of the BTC price their in if for the long run. Remember that not all the orders were place when the BTC price was at $90, also some of the orders could have been placed with mined BTC from previous hardware which was bought on the cheap and those costs could have been fully recovered already.

[seleme]

I can definitely see increased selling... yeah, there are people who'll keep their bitcoins but some people invested lot and they'll want some of it back.

[bezzeb]

Bitcoin to Fiat liquidity isn't the greatest, so getting large amounts turned into money of the land will take a bit of effort or take huge balls.  Either way, the rate of the down curve from any sell-off will have limits.  Then you have plenty of buyers now waiting for a price drop to jump in.

I think it's going to come down to observing what kind of big events we see happening around the world and not the miners....  If public confidence keeps getting rattled, then the usual suspects (gold and silver) get a bump - and now BTC may start to prove itself to be in the same league as a store of value.  Once people start storing, then they start spending.  No other way to start a currency system.

Lastly, the total mining costs (hardware and electricity) are rapidly diminishing as a percentage of total market value.  And that's the big dream right?  All the cost of keeping the giga-hashes flowing will one day get covered by small transaction fees which themselves will only represent some miniscule percentage of the value being traded.  Such a freaking beautiful system from a design perspective, my mind constantly boggles.

[Gator-hex]

I don't see the bitcoin price dropping while Avalon have a monopoly and keep raising prices on their ASIC.

Butterfly labs seem so far away from shipping. See their engineering video http://www.youtube.com/watch?v=4C4bgho5JSI

But yeah if Butterfly ever managed to ship cheap ASICs the price would drop I suspect.

[Fjordbit]

The 24 volume for Mt Gox alone is 121,254.51 btc. At most all miners will average 3600 btc per day. It's not even close to being enough to impact the trade price.

All this assumes that miners aren't selling all of their coins already or assumes some kind of massive change in behavior of the post ASIC group of miners. On one hand, I do expect that the initial miners will not exactly cash out but will instead use profits to buy more mining equipment. This is my plan at least, but I will also hold onto at least 50% of my mining gains.