Why I believe the price is going to $10-$12

[michaelmclees]

Over the next 90 days, I predict difficulty changes to happen on average every 10 days, with 40% increases.  If you mined with 1Ghash, starting at the current rate and mining through the difficulty changes for the next 90 days, you can expect about 38 coins.

Now, in order to start mining at 1Ghash, one needs to spend about $1000.  After about 90 days, one might expect 75% of that if he sold the equipment on the open market.

Assume after 90 days, a modest 20% profit becomes the norm.  So you spend $1000, and after 90 days, you need to get $1200 after selling your equipment for $750.  This means you need to have made $450 in BTC.  450/38?  ...  $11.84 per coin.

Run the same formula for 30% difficulty changes on average and you get between $9 and $10 per coin.

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[Rassah]

Since miners only produce about 7,200BTC a day, do they really have any power to demand higher or lower prices on a market with volumes of 40,000 to 100,000BTC a day?

[bcpokey]

Over the next 90 days, I predict difficulty changes to happen on average every 10 days, with 40% increases.  If you mined with 1Ghash, starting at the current rate and mining through the difficulty changes for the next 90 days, you can expect about 38 coins.

Now, in order to start mining at 1Ghash, one needs to spend about $1000.  After about 90 days, one might expect 75% of that if he sold the equipment on the open market.

Assume after 90 days, a modest 20% profit becomes the norm.  So you spend $1000, and after 90 days, you need to get $1200 after selling your equipment for $750.  This means you need to have made $450 in BTC.  450/38?  ...  $11.84 per coin.

Run the same formula for 30% difficulty changes on average and you get between $9 and $10 per coin.

Someone should make a faq about the fallacy of miners and bitcoin prices. It's like the square and rectangle concept, all rectangles are squares but not all squares are rectangles.

To whit: All mining is related to bitcoin price, but bitcoin price is not related to mining.

Also: Why would anyone be mining @ 90Days in your scenario? You would be earning .755 BTC / 10 days with 1GHash/sec. At 11.84/Coin that is $8.94. Assuming 1GHash takes about 650Watts that's $17.16 in electricity costs @ $0.11 / kWh or a net loss of almost $10.

[VPoro]

Since miners only produce about 7,200BTC a day, do they really have any power to demand higher or lower prices on a market with volumes of 40,000 to 100,000BTC a day?

The market volume is not the right figure to look at here, because it includes short trading. If I had to make a guess, most of the daily volume is generated by people pumping in some money into the economy by doing short trading). Let's assume there's 100 people on Mt. Gox with 1000 USD on their account doing speculative short trading. Let's also assume each one of them uses all of their USD for the short trading. That's ~66 BTC per trade. Now, person A buys 66 BTC from person B, person B buys 66 BTC from person C and person C buys 66 BTC from person A. We have now a 66*3 = 198 BTC trade volume, but there's no actual USD added to the economy.

What I assume, is that some of the miners are selling their BTC, and that's where the extra USD comes in the economy. Otherwise, it's mostly speculating and short trading, hence the large volumes; the same USD are circulating and the speculators are playing a zero sum game with the exchange rate (Or actually, a minus-sum game, since the only one who wins for sure in that game is Mg. Gox...)

[Vandroiy]

Someone should make a faq about the fallacy of miners and bitcoin prices. It's like the square and rectangle concept, all rectangles are squares but not all squares are rectangles.

Someone should make a faq about the basic concept of logic.

No offense, but I'm amazed at how we need an faq entry for that kind of thing. This forum is called "Economics" for a reason, or not? Just over a month ago, I was actually using my mind when discussing on this forum; now it is filled with posters that don't know what an argument is! There just exists no reasonable response to most of the posts. What in the world happened?

Sorry for ranting. I'm just gonna do something else now 'n cool down.

[bcpokey]

Someone should make a faq about the fallacy of miners and bitcoin prices. It's like the square and rectangle concept, all rectangles are squares but not all squares are rectangles.

Someone should make a faq about the basic concept of logic.

No offense, but I'm amazed at how we need an faq entry for that kind of thing. This forum is called "Economics" for a reason, or not? Just over a month ago, I was actually using my mind when discussing on this forum; now it is filled with posters that don't know what an argument is! There just exists no reasonable response to most of the posts. What in the world happened?

Sorry for ranting. I'm just gonna do something else now 'n cool down.

Not to be a jerk, but you seem like you must be new to the concept of large groups of people. The world is made of a pretty standard gaussian distribution. In specialized small communities you can get around this, but as with anything that becomes popularized you begin to see the more standard distribution arise again. And unfortunately that big bulk in the middle tends to be people who aren't interested in logic.

[Vandroiy]

Not to be a jerk, but you seem like you must be new to the concept of large groups of people. The world is made of a pretty standard gaussian distribution. In specialized small communities you can get around this, but as with anything that becomes popularized you begin to see the more standard distribution arise again. And unfortunately that big bulk in the middle tends to be people who aren't interested in logic.

No offense taken. You're probably right and I shouldn't rant about it. But it would help if people at least knew what they know and when they're starting to go overboard. On here, everybody claims to be able to model everything right now, and it's all a flood of nonsense. All the decent discussions are being drowned in that. I guess that just started to frustrate me.

[done]

If the price remains around here over the next 90 days I will have added a great deal of bitcoins to my collection