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Author Topic: What do you think will happen to the price when the blocks drop to 25 coins each  (Read 3132 times)
joulesbeef
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July 21, 2011, 09:40:59 PM
 #1

So much short term speculation.

Right now we product about 100k new coins every 2 weeks.

so far the price has handled it well. There might be a slow decline but it really isnt bad considering inflation.

Sometime next year we are scheduled to have the blocks drop from 50 per found block to 25, making us only create 50k coins every 2 weeks.

now that is pretty far away and their is a lot of coins between now and then.

Do you think price will hold above $10 between now and then baring the unknown.

Think it will start to rise steadily then? or will interest have dropped off so much that we cant even support 50k new coins every 2 weeks?

and yeah I know this is nearly a meaningless exercise, like predicting the weather next may 7th.

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July 21, 2011, 09:51:33 PM
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and yeah I know this is nearly a meaningless exercise, like predicting the weather next may 7th.


In the north east United States, it will be between 50 and 73 degrees Fahrenheit.  I can't narrow it down more than that until the 2012 farmers almanac comes out.

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July 21, 2011, 10:19:24 PM
 #3

I think if it's still around, it will be doing very well.

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July 22, 2011, 02:10:06 AM
 #4

By the time the reward has dropped to 25 btc, one of these scenarios will be true:

1) Bitcoin will have crashed, costing less than $1/each. No real interest in it. Doomed to die.
2) Bitcoin will be trading over $100/each, and vendors will be scrambling to accept it. It'll be on Time Magazine's cover.

In the latter case, the transfer fees will vastly overshadow the 25btc reduction, so blocks will actually be worth more than they are now.
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July 22, 2011, 02:21:19 AM
 #5

It likely won't change

Current investors don't seem to understand less supply = higher price

At the current difficulty the supply of mined bitcoins has dwindled waaaay down and yet the price has been more or less the same or just going down...when it gets reduced to 25 BTC I doubt anyone is going to pay attention. So all miners are screwed.

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July 22, 2011, 02:25:21 AM
 #6

It likely won't change

Current investors don't seem to understand less supply = higher price

At the current difficulty the supply of mined bitcoins has dwindled waaaay down and yet the price has been more or less the same or just going down...when it gets reduced to 25 BTC I doubt anyone is going to pay attention. So all miners are screwed.

Doesn't the total supply remain constant, and the difficulty corrects for the number of miners?
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July 22, 2011, 02:29:00 AM
 #7

It likely won't change

Current investors don't seem to understand less supply = higher price

At the current difficulty the supply of mined bitcoins has dwindled waaaay down and yet the price has been more or less the same or just going down...when it gets reduced to 25 BTC I doubt anyone is going to pay attention. So all miners are screwed.

Doesn't the total supply remain constant, and the difficulty corrects for the number of miners?

Yes, supply is constant, until block reward is dropped. 6 blocks per hour, ~300 coins.


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joulesbeef
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July 22, 2011, 02:38:37 AM
 #8

Quote

and with namecoins they dont seem to understand that massive new supply = lower price

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July 22, 2011, 02:25:43 PM
 #9

It likely won't change

Current investors don't seem to understand less supply = higher price

At the current difficulty the supply of mined bitcoins has dwindled waaaay down and yet the price has been more or less the same or just going down...when it gets reduced to 25 BTC I doubt anyone is going to pay attention. So all miners are screwed.

Doesn't the total supply remain constant, and the difficulty corrects for the number of miners?

Yes, supply is constant, until block reward is dropped. 6 blocks per hour, ~300 coins.



The supply is constant but they are being generated much slower

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netrin
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July 22, 2011, 03:00:11 PM
 #10

What does 'baring the unknown' mean? Discounting unknown variables, NOTHING can be predicted. I'm not claiming the gist of your question is invalid, but these two sentences are:

Do you think price will hold above $10 between now and then baring the unknown....nearly a meaningless exercise, like predicting the weather next may 7th

We can expect the inflation rate to be immediately halved about 18 months from now. The annual inflation rate is above 25% today (based on my back of the napkin estimates below) and will instantly drop to about 11% (annually) in some hour after Christmas 2012. While this could produce an immediate 'shock' releasing selling pressure, it is predictable and represents a smaller average inflationary deceleration than we've seen over the course of all previous years. All things being equal (and blind), prices should immediately rise.

However, miners do not sell immediately after producing coins and demand (traditionally) has far outstripped supply. Some sophisticated graphics might demonstrate a statistically significant increase in prices months after the event, but frankly, I don't think anyone's eyeballs will notice.

