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Author Topic: Price cannot go less than $40.41  (Read 2471 times)
Elwar
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April 13, 2013, 06:16:21 AM
 #1

Current mining:
Difficulty: 7,672,999

62,172.58 GH/s

969.89 megawatt hours

$145,483.85 / day

3600 bitcoins created / day

$145,483 / 3600 = $40.41

If you want fundamentals. You cannot charge less for a product than it takes to produce.

But for every product you buy you have to consider:

cost of production + cost of distribution + cost of retail + cost of marketing  at the very least.

Price rarely dips below difficulty for this reason.


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flyhouse
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April 13, 2013, 06:23:41 AM
 #2

Don't forget that if prices fall below that, mining resources will be taken offline, hence the difficulty will drop.

That's the amazing thing about BTC- it's a self-regulating system in its design!
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April 13, 2013, 06:24:48 AM
 #3

you are wrong, because most of bitcoins that exists today were mined very cheaply. more likely difficulty will drop after price fall.
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April 13, 2013, 06:31:20 AM
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Difficulty rarely dips below price for this reason.


WHat?
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this statement is false


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April 13, 2013, 06:32:50 AM
 #5

this has been discussed many times before. price and difficulty are decoupled, but modulate each other. if the price drops below the difficulty due to decreased confidence, it will cause the least efficient rigs to suffer losses. theoretically, these rigs leave the network and the difficulty adjusts with the price. similarly, as demand for btc increases, rigs become more profitable, pushing the difficulty up with the price.

this sentence has fifteen words, seventy-four letters, four commas, one hyphen, and a period.
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Crypt_Current
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April 13, 2013, 06:38:00 AM
 #6

this has been discussed many times before. price and difficulty are decoupled, but modulate each other. if the price drops below the difficulty due to decreased confidence, it will cause the least efficient rigs to suffer losses. theoretically, these rigs leave the network and the difficulty adjusts with the price. similarly, as demand for btc increases, rigs become more profitable, pushing the difficulty up with the price.

my rigs are generally very inefficiently run and extremely small compared to competition, yet I continue them running as much as humanly possible, even to the detriment of the quality of my life.
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manfred
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April 13, 2013, 08:08:34 AM
 #7

@ Elwar
There are people paying far less per kilowatt hour for the electric. They still make a profit selling a bitcoin for $ 20
The real power is with who controls energie. It does not matter what u produce (salat, steel, bitcoins...) if u produce for a lower cost you have an advantage.
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April 13, 2013, 08:29:50 AM
 #8

It only means that if the price gets under 40 then people will switch off mining rigs.  If that happens too quickly - then the algorithm will not adjust and the confirmation time can grow threatening the whole bitcoin network.  This can have a feedback spiral - but I don't see that very probable.
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April 13, 2013, 09:45:19 AM
 #9

No they wont switch off. You dont spent x amount on a rig and Imagen the price of bitcoin rises to the stratosphere and then just turn it off because it t falls temporary below operating cost. the last staple price was $13 everyone was happy then. In the long run the price will settle somewhere around  cost of production + cost of distribution + cost of retail + cost of marketing everything else is just speculation. Yes i know supply and demand. Well, there is unlimited supply of crypto currencies the limited number of bitcoins are as with meaningless. I hear it is so hard to get traction. In the long run traction is not a factor. Not every snowball gets enough traction to start an avalanche, but look at the devastation it leaves behind if it gets going.
Be wise only spent what i easy can afford.
Have to go plane to catch.
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April 13, 2013, 09:45:56 AM
 #10

If you want fundamentals. You cannot charge less for a product than it takes to produce.

Thats correct, you do not generally create a business based on selling below cost, but you still need to find someone to buy it at that price.

There's plenty of businesses that have gone bust over the years because customers would not buy their products at the price they needed to sell them at based on cost.

Also, not that I'm suggesting it likely, but if the code was ever cracked then Bitcoins would become worthless and the cost of electricity or other factors would be meaningless.

We are beyond the point where mining is the major driver of price.
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April 13, 2013, 09:56:26 AM
 #11

Given the fundamentals then, the price should be only a little higher than 41, somewhere in the 50's. $114 is a little high if I can mine myself for a long term average of $41 per coin.

Do as thou wilt shall be the whole of the law.
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April 13, 2013, 11:23:29 AM
 #12

No they wont switch off. You dont spent x amount on a rig and Imagen the price of bitcoin rises to the stratosphere and then just turn it off because it t falls temporary below operating cost.
If they were rational then they would switch off the rigs - If they still wanted bitcoins - then buying them would be cheaper then running the rigs.

