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Author Topic: Is the rapid drop in bitcoin value because there are more miners than buyers?  (Read 3260 times)
Blackout
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August 04, 2011, 06:54:18 AM
 #1

It seems like the mining bug is all the rage now and so many people have gone out and bought so many insane rigs that we have more miners than users / buyers of bitcoin.

If everyone is mining and no one is buying I imagine the price is going to drop fast, as it is.  It was 17 last week, and it just dropped $3 in a day and is at around $10 now as I write this.

Are all the news articles and massive press hurting it rather than helping it?  All the press I have seen seems to focus on it as:

a> hey you can make your computer make free money!

or

b> look at this ponzi scheme currency you can buy illegal stuff with! buy drugs!

I haven't seen too many main stream coverage or youtube videos focusing on USING it as a valuable currency.. or the legitimate freedom it supplies.  It all seems to be on debasing it, or mine it and make $$$ and get out.

Your thoughts?


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August 04, 2011, 06:57:19 AM
 #2

the number of miners has nothing to do with it.

we mine 300 coins an hour, doesnt matter if their are 10 of us or 10,000

it was bad news, happens to every stock, commodity on bad news.

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August 04, 2011, 07:01:21 AM
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How can the number of miners have nothing to do with it?  More miners = difficulty increases and with no buys or users value decreases.... if there is no use...no buys not involved in mining... we are calculating hashes for nothing trading data not currency / commodity are we not?


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August 04, 2011, 07:04:22 AM
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Is the rapid drop in bitcoin value because there are more sellers than buyers?

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August 04, 2011, 07:05:03 AM
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How can the number of miners have nothing to do with it?  More miners = difficulty increases and with no buys or users value decreases.... if there is no use...no buys not involved in mining... we are calculating hashes for nothing trading data not currency / commodity are we not?



You are talking about a casual change over a longer period of time, this influx of miners is not creating an extreme enough variance in the exchange markets to cause what we've seen happen over the past couple days. Just like the stock market, news can have an incredible impact on trades any given day(s).

Is the rapid drop in bitcoin value because there are more sellers than buyers?

That is correct, this is pretty much the fundamental "invisible" mechanism that drives market change, as units are purchased the price goes up (people are placing faith in the currency) and as units are sold the price is driven down.

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August 04, 2011, 07:06:34 AM
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The noob Miners got fear, not to be able to pay the cost of the mining rig...
(instead not to sell and letting the value grow to get much more than the value of theyr mining rig)

THINK LONGTERM

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August 04, 2011, 01:03:32 PM
 #7

Is the rapid drop in bitcoin value because there are more sellers than buyers?

I agree with you but I think there are more sellers than buyers because who are the sellers? - the miners, and there are more and more miners than actual users / normal people trying out bitcoin to buy things.

I have not made a huge investment.. I have a small rig and have been doing this about a month and it has paid for my  5830s already.  I pulled out my 4850 x2 - sold that for $125 and bought 3 5830s... I already had a high end machine with very good cooling so my investment was $260...
I have a little under 30 coins so far. I am getting from 1150 to 1250 mhash
 
So this is an enthusiastic hobby for me right now.  Plus if I use the machine I can just lower the aggression on the 1st card to 3 and it works smooth as ice.... if I want to game or cad, two crossfired 5830s are amazing performance for the buck.

I am consider now building another just for mining as I;d like to get my mhash up to 2500 so they coins come in a little faster....but it seems
the influx of new miners is massive and many of them are doing some pretty insane big investments.  This makes me wonder.... because onviously there are more sellers than buyers until bitcoin has more mainstream acceptance from non geeks.



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August 04, 2011, 01:15:00 PM
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the number of miners has nothing to do with it.

we mine 300 coins an hour, doesnt matter if their are 10 of us or 10,000

it was bad news, happens to every stock, commodity on bad news.

Of course the number of miners have everything to do with it, that shows that many miners have invested heavily in rigs (look at the Hash levels). Most of these investors came in in May and June (as my self), these investors will want to make their money back, only way of doing so is to have USD / fiat currency buyers.