It is worth noting for giggles that 21 December, 2012 is the Gregorian date that the Mayan calendar will enter a new b'ak'tun (394 year cycle).

   Annual Inflation rates (estimated from first day of each year, please correct me)
   52500 x 50.0 =100.0% 2009
   52500 x 50.0 = 50.0% 2010
   52500 x 50.0 = 33.3% 2011
   52500 x 50.0 = 25.0% 2012
   52500 x 25.0 = 11.1% 2013 <--- Dec/January
   52500 x 25.0 = 10.0% 2014
   52500 x 25.0 =  9.1% 2015
   52500 x 25.0 =  8.3% 2016
   52500 x 12.5 =  4.0% 2017
   52500 x 12.5 =  3.8% 2018
   52500 x 12.5 =  3.7% 2019
   52500 x 12.5 =  3.6% 2020

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July 22, 2011, 03:01:56 PM
 #11

It likely won't change

Current investors don't seem to understand less supply = higher price

At the current difficulty the supply of mined bitcoins has dwindled waaaay down and yet the price has been more or less the same or just going down...when it gets reduced to 25 BTC I doubt anyone is going to pay attention. So all miners are screwed.

Doesn't the total supply remain constant, and the difficulty corrects for the number of miners?

Yes, supply is constant, until block reward is dropped. 6 blocks per hour, ~300 coins.



The supply is constant but they are being generated much slower

You're joking, right? the system adjusts difficulty so that there is always ~300 coins every hour. If you are seeing 'slower' generation, it's because the number of miners, and thus the difficulty, is higher, and your share of the total hashing power, is lower. Learn2math.

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July 22, 2011, 03:07:21 PM
 #12

You're joking, right? the system adjusts difficulty so that there is always ~300 coins every hour. If you are seeing 'slower' generation, it's because the number of miners, and thus the difficulty, is higher, and your share of the total hashing power, is lower. Learn2math.

I can't tell who's saying what. But as I read the code, the average block generation rate is expected to remain constant for ever, however the amount of coins generated per block is not meant to remain constant but rather halve every four years. Dynamics of difficulty, hashing power, demand, and price are symptoms of the algorithm. Supply is predictable but will be reduced periodically by design.

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July 22, 2011, 03:13:52 PM
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You're joking, right? the system adjusts difficulty so that there is always ~300 coins every hour. If you are seeing 'slower' generation, it's because the number of miners, and thus the difficulty, is higher, and your share of the total hashing power, is lower. Learn2math.

Netrin is correct, the number of BLOCKs is targeted to be constant at about 6/hr. Difficulty only adjusts for blocks per hour. So when the block reward drops to 25BTC, the supply of coin will drop corresponding because it would be 6 blocks /hr x 25. If 90% of people stop mining and difficulty drops to the floor, it will STILL be 6 blocks x 25 BTC per hour at that point.


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myrkul
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July 22, 2011, 03:42:42 PM
 #14

You're joking, right? the system adjusts difficulty so that there is always ~300 coins every hour. If you are seeing 'slower' generation, it's because the number of miners, and thus the difficulty, is higher, and your share of the total hashing power, is lower. Learn2math.

Netrin is correct, the number of BLOCKs is targeted to be constant at about 6/hr. Difficulty only adjusts for blocks per hour. So when the block reward drops to 25BTC, the supply of coin will drop corresponding because it would be 6 blocks /hr x 25. If 90% of people stop mining and difficulty drops to the floor, it will STILL be 6 blocks x 25 BTC per hour at that point.

Yes, but he's saying he's seeing a drop in coin generation NOW, when there are 50 coins per block. My apologies If I wasn't clear.

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netrin
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July 22, 2011, 03:59:22 PM
 #15

You're joking, right? the system adjusts difficulty so that there is always ~300 coins every hour. If you are seeing 'slower' generation, it's because the number of miners, and thus the difficulty, is higher, and your share of the total hashing power, is lower. Learn2math.

Netrin is correct, the number of BLOCKs is targeted to be constant at about 6/hr. Difficulty only adjusts for blocks per hour. So when the block reward drops to 25BTC, the supply of coin will drop corresponding because it would be 6 blocks /hr x 25. If 90% of people stop mining and difficulty drops to the floor, it will STILL be 6 blocks x 25 BTC per hour at that point.

Yes, but he's saying he's seeing a drop in coin generation NOW, when there are 50 coins per block. My apologies If I wasn't clear.

