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Author Topic: Why $17??  (Read 12352 times)
ElectricMonk
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June 30, 2011, 01:04:58 PM
 #21

Seems like $17 dollars might be the price in kWh to produce a Bitcoin under current conditions?

Not even close.

If current conditions were stable ( they are not, but we are talking about the current conditions) then a miner could expect a 500% ROI on reasonably cost efficient rigs, and not particularly cheap electricity.

The value of bitcoins is currently higher than their cost of production, and if nothing changed in the market it would stay that way for a decade, at which point the block reward would have dwindled to near the price in kWh.

That's good. I'll expect the Bitcoin price to increase 6 fold before stabilising then.

Excellent news!

Show me how you got your 500% and I'll send you some cash and you can keep half of the ROI. Scrap that. I'll just buy more coin.
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June 30, 2011, 01:24:24 PM
 #22

Why has the price been hanging around $17 for so long? Is there some market fundamentals I'm missing? Is 17 some significant occult number? is Mister Seventeen toying with us?

Let me consult my magic 17 Ball (1+7=8)

"Looks cloudy - Try again later"
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June 30, 2011, 01:26:35 PM
 #23

A typical electricity cost now is $1.50 per BTC. This doesn't account for equipment depreciation or time invested, just electricity. Of course, it varies according to your rate and this is based on 0.10 US$/kWH.

We're sitting at $17 because some holders of BTC have arbitrarily decided they won't sell less than that.

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June 30, 2011, 01:29:01 PM
 #24

There is almost zero spread on Mt Gox because certain active traders were granted zero commissions for 30 days following the security problem.  Without commissions to compensate for, bid and ask prices sometimes agree to four significant digits! This situation represents an "ideal" market.

I thought this might be the case too, but the numbers don't really back it.  20k is a low volume.  If all the trades were buy at 16.75 and sell at 17.0 then there is only 5,000 USD in value flopping around at the extreme.  Of course most trades are closer to the market price and not everyone is trading to make a few pennies on the zero commission.  I've personally been doing a couple hundred trades each day(sell, then buy back) not caring if I win or lose a dollar or 10 but trying to see what changes happen near the boundary.  Without any great data all I can say is that nothing happens.  I would guess that a few others are also essentially buying and selling to themselves too just for shits and giggles and if that is true then the true volume is even lower than 20k. Maybe someone is trying to game it, but the main reason it's so stagnant is that nobody else is doing anything.  
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June 30, 2011, 01:29:54 PM
 #25

A typical electricity cost now is $1.50 per BTC. This doesn't account for equipment depreciation or time invested, just electricity. Of course, it varies according to your rate and this is based on 0.10 US$/kWH.

We're sitting at $17 because some holders of BTC have arbitrarily decided they won't sell less than that.


Couldn't the same be said for the people arbitrarily deciding they will not pay more than 17 for a BTC?
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June 30, 2011, 01:36:48 PM
 #26

coins are going for $20-30 on ebay.

Of course I can't say how many people are buying them using stolen ebay/paypal information which is very likely unfortunately.
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June 30, 2011, 02:24:02 PM
 #27

BECAUSE.  Cool
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June 30, 2011, 02:43:00 PM
 #28


Let me consult my magic 17 Ball (1+7=8)

"Looks cloudy - Try again later"

Yea thats just a storm-front passing...outlook forecast is fine and sunny Smiley

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grid
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June 30, 2011, 02:44:32 PM
 #29

A typical electricity cost now is $1.50 per BTC.

That sounds like an old figure.

At the current difficulty of 1,379,223 you need roughly 1,370 MHash/s to generate 1 BTC per day.
The efficiency of most GPU miners hovers at a bit under 1.3MHash/J which means you need to have just the GPUs consuming at least 1kW of electricity to get that MHash rate.
1kW over 24 hours = 24kWh
24kWH*0.10$=2.4$/BTC
This is a very conservative estimate as real world mining rig efficiencies as measured at the socket are even lower. But still your point is valid and the mining price is way lower than $17.

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June 30, 2011, 02:53:15 PM
 #30

coins are going for $20-30 on ebay.

Of course I can't say how many people are buying them using stolen ebay/paypal information which is very likely unfortunately.

that's because more people have ebay accounts than mtgox accounts...

look the problem is adoption...  at most there are what... 100,000 of us.. total (as it stands now).

If the adoption rate increases than the prices increase....   the problem is 99.9999% of the population don't know what a bitcoin is..  and the .00001% of the population that does is hording them....  in other words it's changing hands ONLY within that 100,000 people....   you need to widen the market to get this to work.. it needs to reach 100,000,000 people....   

You're trying to go international with a population of Allentown, PA.

you need easier to use clients,  mobile access, central wallets,  debit cards that work with it,  you need to adopt this currency to a quasi tangible one...  merchants need to be able to log bitcoins in their quickbooks as a cash deposit...  the IRS wants to tax them the same way they tax dollar transfers... 

I think your getting the point...  the problem is out of the 100,000 people using them.. only hundred or two of them are actually building tools to make it more used.

this will take years to develop ....




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June 30, 2011, 03:05:45 PM
 #31

A typical electricity cost now is $1.50 per BTC.

