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Author Topic: More miners = lower Bitcoin price (not why you think)  (Read 2580 times)
AngelusWebDesign
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September 23, 2011, 04:07:46 PM
 #1

The more people get into mining, the more money is spent on hardware.
The more money spent on hardware, the more BTC need to be immediately sold to pay for that hardware.

Some miners hold, some sell immediately, some sell only what is needed for electricity.

BUT...

The more individual miners participating in Bitcoin Mining, the more coins are going to be put up for sale immediately on Mt. Gox (or another exchange).

Anyone who started mining since July, for example, is going to have to immediately sell their BTC for months to come, if they want to actually break even and start MAKING money. I realize that some people are in this "for fun" or to donate their PC resources in the manner of Folding@Home.

Sure, one block is found every 10 minutes whether the total Network size is 4 Thash or 14 Thash. But if it were 4 Thash, there'd be less guys involved and it would be easier for a few guys to "hold" and make the price go up.

I realize that as time goes on, the effects of miners becomes less and less, and the total BTC in circulation increases.

But has anyone considered that the activity of miners could serve as a "tie-breaker" -- that a small percentage of the market (i.e., Miners) could theoretically make the price move up or down?

But that would never happen now, since there are too many miners involved -- too many miners to have a price greater than $5 or $6/BTC. Because too much money has already been spent on hardware...
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Litt
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September 23, 2011, 04:45:21 PM
 #2

You have obviously not given up on brewing up new random ideas based on your creative imagination.  Wink

I see you are still trying to pass your judgment as if it were based on some type real data and facts trying to discourage the idea of mining.


Does network effect have anything to do with this you think?
iamzill
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September 23, 2011, 05:20:59 PM
 #3

The more money spent on hardware, the more BTC need to be immediately sold to pay for that hardware.
For me personally, I consider all my mining hardware to be sunk cost. Whether I brought that hardware for $1000 or $1 is irrelevant since it cannot be easily recovered anyways. My only goal is to maximize profits, not to break even.
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September 23, 2011, 06:42:29 PM
 #4

I personally prefer to mine my coins and wait for the price to be a bit better. If you are a hobby miner and you want a quick return, yes, you`ll try to sell your coins quickly, but if you are a more serious miner you`ll probably be able to wait it out a bit. But yeah, your guess is as good as mine.

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stryker
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September 23, 2011, 07:10:26 PM
 #5

@Litt stop being a dick, his assumptions are perfectly valid, great ideas come from sharing thoughts.

@OP I still think the biggest thing that dictates price is bitcoins actually being traded for stuff.... exchanging them for <insert your currency here> is only an interface to acquire coins for those who dont mine and if enough coins are not being spent for "stuff" then selling too many coins brings the price down....

thoughts?
bcpokey
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September 23, 2011, 09:01:41 PM
 #6

@Litt stop being a dick, his assumptions are perfectly valid, great ideas come from sharing thoughts.

@OP I still think the biggest thing that dictates price is bitcoins actually being traded for stuff.... exchanging them for <insert your currency here> is only an interface to acquire coins for those who dont mine and if enough coins are not being spent for "stuff" then selling too many coins brings the price down....

thoughts?


You've obviously not spent much time on the forums. Litt is merely remarking on a common phenomenon with the OP. One that I used to find quite annoying, but as I've slipped away from the bitcoin world, find less abrasive.

Are his ideas perfectly valid? Well who knows. Supply and demand is not the end-all be-all of marketplace. In May(ish) there were 6.3million(ish) bitcoins in circulation and the price was around $1/coin. Since then mining power has gone up about tenfold (meaning 10x as much hardware, all of which was purchased afterwards and needed to be paid off according to OP), about a million new coins have been mined and very few lost. But the price is 6 times higher today than it was then.  Obviously a limited analysis will be correct in a limited capacity, but there is more to it than that.
AngelusWebDesign
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September 23, 2011, 09:16:58 PM
 #7

Thank you for your contribution. But I'd like to critique it, if you don't mind.

You conveniently pick the time period "Mayish" RIGHT BEFORE most of us discovered Bitcoin.

