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Author Topic: Price cannot go less than $40.41  (Read 2500 times)
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Gerald Davis

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April 13, 2013, 08:43:46 PM

Nonsense.  Mining has in the past (and potentially will in the future) operated at negative profitability.  When that happens some miners drop out and the difficulty will adjust.   Bitcoin mining can be profitable at $1,000 per BTC or $1.00 per BTC.   Due to dynamic difficulty it is not like any other industry.

If gold prices fall then marginal miners will become unprofitable, they will stop mining (or scale back) and that WILL REDUCE PRODUCTION.  Lower production = lower available supply = drives prices higher.  As prices rise marginal miners add production.  More production = more available supply = drives prices lower.

With Bitcoin as marginal miners (the least profitable miners) stop mining, difficulty adjusts and the production remains the same.  There is no feedback loop like other industries.

TL/DR price drives difficulty, difficulty never has and never will drive price
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April 13, 2013, 08:46:17 PM

Indeed, it seems OP has fallen to the sunk costs fallacy. If one cannot regain already-lost costs, the best action is to regain as much of it as possible, not to wait whilst the amount that can be regained dwindles.

TL/DR price drives difficulty, difficulty never has and never will drive price

There is actually a minor effect that many fail to notice. An adjustment to a higher difficulty generally decreases miner profits, and with decreased profits comes deflation. This, however, makes very little impact.
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April 13, 2013, 09:02:31 PM

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.

Doesn't this presume that only miners are selling bitcoins? 11 million coins out there. Miners find 3.6 thousand per day - i.e. miners find a minor (pun intended) .032%/day of what already exists. In a month, they still only find a mere ~1% of what already exists. There seem then plenty of bitcoins subject to selling pressure by those not incurring the expenses of mining. So, I'd think that it could drop below $40.41

I will assume forex follows most of the price patterns of stock trading. What did Jesse Livermore - trader extraordinaire - say about how low something can go?

"Remember that stocks are never too high for you to begin buying or too low to begin selling."

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