Wall Observer BTC/USD - Bitcoin price movement tracking & discussion

[adamstgBit]

Meanwhile in canada:

[empowering]

Now imagine a magical land where electricity is funnelled from state-owned factories and rigs are just another hidden operating expense. How much does it cost to mine a bitcoin there?

Imagine a land where they have an excess of children, with abacuses, all mining by hand with their abaci.
 (they have got dab radio to keep them going powered by geothermal of course)

[phoenix1]

What's interesting is days destroyed is basically at zero. All the coins being moved to exchanges to be sold are probably very new. The theory Chinese miners are selling to get their money offshore denominated in USD is pretty interesting.


I will keep coming back to BurtW's post on mining breakeven costs based around energy, which projects a mid October price of $233. If miner's are selling there comes a price point where buying is more cost effective than mining. I could see a bottom around $250.

When calculated in the OP over the time period from March 14, 2013 to March 13, 2014 the average increase in the difficulty and hash rate was 23.92% per adjustment period and the average length of each adjustment period was 11.38 days.

Recalculated over the period June 29, 2013 to June 29, 2014 it was 23.45% and 11.41 days.

Now, recalculating over the period August 24, 2013 to August 31, 2014 it is 21.12% and 11.63 days.

Assuming the network growth rate over the next year is the same as it was this last year we get:

Code:

                                Hash Rate   Power      Energy            Cost        Cost
     Date          Difficulty        TH/s      MW         MWh        $/Period       $/BTC
---------  ------------------  ----------  ------  ----------  --------------  ----------
11-Sep-14      33,220,936,877     237,808     238      66,349      $6,634,853     $131.64
23-Sep-14      40,236,446,759     288,028     288      80,360      $8,035,984     $159.44
04-Oct-14      48,733,473,526     348,853     349      97,330      $9,733,002     $193.12
16-Oct-14      59,024,880,009     422,523     423     117,884     $11,788,392     $233.90
28-Oct-14      71,489,598,585     511,750     512     142,778     $14,277,833     $283.29
08-Nov-14      86,586,583,575     619,820     620     172,930     $17,292,988     $343.11
20-Nov-14     104,871,710,060     750,712     751     209,449     $20,944,876     $415.57
02-Dec-14     127,018,241,359     909,246     909     253,680     $25,367,960     $503.33
13-Dec-14     153,841,618,762   1,101,258   1,101     307,251     $30,725,098     $609.62
25-Dec-14     186,329,486,300   1,333,819   1,334     372,135     $37,213,544     $738.36
05-Jan-15     225,678,056,071   1,615,491   1,615     450,722     $45,072,202     $894.29
17-Jan-15     273,336,153,086   1,956,646   1,957     545,904     $54,590,430   $1,083.14
29-Jan-15     331,058,561,407   2,369,846   2,370     661,187     $66,118,694   $1,311.88
09-Feb-15     400,970,635,767   2,870,303   2,870     800,815     $80,081,465   $1,588.92
21-Feb-15     485,646,557,708   3,476,447   3,476     969,929     $96,992,858   $1,924.46
05-Mar-15     588,204,117,648   4,210,593   4,211   1,174,756    $117,475,554   $2,330.86
16-Mar-15     712,419,512,763   5,099,775   5,100   1,422,837    $142,283,732   $2,823.09
28-Mar-15     862,866,387,600   6,176,732   6,177   1,723,308    $172,330,835   $3,419.26
08-Apr-15   1,045,084,236,901   7,481,119   7,481   2,087,232    $208,723,207   $4,141.33
20-Apr-15   1,265,782,371,309   9,060,961   9,061   2,528,008    $252,800,823   $5,015.89
02-May-15   1,533,086,956,002  10,974,431  10,974   3,061,866    $306,186,635   $6,075.13
13-May-15   1,856,840,218,301  13,291,983  13,292   3,708,463    $370,846,321   $7,358.06
25-May-15   2,248,962,841,151  16,098,949  16,099   4,491,607    $449,160,670   $8,911.92
06-Jun-15   2,723,892,885,897  19,498,682  19,499   5,440,132    $544,013,236  $10,793.91
17-Jun-15   3,299,117,405,623  23,616,363  23,616   6,588,965    $658,896,517  $13,073.34
29-Jun-15   3,995,816,323,188  28,603,604  28,604   7,980,405    $798,040,547  $15,834.14
10-Jul-15   4,839,642,281,734  34,644,038  34,644   9,665,686    $966,568,646  $19,177.95
22-Jul-15   5,861,665,181,962  41,960,074  41,960  11,706,861  $1,170,686,065  $23,227.90
03-Aug-15   7,099,516,184,307  50,821,092  50,821  14,179,085  $1,417,908,463  $28,133.10
14-Aug-15   8,598,773,298,472  61,553,356  61,553  17,173,386  $1,717,338,634  $34,074.18
26-Aug-15  10,414,639,578,109  74,552,032  74,552  20,800,017  $2,080,001,680  $41,269.87
07-Sep-15  12,613,975,712,232  90,295,733  90,296  25,192,510  $2,519,250,952  $49,985.14