Right. When we talk about 'averages' and 'constant' we have to be discussing annual or monthly rates, certainly nothing less than two week. The difficulty is adjusted every 2016 blocks, which is expected to be every two weeks. If the block generation rate is say 12 blocks/hour, then the difficulty will be (at most) doubled* in the next two weeks. Miners might decide a doubled difficulty is no longer profitable, so they stop mining, which makes the rate go below expectation, perhaps 3 blocks/hour.

* In actuality, the new rate is not a pure function of previous rate, but rather a moving average, weighted standard deviation, and a special sauce. The difficulty adjustments are less extreme and should smooth out over the long run. Perhaps the algorithm will be tweaked at some planned time well in to the future, though if so, it should be planned soon before we get a lot of new client/miner forks in the ecosystem.

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July 22, 2011, 04:24:21 PM
 #16

The time before the price will probably increase because buyers will expect the price to increase and start buying and miners will hold for the coming price increase, to sell at a higher price.
Once the difficulty does increase, there will be huge sell offs so the price might acctually drop at first instead of rise, this will make even more sell in panic, since they will be taken by the drop when they expected an increase.

Once this settles price will start to increase over the months.


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July 22, 2011, 06:54:14 PM
 #17

  Annual Inflation rates (estimated from first day of each year, please correct me)
   52500 x 50.0 =100.0% 2009
   52500 x 50.0 = 50.0% 2010
   52500 x 50.0 = 33.3% 2011
   52500 x 50.0 = 25.0% 2012
   52500 x 25.0 = 11.1% 2013 <--- Dec/January
   52500 x 25.0 = 10.0% 2014
   52500 x 25.0 =  9.1% 2015
   52500 x 25.0 =  8.3% 2016
   52500 x 12.5 =  4.0% 2017
   52500 x 12.5 =  3.8% 2018
   52500 x 12.5 =  3.7% 2019
   52500 x 12.5 =  3.6% 2020

Those numbers are close, but I think you may be off by one year:

YearNew BTCs/yrStart BTCsEnd BTCsBTC Increase
2009262500002625000infinite
2010262500026250005250000100.0%
201126250005250000787500050.0%
2012262500078750001050000033.3%
20131312500105000001181250012.5%
20141312500118125001312500011.1%
20151312500131250001443750010.0%
2016131250014437500157500009.1%
201765625015750000164062504.2%
201865625016406250170625004.0%
201965625017062500177187503.8%
202065625017718750183750003.7%
202132812518375000187031251.8%
202232812518703125190312501.8%
202332812519031250193593751.7%
202432812519359375196875001.7%
2025164062.51968750019851562.50.8%
2026164062.519851562.5200156250.8%
2027164062.52001562520179687.50.8%
2028164062.520179687.5203437500.8%

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July 22, 2011, 07:05:42 PM
 #18

  Annual Inflation rates (estimated from first day of each year, please correct me)
   52500 x 50.0 =100.0% 2009
   52500 x 50.0 = 50.0% 2010
...

Those numbers are close, but I think you may be off by one year:

YearNew BTCs/yrStart BTCsEnd BTCsBTC Increase
2009262500002625000infinite
2010262500026250005250000100.0%
...
2028164062.520179687.5203437500.8%

Ah yes of course 0 ⇒ X is ∞. Thanks!



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July 22, 2011, 07:17:41 PM
 #19

The time before the price will probably increase because buyers will expect the price to increase and start buying and miners will hold for the coming price increase, to sell at a higher price.
Once the difficulty does increase, there will be huge sell offs so the price might acctually drop at first instead of rise, this will make even more sell in panic, since they will be taken by the drop when they expected an increase.

Once this settles price will start to increase over the months.

Having predicted this, you will buy even earlier, sell before the peak, buy again above the bear trap and hope that no one will notice the fundamental change underneath. The lesser fool will create artificial/conscious volatility to demonstrate us all wrong and make a killing when we begin to doubt our predictions.

The weather, by the way, next may 7th will be 20 C, cloudy, with a chance of rain somewhere.

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July 22, 2011, 07:22:19 PM
 #20

I think you are still off by half a year, bitcoin did not start in January 2009, but later in the year, right?

Strictly speaking, yes: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks"

http://blockexplorer.com/block/000000000019d6689c085ae165831e934ff763ae46a2a6c172b3f1b60a8ce26f

Hash: 000000000019d6689c085ae165831e934ff763ae46a2a6c172b3f1b60a8ce26f
Time: 2009-01-03 18:15:05
Difficulty: 1 ("Bits": 1d00ffff)
Transactions: 1
Total BTC: 50

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