By "MayISH" you certainly don't mean after May 20, because the first price I knew for BTC was $6. And a lot of people dogpiled into BTC after that point -- I wasn't the first -- or the last -- to discover BTC.

Some who discovered BTC sunk some money into the new currency -- and we're talking "money that folds" -- a few hundred, even a thousand or more, dollars.

Most of those people haven't left. A few speculators have -- the ones that brought us up to $30 -- but a significant % of people who joined in the Main Expansion -- say, those who joined after May 15, 2011 -- are still with us, and still have BTC holdings.

I was just pointing out another factor in the price of BTC -- it's by no means the only factor.

Matthew
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September 23, 2011, 09:31:45 PM
 #8

@Litt stop being a dick, his assumptions are perfectly valid, great ideas come from sharing thoughts.

@OP I still think the biggest thing that dictates price is bitcoins actually being traded for stuff.... exchanging them for <insert your currency here> is only an interface to acquire coins for those who dont mine and if enough coins are not being spent for "stuff" then selling too many coins brings the price down....

thoughts?


My thought about "traded for stuff".   It just occurred to me that even if I use my bitcoins to buy things on line, they are still turned into fiat currency right away.. 

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evlew
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September 23, 2011, 11:07:53 PM
 #9

The more money spent on hardware, the more BTC need to be immediately sold to pay for that hardware.
For me personally, I consider all my mining hardware to be sunk cost. Whether I brought that hardware for $1000 or $1 is irrelevant since it cannot be easily recovered anyways. My only goal is to maximize profits, not to break even.

This.

I pay all my costs with USD I earn from my job.  Haven't sold a bitcoin yet.  Although I have made a couple of small purchases with them.  

And yes, this is typical Angelus.  If his thoughts actually contributed to something, people would be open to them, but they are pure speculation with a lot of factors missing, based on his opinion of what most 17 year old zit faced miners are doing in their mom's basement.
RandyFolds
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September 23, 2011, 11:56:30 PM
 #10

The more money spent on hardware, the more BTC need to be immediately sold to pay for that hardware.
For me personally, I consider all my mining hardware to be sunk cost. Whether I brought that hardware for $1000 or $1 is irrelevant since it cannot be easily recovered anyways. My only goal is to maximize profits, not to break even.

So, you use clever wording to convince yourself you are 'maximizing profits' vs. minimizing losses?

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September 24, 2011, 12:13:54 AM
 #11


error
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September 24, 2011, 12:22:02 PM
 #12

This is not a new idea; it's been suggested many times before.

The short answer is: Far more than 7200BTC/day moves on the exchanges. Miners selling immediately account for only a small proportion of exchange volume. This has been true for as long as I can remember.

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stryker
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September 24, 2011, 12:41:34 PM
 #13

yes I guess even coins traded for goods are turned into fiat currency, I guess its the case that the retailers have to buy their goods in other currencies.... I do wonder though, keep using bit coins and maybe their use will trickle "upstream" to distributors and importers.
afro25
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September 24, 2011, 03:52:23 PM
 #14



The more individual miners participating in Bitcoin Mining, the more coins are going to be put up for sale immediately on Mt. Gox (or another exchange).


The less miners there are, means that there are more Bitcoins per person.
If they hold, the price will go up - But as they have more coins per person they will have a larger effect on the market when they do sell them (if all at once).
If you have one person selling 10,000 coins all at once the price is likely to drop a fair bit.

People selling their coins on a regular basis keeps the market more stable than say one person dumping all their coins every other week, which would cause more fluctuation in price and people would be less likely to invest.

Surely: Hoarding = Climbing price => Dumping => Falling Price => Repeat = Why would you invest in this?
When: Regular selling = Coins Distributed between more people => Stable price => Steady climb as it becomes more popular => Repeat = More attractive to investors who don't want as much of a risk.

AngelusWebDesign
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September 24, 2011, 04:21:24 PM
 #15



The more individual miners participating in Bitcoin Mining, the more coins are going to be put up for sale immediately on Mt. Gox (or another exchange).