In other words something has got to give by the end of the year, or actually before December 1

One problem I have with this is the assumption that big miners are in it for BTC and not fiat. I don't know everyone's motives but I am sure that for some it is an opportunistic business model (ie buy ASIC's, mine, sell, profit). As such what gives is price and it's a race to the bottom in terms of who has the cheapest electricity. Hardware is a sunk cost now, so it makes sense to continue to mine as long as your electicity costs less than than you can sell the BTC for, even if that means just minimising losses (on sunk costs), for all those miners whose goal is not to accumulate BTC.

We hear many times that miners will just hoard or switch off and buy instead. IMO only those that are true believers and not in it for fiat will do so. The rest will get what they can out of their equipment while they can. Many a bad investment decision has been made in the past and will be in the future in many industries. Why this mythical illusion that BTC is so different?

It looks very much like mining bubble to me

EDIT : In conclusion is it not a perfectly reasonable proposition that difficulty could nosedive to match current price as inefficient miners who are in it for fiat simply switch off their hardware at some point and exit the game or wait for their equipment to become profitable again, if ever? The assumption that they will simply buy BTC instead seems deeply flawed. Meanwhile the BTC inflation rate (supply) will remain constant. In the absence of new demand where does price go ?

I agree that the idea that miners 'start buying' is deeply flawed but when mining becomes unprofitable they will stop mining, supply will be reduced and the price will stabilise.  Is this not part of the big "Satoshi Plan" of checks and balances for the functioning of BTC anyway; at the moment we have a confluence of negative factors: too much supply and negative sentiment due to Gox, Neo et al.

When the miners stop the flow of coins the price will find equilibrium and sentiment will return with a stable price.

Simples.

No ... until the next halving, supply is a constant no matter how many miners mine or what the hash rate is. The unprofitable miners will stop mining, maybe, but that has no effect on the BTC inflation/emission rate, which remains a constant until the next halving regardless of how many miners there are. Whatever the hash rate, the same number of BTC will be mined in the same time (excluding small variance between difficulty adjustments). This is a fundamental part of the BTC protocol - the emission rate is a constant until the 'halvings'


Supply is fixed in this equation, re how many BTC are mined. The variables are difficulty and hash rate, but these have no effect on supply, just on profitability of miners.

If every other miner shut down and you and I could mine the (approx) 3600 BTC per day on laptops once the difficulty rapidly adjusted downwards.

Sure, the network would be massively open to a 51% attack, but I am taking it to en extreme to demonstrate what I believe is a poorly understood function of the BTC supply/demand equilibrium

[empowering]

Meanwhile in canada:

Adam... what are you up to? STEP AWAY FROM THE KEYBOARD - 

[BlindMayorBitcorn]

Now imagine a magical land where electricity is funnelled from state-owned factories and rigs are just another hidden operating expense. How much does it cost to mine a bitcoin there?