That sounds like an old figure.

At the current difficulty of 1,379,223 you need roughly 1,370 MHash/s to generate 1 BTC per day.
The efficiency of most GPU miners hovers at a bit under 1.3MHash/J which means you need to have just the GPUs consuming at least 1kW of electricity to get that MHash rate.
1kW over 24 hours = 24kWh
24kWH*0.10$=2.4$/BTC
This is a very conservative estimate as real world mining rig efficiencies as measured at the socket are even lower. But still your point is valid and the mining price is way lower than $17.
I just checked and I'm actually using the same figure, 1370.
So it must just be a bit different power usage in equipment.
I was using 3x5770s 600MHs @ 375W total, 0.625x24x0.10=1.5

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June 30, 2011, 03:11:33 PM
 #32

this will take years to develop ....

mp3 players had been around for ages and no one was buying them.. then apple came along and changed everything overnight.

Seriously, it's only going to take an easy to use smartphone app to go viral to send bitcoin skywards. As long as it checks the market, uses a barcode scanner, has a secure wallet, and is fast, we will have a useful ninja currency.

this could do it for bitcoin, and it could do it overnight
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June 30, 2011, 03:27:18 PM
 #33

Quote
You're trying to go international with a population of Allentown, PA.
Bitcoin is already international  Cheesyi live west of bali
The problem is the population.

Quote
this will take years to develop ....
Agree... but hoping togo exponentially soon

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qualia8
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June 30, 2011, 03:28:08 PM
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look the problem is adoption...  at most there are what... 100,000 of us.. total (as it stands now).

If the adoption rate increases than the prices increase....   the problem is 99.9999% of the population don't know what a bitcoin is..  and the .00001% of the population that does is hording them....  in other words it's changing hands ONLY within that 100,000 people....   you need to widen the market to get this to work.. it needs to reach 100,000,000 people....   

You're trying to go international with a population of Allentown, PA.

you need easier to use clients,  mobile access, central wallets,  debit cards that work with it,  you need to adopt this currency to a quasi tangible one...  merchants need to be able to log bitcoins in their quickbooks as a cash deposit...  the IRS wants to tax them the same way they tax dollar transfers... 

I think your getting the point...  the problem is out of the 100,000 people using them.. only hundred or two of them are actually building tools to make it more used.

this will take years to develop ....


Good stuff.  My own guess about recent price stability is that some early adopter(s) decided not only to sell above 17, but to buy below it, thus stabilizing the price.  If so, it's a personal sacrifice for them, but a boon to the bitcoin economy, which will lose the speculators, but gain merchants.  Ultimately, this is good for the speculators too, but it will be awhile before they can cash out.
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June 30, 2011, 03:39:38 PM
 #35

with recent events of hacking and bitcoin trojans im not surprised its stable at 17 and also the diffculty will rise again making it hardder to earn any coins. I have 2 6990s and only make 1 coin a day and sometimes just .88 so hopefully mtgox will be back on their feet and we will be getting $30+ per coin.

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ElectricMonk
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June 30, 2011, 03:42:42 PM
 #36

OK. Let's assume that it costs $1.50 - $2.50 in electricity/equipment to make a bitcoin.

Why don't I give up work and start mining tomorrow?

There's labour costs / opportunity costs.
There's the accumulation of knowledge.
Lack of hardware supply? (supply drops, price is higher)

There's more cost than just the electricity at the moment but eventually the electricity costs will be the main factor. I don't think people are factoring in the really big costs - the opportunity cost being the greatest.

Seems possible that $17 might be close to the cost of producing a bitcoin given the current conditions (opportunity costs, hardware availability, knowledge acquisition, electricity) and perhaps that's why it has stabilised.

My comment regarding kWh per BTC was misleading.

See this post for a similar discussion regarind mining cost / price correlation...
http://forum.bitcoin.org/index.php?topic=23360.60
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June 30, 2011, 03:50:52 PM
 #37

coins are going for $20-30 on ebay.

Of course I can't say how many people are buying them using stolen ebay/paypal information which is very likely unfortunately.

coins are more expensive on Ebay because there is a "risk premium". If you sell on Mt. Gox, you can be sure you are not cheated by the buyer (ie. no chargebacks.) You do not have that protection on Ebay, so sellers demand a higher price for their increased risk.
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June 30, 2011, 03:54:35 PM
 #38

People were freaking out when the price was jumping around and the market was very volatile, now people are freaking out that the price is too stable...

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June 30, 2011, 04:05:22 PM
 #39

Because we will see $14 or less soon.

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June 30, 2011, 05:24:48 PM
 #40

The reason is simple:

http://www.google.com/trends?q=bitcoin&ctab=0&geo=all&date=ytd&sort=0

We've temporarily leveled off on google trends. Our search engine trend has been _highly_ correlated with the price of bitcoin. See my post here from a few weeks ago.

http://forum.bitcoin.org/index.php?topic=17318.0

I think this lull is temporary, and as soon as interest picks up in new, more mainstream sectors, the price will start rising again. Just keep checking the google trend line, when it goes up, you've got about a day or two before prices start rising (google trends is delayed three or four days, which is about the time someone needs to get money in).

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