The more USD or direct buyers at the exchanges, the more they will invest in the rigs, and the more pressure to make that money back. Its a classic negative spiral for the direct buyer. They will lose in most cases if they keep feeding and paying the profits of the miners. What should happen is that the miner should think that he wants to invest directly in the Bitcoin economy. He will do that when the prices at the exchanges are much lower than today.
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August 04, 2011, 03:26:29 PM
 #9

There is only one reason behind any kind of price drop: People lost the interest


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August 05, 2011, 06:15:47 PM
 #10

Most people haven't traded a market ever. You can tell from the posts that are full of wild fantasies including market 'manipulation' and 'big sellers' or 'big buyers' holding the ENTIRE market at their mercy. This unfortunate sensationalism doesn't come close to the truth.

Why do prices go down? More sellers than buyers. You can spin tales about how it is all one person at a desk with a thousand levers controlling price and cackling maniacally, but the humdrum truth is plain old market forces.

Same with when it goes up, more buyers than sellers. It amazes me the effort that goes into producing theories and grand backdrops of what amounts to regular market forces.

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August 05, 2011, 07:22:59 PM
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I don't recall writing any grand theories or backdrops... I was just asking a simple question.   I have noticed in the last month huge articles and pictures and magazine write ups and youtube vids of people building MASSIVE rigs.  Not just little hobby rigs but rooms of 40 to 100 gpus and more.  I see far more articles about mining bitcoin than USING bitcoin so yes, it is the market, but who are the sellers, the miners, so if everyone is mining are 3/4 mining there is only 1/4th to sell to correct?

Also from the history the butcoin market IS and CAN be manipulated by "one person at a desk with a thousand levers"... or more like one lever... isn't that what happened with the MtGox hack when the value dropped down to a
penny in one day?

I wasn't around at that time but does that incident not pretty much prove MtGox is too powerful an influence? I thought the whole point of bitcoin is non centralization so stuff like that couldn't happen.   I also don't understand how they 'rolled back'.... I thought the bitcoin chain is the bitcoin chain.... but now I am getting off topic.


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August 05, 2011, 07:35:21 PM
 #12

THINK LONGTERM

There seems to be a lack of this.

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August 05, 2011, 07:54:41 PM
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THINK LONGTERM

There seems to be a lack of this.

Probably because of the breaches and hacks.... and exactly the fear of the scenario the last poster just posted!

When you say think long term you are speaking as an investor or miner, and there has to be a lot of trust or not much investment for long term. Isn't the point of bitcoin to get it wider accepted as a usable currency. To get bitcoin to the point of paypal or something like that?  People don't look at paypal as a long term investment, they look at it as a convenience and are willing to pay the fee for the fast convenience.  The regular consciousness of the world is just now begining to become aware off the 'bull' of the fed and fractional reserve banking.... and most are too fearful to even think about it and the government and elites play off that fear as they transfer the wealth of those uneducated in how such systems work to themselves.

Most people are naive of any monetary theory and don't even understand terms like fiat or "money is debt, not value"  at least the current US dollar and most every other currency... is there a non fiat currency in use by any government  currently? I mean sure you can buy gold or silver coins but currently you'd still have to "sell them" for a currency somewhere.. you can't currently walk into a grocery store and drop some gold or silver shavings or bars. Sure - there are a few old silver or old coins around but they are collected or stored not used as currency.

But I'm rambling now...   was just wondering as there has been a pretty steep drop this week.. about 1/3rd of value.

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August 05, 2011, 07:57:03 PM
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"In other news, 23 tons of Gold just up and disappeared today in the bank of Goldtomat. Bank spokesman, Gerald Itallgo said, "It was the damnedest thing, it done disappeared!" Gold futures dropped today, because, as we all know, gold sometimes just disappears entirely. Who will be affected next? More at 11!"

Bitcoin is like a commodity that can disappear. When $100,000 USD worth of a commodity can just disappear, people think twice about buying it. If the same people selling keep selling (Supply), but there are less buyers (Demand), that means the price falls.

Actually, gold could disappear, or become unusable. The problem with bitcoin right now is NOT that the BTC that were in Mybitcoin and Bitomat have disappeared, though. Rather the opposite... someone is dumping them in large numbers.