Imagine a land where they have an excess of children, with abacuses, all mining by hand with their abaci.
 (they have got dab radio to keep them going powered by geothermal of course)

Just saying the way I see it we will have a constant supply of very cheap coins from China for the forseeable future as no price is too low to sell free coins...

[adamstgBit]

Meanwhile in canada:

Adam... what are you up to? STEP AWAY FROM THE KEYBOARD -  

i'm top bid.

2K walls on virtex give me a break.... these walls will move out of the way so fast should stamps run up

[Schickeria]

Are the deposits on circle are holded in BTC or fiat?

[adamstgBit]

Are the deposits on circle are holded in BTC or fiat?

depends what you deposit i guess.

[Schickeria]

Are the deposits on circle are holded in BTC or fiat?

depends what you deposit i guess.

My English is lacking, hm?

Another trial:

I hold BTC or Fiat on a circle Account? You know what I mean? I guess BTC, but want to be sure.

[empowering]

Now imagine a magical land where electricity is funnelled from state-owned factories and rigs are just another hidden operating expense. How much does it cost to mine a bitcoin there?

Imagine a land where they have an excess of children, with abacuses, all mining by hand with their abaci.
 (they have got dab radio to keep them going powered by geothermal of course)

Just saying the way I see it we will have a constant supply of very cheap coins from China for the forseeable future as no price is too low to sell free coins...

I was kidding.

But to be serious, I do not see it personally, easier ways for the state to go about such a thing if they wanted to.  

[phoenix1]

Now imagine a magical land where electricity is funnelled from state-owned factories and rigs are just another hidden operating expense. How much does it cost to mine a bitcoin there?

Imagine a land where they have an excess of children, with abacuses, all mining by hand with their abaci.
 (they have got dab radio to keep them going powered by geothermal of course)

Just saying the way I see it we will have a constant supply of very cheap coins from China for the forseeable future as no price is too low to sell free coins...

It has been suggested that this is indeed happening in China (I guess it could happen anywhere...). Heck, you work in the IT dept of a state owned industry and plug a few miners into their power supply. Chances of getting caught must be close to zero - just another black box with a fan. You could probably bill them for the mining equipment too  

[BlindMayorBitcorn]

Now imagine a magical land where electricity is funnelled from state-owned factories and rigs are just another hidden operating expense. How much does it cost to mine a bitcoin there?

Imagine a land where they have an excess of children, with abacuses, all mining by hand with their abaci.
 (they have got dab radio to keep them going powered by geothermal of course)

Just saying the way I see it we will have a constant supply of very cheap coins from China for the forseeable future as no price is too low to sell free coins...

It has been suggested that this is indeed happening in China (I guess it could happen anywhere...). Heck, you work in the IT dept of a state owned industry and plug a few miners into their power supply. Chances of getting caught must be close to zero - just another black box with a fan. You could probably bill them for the mining equipment too  

At this point I really can't see any other explanation

[adamstgBit]

Are the deposits on circle are holded in BTC or fiat?

depends what you deposit i guess.

My English is lacking, hm?

Another trial:

I hold BTC or Fiat on a circle Account? You know what I mean? I guess BTC, but want to be sure.

it is my understanding that circle accounts can hold BTC or Fiat(of any color), and you are free to switch back and forth at anytime, I'm guessing they won't let you do bitcoin trading with this account... its probably part of their policy that it the service should not be used to day trade bitcoin.

[phoenix1]

Now imagine a magical land where electricity is funnelled from state-owned factories and rigs are just another hidden operating expense. How much does it cost to mine a bitcoin there?

