I think you're failing to see my point about how this affects specifically bitcoins.
If I work at a job for $10/hr, and I get a pay cut to $5/hr then I'm getting half the money. If I keep getting paid $10/hr but the dollar deflates or inflation makes everything in the US cost double, that's the same thing as getting a pay cut to $5/hour cuz I'm basically still getting half the money, just not mathematically. But dollar values are just arbitrary numbers and the only important thing is what items that meaningless number can buy you.
So on the BTC side, if double the people mine, that means my own mining creates 50% less bitcoins. If BTC drop 50% in their USD value, I'm mining at the same rate but it's 50% less profitable. So either way, it's exactly the same end results. I'm going to lose 50% profitability on my mining operation in either case.
Obviously that logic does not apply to already owned BTC but right now, that's pretty close to 0
Let's say I even had 50 BTC and a decent mining rig. If the value of BTC doubles to 26 USD/BTC, hurray. Then it's kinda like I have 100 BTC, just not literally.
But compared to the rate I'm mining them at, I don't care what my static pile of coins is worth because now it's insanely hard to get any more of them from then on if there are too many miners. I can mine indefinitely but the amount I own is definite so mining takes priority.
Back to my crappy analogy, that's like if I'm working and making $10/hr and made about $1000 so far. Then I find out my $1000 is now worth in effect $2000 cuz of deflation. Hurray, I'm rich. But awwww, now I found out my company can only afford to pay me $0.10/hr from now on cuz they hired an extra 100 workers to do my job. Great, the value of my money went up but I'm basically not going to make any more money so how long is that $1000 going to last even if it is worth $2000 now?
Now, if I had 10,000 BTC and am mining 0.5 BTC/day, that's a different story. Then I don't give a crap how many people are mining or how productive it is, I care how much my stockpile of coins are worth. But think about how many people in the world that applies to at the moment. I'm definitely not one of them!
And the math says I won't be in the next 5 years either.
So the point is, for me and most of you over the next couple years, if the number of people mining is related too directly to the USD cost and they get way too close together, that's a problem regardless of the actual value of the BTC you already earned.