The rough equivalent with gold, if you want to draw the parallel, would be someone stealing around 4,000 tonnes of gold, then dumping them on the market... where would gold be then?
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August 05, 2011, 07:58:28 PM
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"In other news, 23 tons of Gold just up and disappeared today in the bank of Goldtomat. Bank spokesman, Gerald Itallgo said, "It was the damnedest thing, it done disappeared!" Gold futures dropped today, because, as we all know, gold sometimes just disappears entirely. Who will be affected next? More at 11!"

Isn''t this exactly what happened with all the gold that was underneath the twin towers?


It just done melted!

yeah right.


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August 05, 2011, 08:07:50 PM
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Keep in mind, the annualized inflation rate of bitcoin is ~37.6% at the moment.  If the price holds steady it means that there is enough new demand to keep up with this pace of inflation.  To me, it seems quite natural that the variance in demand relative to the rate of inflation in such a small market is bound to create substantial volatility in both directions.  People should be more surprised that the price stuck at around $14 or $15 for so long.  

The absolute number of miners has nothing to do with it...the question is simply to what degree the net demand is increasing in relation to the supply.  A miner that sells all of their generated bitcoins are reducing net demand (just like anyone else selling bitcoins) while a miner that holds all of their generated bitcoins and increasing net demand (just like anyone else buying bitcoins).

The breaches, the hacks, and the fading media attention are probably all contributing to a lull in demand at the moment.

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August 05, 2011, 08:29:52 PM
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Keep in mind, the annualized inflation rate of bitcoin is ~37.6% at the moment.  If the price holds steady it means that there is enough new demand to keep up with this pace of inflation.  To me, it seems quite natural that the variance in demand relative to the rate of inflation in such a small market is bound to create substantial volatility in both directions.  People should be more surprised that the price stuck at around $14 or $15 for so long.  

The absolute number of miners has nothing to do with it...the question is simply to what degree the net demand is increasing in relation to the supply.  A miner that sells all of their generated bitcoins are reducing net demand (just like anyone else selling bitcoins) while a miner that holds all of their generated bitcoins and increasing net demand (just like anyone else buying bitcoins).

The breaches, the hacks, and the fading media attention are probably all contributing to a lull in demand at the moment.

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August 05, 2011, 08:33:24 PM
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IMHO, drop in price is due to the sale of a large number of coins that have recently been declared stolen or destroyed.  People who buy many mining rigs are probably hoarding most for when the price goes through the roof.

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August 05, 2011, 09:32:32 PM
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IMHO, drop in price is due to the sale of a large number of coins that have recently been declared stolen or destroyed.  People who buy many mining rigs are probably hoarding most for when the price goes through the roof.


which will again drop the price due to more selling than buyers, oh what a vicious cycle.

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August 05, 2011, 09:45:58 PM
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IMHO, drop in price is due to the sale of a large number of coins that have recently been declared stolen or destroyed.  People who buy many mining rigs are probably hoarding most for when the price goes through the roof.

IF the price goes through the roof. IF is a big word. Hard for the price to go through the roof when so many exchanges and pool's can and have been dubious or compromised.  

I am looking at it thisit this way - I hold onto the coins I mine in a private wallet offline that I send to everyday.  Those that I mine, I hold, and don't spend.  When / if I want to use bitcoins for something I actually buy them with cash at the current price I don't use my saved stash that way I can judge the price for real at the moment and not be subject to the massive flux. There have only been a few times where it was preferable to use bitcoins to the cash I have though,  there's just not enough services and the premium is usually more than credit card or paypal fees from except in a few instances but I wanted to support the growth of the system because I like the idea of it and sure it would be nice if the bitcoins value explodes but if it doesn't then I haven't lost much of anything either.

If I actually went and bought a dedicated rig.. that would then be an investment and risk at that point and I couldn't validate it with any other use other than mining bitcoins and at this point I can't figure out if that's a good or bad idea. 6 months ago it was obviously a fantastic idea and many have profited.... currently... the prospects are certainly not as appetizing.

With anything else I do.... I can gauge the use of the technology to offset the price drop of it...  I can USE the graphic cards in the main rig to render in the indie moving / music video / commercial world that I work in. If the profit offsets the the tech cost of cameras and computers (which now it certainly does) it's worth it and who cares of something newer better faster comes out tomorrow if you are making money with it today. With bitcoins at this stage I just don't know.....
 
But as Spock would say.. it's "fascinating"


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