Imagine a land where they have an excess of children, with abacuses, all mining by hand with their abaci.
 (they have got dab radio to keep them going powered by geothermal of course)

Just saying the way I see it we will have a constant supply of very cheap coins from China for the forseeable future as no price is too low to sell free coins...

It has been suggested that this is indeed happening in China (I guess it could happen anywhere...). Heck, you work in the IT dept of a state owned industry and plug a few miners into their power supply. Chances of getting caught must be close to zero - just another black box with a fan. You could probably bill them for the mining equipment too  

At this point I really can't see any other explanation

This is absolutely happening IMO, the only question is what % of BTC are being mined this way and hence if it has any significance.
I have no idea, but I would place a large bet that it is happening to some degree. It's human nature.

[empowering]

Now imagine a magical land where electricity is funnelled from state-owned factories and rigs are just another hidden operating expense. How much does it cost to mine a bitcoin there?

Imagine a land where they have an excess of children, with abacuses, all mining by hand with their abaci.
 (they have got dab radio to keep them going powered by geothermal of course)

Just saying the way I see it we will have a constant supply of very cheap coins from China for the forseeable future as no price is too low to sell free coins...

It has been suggested that this is indeed happening in China (I guess it could happen anywhere...). Heck, you work in the IT dept of a state owned industry and plug a few miners into their power supply. Chances of getting caught must be close to zero - just another black box with a fan. You could probably bill them for the mining equipment too  

At this point I really can't see any other explanation

sorry... did I misunderstand... you mean covert non state funded, but using the states resources, in China? as opposed to the state doing it themselves?

Interesting thought, though they would have to be pretty sure of not getting caught... it is not uncommon to for people to disappear and never be seen again in China, but if you are talking more on a triad level.. then I guess it is a potential.

[phoenix1]

Now imagine a magical land where electricity is funnelled from state-owned factories and rigs are just another hidden operating expense. How much does it cost to mine a bitcoin there?

Imagine a land where they have an excess of children, with abacuses, all mining by hand with their abaci.
 (they have got dab radio to keep them going powered by geothermal of course)

Just saying the way I see it we will have a constant supply of very cheap coins from China for the forseeable future as no price is too low to sell free coins...

It has been suggested that this is indeed happening in China (I guess it could happen anywhere...). Heck, you work in the IT dept of a state owned industry and plug a few miners into their power supply. Chances of getting caught must be close to zero - just another black box with a fan. You could probably bill them for the mining equipment too  

At this point I really can't see any other explanation

sorry... did I misunderstand... you mean covert non state funded, but using the states resources, in China? as opposed to the state doing it themselves?

Interesting thought, though they would have to be pretty sure of not getting caught... it is not uncommon to for people to disappear and never be seen again in China, but if you are talking more on a triad level.. then I guess it is a potential.

Ever charged your mobile phone at work ??
Ever met anyone in front office who has a clue about IT infrastructure? There are a few , but not many ...
Very easy to do IMO. No need for Triads, but that adds another sinister dimension so lets roll with it - Triad Manipulators  

Actually, it could be anyone at any company, does not need to be state owned, or in China ...

[BlindMayorBitcorn]

Now imagine a magical land where electricity is funnelled from state-owned factories and rigs are just another hidden operating expense. How much does it cost to mine a bitcoin there?

Imagine a land where they have an excess of children, with abacuses, all mining by hand with their abaci.
 (they have got dab radio to keep them going powered by geothermal of course)

Just saying the way I see it we will have a constant supply of very cheap coins from China for the forseeable future as no price is too low to sell free coins...

It has been suggested that this is indeed happening in China (I guess it could happen anywhere...). Heck, you work in the IT dept of a state owned industry and plug a few miners into their power supply. Chances of getting caught must be close to zero - just another black box with a fan. You could probably bill them for the mining equipment too  

At this point I really can't see any other explanation

sorry... did I misunderstand... you mean covert non state funded, but using the states resources, in China? as opposed to the state doing it themselves?