But yeah - maybe rationality is not a good assumption here.
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April 13, 2013, 11:32:07 AM
 #13

I've got a sizable mining farm, and I'm mining at a loss (albeit slight) under the criminal Australian power prices and as-of-this-second BTC price.

Why? Because I've dumped all the capital I'm willing to into buying/trading them, and I'm looking forward to sky-high prices and awesome trading opportunities in the months and years to come. I can't be bothered forwarding every paycheck into my Gox account every week, so this is a good second choice. Plus, it's fun to maintain and the house is never cold. Grin

Bottom line, I'm getting them any way I can. Smiley
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April 13, 2013, 11:35:19 AM
 #14

That argument is nonsense. Hash power follow price, NOT the inverse!

How much do you spend to make something means nothing, if no one want to pay for that price then what do you do?
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April 13, 2013, 01:27:31 PM
 #15

No they wont switch off. You dont spent x amount on a rig and Imagen the price of bitcoin rises to the stratosphere and then just turn it off because it t falls temporary below operating cost.
If they were rational then they would switch off the rigs - If they still wanted bitcoins - then buying them would be cheaper then running the rigs.

But yeah - maybe rationality is not a good assumption here.


The problem with this is if you invest a few thousand USD into a mining rig it's very difficult to really turn it off as the hardware inside would be worthless after a few months.

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BitcoinAshley
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April 13, 2013, 01:38:25 PM
 #16

Given the fundamentals then, the price should be only a little higher than 41, somewhere in the 50's. $114 is a little high if I can mine myself for a long term average of $41 per coin.


What you said is true if you're someone who has no idea what he/she is talking about and you assume that the only fundamental to be taken into consideration regarding Bitcoin's price is the hashing power, which is absolutely 100% a false assumption.

The most important factor is - how many people want bitcoin compared to how many people want to get rid of it. And a lot of people want bitcoin.

mestar
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April 13, 2013, 02:01:16 PM
 #17

If you want fundamentals. You cannot charge less for a product than it takes to produce.

Sure you can.   

Let me just copy paste from another thread
https://bitcointalk.org/index.php?topic=173699.msg1814860#msg1814860


While the "endowment effect" is certainly real, it is not a law.  You might not want to sell below costs, but others will, and the price can go down.   Especially in markets where you have many producers (and bitcoin mining is a perfect example of that), and their costs are different.   What might be your cost of production, might be twice expensive as others can produce them, and they will certainly sell bellow your costs.

It might also work if you are a monopolist, and you have the power not to sell below costs.  And again, this is definitely not the case in the bitcoin mining market.

So, yes, bitcoin can go to $0.50, no problem.

sgbett
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April 13, 2013, 05:00:05 PM
 #18

No they wont switch off. You dont spent x amount on a rig and Imagen the price of bitcoin rises to the stratosphere and then just turn it off because it t falls temporary below operating cost. the last staple price was $13 everyone was happy then. In the long run the price will settle somewhere around  cost of production + cost of distribution + cost of retail + cost of marketing everything else is just speculation. Yes i know supply and demand. Well, there is unlimited supply of crypto currencies the limited number of bitcoins are as with meaningless. I hear it is so hard to get traction. In the long run traction is not a factor. Not every snowball gets enough traction to start an avalanche, but look at the devastation it leaves behind if it gets going.
Be wise only spent what i easy can afford.
Have to go plane to catch.

Agreed. In the first instance I would stop selling and accumulate. even if its a 50/50 split supply will be reduced, price gotta go up.

I don't think either follows the other, i think its a much more complex feedback loop. With further chaos introduced by speculators.

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April 13, 2013, 08:37:25 PM
 #19

Following words (written in bold) will become vital for future BTC/USD rates:

1. Deflation of hardware (ASICs, etc.) prices,
2. Innovation of new hardware (something more powerful than current ASICs) and/or energy innovation for GPUs,
3. Manipulation (made by fiat creators).

My prediction of this year BTC/USD rates: I'm expecting a range-bound market (low channel: $40 upchannel: $260) this year. In the long run, I'm very bullish.

US options trader and ancap
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April 13, 2013, 08:39:53 PM
 #20

The labor theory of value is incorrect. If I hire A-list celebrities to use diamond-encrusted crayons to scribble on paper all day, it doesn't make the scribble worth the input.

My attempt at adding to the bitcoin-using marketplace: https://bitcointalk.org/index.php?topic=171843.0
Like online video games? Check it out! I'm selling at a big discount
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