Interesting thought, though they would have to be pretty sure of not getting caught... it is not uncommon to for people to disappear and never be seen again in China, but if you are talking more on a triad level.. then I guess it is a potential.

I wasn't being entirely clear. But that's what I meant. There are a lot of corrupt types willing to look the other way for a slice of the pie I guess

[phoenix1]

Rule of thumb  - if there is money to be made, someone is doing it ...

[nanobrain]

What's interesting is days destroyed is basically at zero. All the coins being moved to exchanges to be sold are probably very new. The theory Chinese miners are selling to get their money offshore denominated in USD is pretty interesting.


I will keep coming back to BurtW's post on mining breakeven costs based around energy, which projects a mid October price of $233. If miner's are selling there comes a price point where buying is more cost effective than mining. I could see a bottom around $250.

When calculated in the OP over the time period from March 14, 2013 to March 13, 2014 the average increase in the difficulty and hash rate was 23.92% per adjustment period and the average length of each adjustment period was 11.38 days.

Recalculated over the period June 29, 2013 to June 29, 2014 it was 23.45% and 11.41 days.

Now, recalculating over the period August 24, 2013 to August 31, 2014 it is 21.12% and 11.63 days.

Assuming the network growth rate over the next year is the same as it was this last year we get:

Code:

                                Hash Rate   Power      Energy            Cost        Cost
     Date          Difficulty        TH/s      MW         MWh        $/Period       $/BTC
---------  ------------------  ----------  ------  ----------  --------------  ----------
11-Sep-14      33,220,936,877     237,808     238      66,349      $6,634,853     $131.64
23-Sep-14      40,236,446,759     288,028     288      80,360      $8,035,984     $159.44
04-Oct-14      48,733,473,526     348,853     349      97,330      $9,733,002     $193.12
16-Oct-14      59,024,880,009     422,523     423     117,884     $11,788,392     $233.90
28-Oct-14      71,489,598,585     511,750     512     142,778     $14,277,833     $283.29
08-Nov-14      86,586,583,575     619,820     620     172,930     $17,292,988     $343.11
20-Nov-14     104,871,710,060     750,712     751     209,449     $20,944,876     $415.57
02-Dec-14     127,018,241,359     909,246     909     253,680     $25,367,960     $503.33
13-Dec-14     153,841,618,762   1,101,258   1,101     307,251     $30,725,098     $609.62
25-Dec-14     186,329,486,300   1,333,819   1,334     372,135     $37,213,544     $738.36
05-Jan-15     225,678,056,071   1,615,491   1,615     450,722     $45,072,202     $894.29
17-Jan-15     273,336,153,086   1,956,646   1,957     545,904     $54,590,430   $1,083.14
29-Jan-15     331,058,561,407   2,369,846   2,370     661,187     $66,118,694   $1,311.88
09-Feb-15     400,970,635,767   2,870,303   2,870     800,815     $80,081,465   $1,588.92
21-Feb-15     485,646,557,708   3,476,447   3,476     969,929     $96,992,858   $1,924.46
05-Mar-15     588,204,117,648   4,210,593   4,211   1,174,756    $117,475,554   $2,330.86
16-Mar-15     712,419,512,763   5,099,775   5,100   1,422,837    $142,283,732   $2,823.09
28-Mar-15     862,866,387,600   6,176,732   6,177   1,723,308    $172,330,835   $3,419.26
08-Apr-15   1,045,084,236,901   7,481,119   7,481   2,087,232    $208,723,207   $4,141.33
20-Apr-15   1,265,782,371,309   9,060,961   9,061   2,528,008    $252,800,823   $5,015.89
02-May-15   1,533,086,956,002  10,974,431  10,974   3,061,866    $306,186,635   $6,075.13
13-May-15   1,856,840,218,301  13,291,983  13,292   3,708,463    $370,846,321   $7,358.06
25-May-15   2,248,962,841,151  16,098,949  16,099   4,491,607    $449,160,670   $8,911.92
06-Jun-15   2,723,892,885,897  19,498,682  19,499   5,440,132    $544,013,236  $10,793.91
17-Jun-15   3,299,117,405,623  23,616,363  23,616   6,588,965    $658,896,517  $13,073.34
29-Jun-15   3,995,816,323,188  28,603,604  28,604   7,980,405    $798,040,547  $15,834.14
10-Jul-15   4,839,642,281,734  34,644,038  34,644   9,665,686    $966,568,646  $19,177.95
22-Jul-15   5,861,665,181,962  41,960,074  41,960  11,706,861  $1,170,686,065  $23,227.90
03-Aug-15   7,099,516,184,307  50,821,092  50,821  14,179,085  $1,417,908,463  $28,133.10
14-Aug-15   8,598,773,298,472  61,553,356  61,553  17,173,386  $1,717,338,634  $34,074.18
26-Aug-15  10,414,639,578,109  74,552,032  74,552  20,800,017  $2,080,001,680  $41,269.87
07-Sep-15  12,613,975,712,232  90,295,733  90,296  25,192,510  $2,519,250,952  $49,985.14

In other words something has got to give by the end of the year, or actually before December 1

One problem I have with this is the assumption that big miners are in it for BTC and not fiat. I don't know everyone's motives but I am sure that for some it is an opportunistic business model (ie buy ASIC's, mine, sell, profit). As such what gives is price and it's a race to the bottom in terms of who has the cheapest electricity. Hardware is a sunk cost now, so it makes sense to continue to mine as long as your electicity costs less than than you can sell the BTC for, even if that means just minimising losses (on sunk costs), for all those miners whose goal is not to accumulate BTC.

We hear many times that miners will just hoard or switch off and buy instead. IMO only those that are true believers and not in it for fiat will do so. The rest will get what they can out of their equipment while they can. Many a bad investment decision has been made in the past and will be in the future in many industries. Why this mythical illusion that BTC is so different?

It looks very much like mining bubble to me

EDIT : In conclusion is it not a perfectly reasonable proposition that difficulty could nosedive to match current price as inefficient miners who are in it for fiat simply switch off their hardware at some point and exit the game or wait for their equipment to become profitable again, if ever? The assumption that they will simply buy BTC instead seems deeply flawed. Meanwhile the BTC inflation rate (supply) will remain constant. In the absence of new demand where does price go ?

I agree that the idea that miners 'start buying' is deeply flawed but when mining becomes unprofitable they will stop mining, supply will be reduced and the price will stabilise.  Is this not part of the big "Satoshi Plan" of checks and balances for the functioning of BTC anyway; at the moment we have a confluence of negative factors: too much supply and negative sentiment due to Gox, Neo et al.

When the miners stop the flow of coins the price will find equilibrium and sentiment will return with a stable price.

Simples.

No ... until the next halving, supply is a constant no matter how many miners mine or what the hash rate is. The unprofitable miners will stop mining, maybe, but that has no effect on the BTC inflation/emission rate, which remains a constant until the next halving regardless of how many miners there are. Whatever the hash rate, the same number of BTC will be mined in the same time (excluding small variance between difficulty adjustments). This is a fundamental part of the BTC protocol - the emission rate is a constant until the 'halvings'


Supply is fixed in this equation, re how many BTC are mined. The variables are difficulty and hash rate, but these have no effect on supply, just on profitability of miners.

If every other miner shut down and you and I could mine the (approx) 3600 BTC per day on laptops once the difficulty rapidly adjusted downwards.

Sure, the network would be massively open to a 51% attack, but I am taking it to en extreme to demonstrate what I believe is a poorly understood function of the BTC supply/demand equilibrium

We'd better get the entire 21M of the buggers mined then and get things simplified then.

[spiderbrain]

Mooo!