The less miners there are, means that there are more Bitcoins per person.
If they hold, the price will go up - But as they have more coins per person they will have a larger effect on the market when they do sell them (if all at once).
If you have one person selling 10,000 coins all at once the price is likely to drop a fair bit.

People selling their coins on a regular basis keeps the market more stable than say one person dumping all their coins every other week, which would cause more fluctuation in price and people would be less likely to invest.

Surely: Hoarding = Climbing price => Dumping => Falling Price => Repeat = Why would you invest in this?
When: Regular selling = Coins Distributed between more people => Stable price => Steady climb as it becomes more popular => Repeat = More attractive to investors who don't want as much of a risk.


Good point.
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September 24, 2011, 04:25:10 PM
 #16

So...you're telling me you want to reduce the community of Bitcoin, so the price can go up temporarily?

What do you think those miners are going to do if they quit now? Continue contributing to this community? If miners quit and don't come back, MAYBE it could push the price higher short-term, but long-term, you're going to suffer, simply because there's going to be less people in that network.

What made the price jump was the coming of new people in the Bitcoin network. The network became more active, with more projects, more ideas, more activity and more demand. If you remove people, you're going to get less activity, less projects, less ideas and less demand.

We need more...of everything. Miners, businesses, projects, shops, whatever. The network needs to be secure at 100% if you want it to develop. It needs more miners. If Bitcoin get attacked, even only one time, it could seriously be dangerous to its development, and it could become the start of the end.

Personnally, I'm more worried to see the difficulty going down like that, seeing less power in the network. Right now, with 5 millions $, you destroy Bitcoin. Do you really think you're going to attract big investors if, for that ridicule amount, you can buy 50+1% of the network?
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September 24, 2011, 04:31:40 PM
 #17

Substitute "gold" for "bitcoin" and see if the statement holds true. Gold is seldom exchanged for anything physical. The amount of gold mined has been fairly steady between 2400 and 2600 tonnes the last decade and has been rising the last 3 years. Yet over the same time period the price has quadrupled.

Every two weeks, the number of bitcoins mined becomes a smaller and smaller percentage of the total number available. The number of miners should be irrelevant since in theory, it will not increase the rate at which bitcoins are added due to difficulty changes (except in the very short term).

It would be interesting to graph the number of bitcoins added to the system over time vs the price.

Bitcoin is backed by the full faith and credit of YouTube comments.
AngelusWebDesign
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September 24, 2011, 05:07:05 PM
 #18

So looking at the "total miner debt" as a weight on the price of BTC seems to be less important than the "total activity" in the Bitcoin world.

That sounds reasonable.

I think you're right -- I'd gladly weather a 10% difficulty increase (or two) if it meant re-capturing some of the buzz Bitcoin had a few months ago.

The problem is when only miners show up (or stick around). Bitcoin can't be a community of mostly miners or the price is going to keep going down toward "cost".
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September 24, 2011, 06:23:38 PM
 #19


The problem is when only miners show up (or stick around). Bitcoin can't be a community of mostly miners or the price is going to keep going down toward "cost".


See mining as the entry point of many people in this community. It doesn't mean that we're going to be only miners until the end of the time. I'm currently interested in investing with some companies at GLBSE, and I'm looking for a Canadian BTC Shop/Ebay right now(everything is in the US). Mining will be my primary contribution to Bitcoin for a good chunk of time, but it doesn't mean I will not participate in other areas of Bitcoin.

I believe that a good bunch of miners are interested in other areas of Bitcoin too. We invested a lot already, and it's in our interest to increase our activity with Bitcoins.

Mining already spawned a tons of new entrepreneurs, who maybe never taught of starting their own little business. Even if it's one mining rig, you can still generate profit, and you can still make a little business of it. Even if you make only 1$, tell yourself that Microsoft XBox division lost around 8 billion$ in the last 10 years. So, you're 8 billion richer than Microsoft XBox division  Grin

It's not everybody who's going to revolutionize Bitcoin, but, in this mass of miners, the chances are high that we have a bunch of great individuals ready to push Bitcoin farther.
Manko
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October 02, 2011, 05:59:54 AM
 #20


+1

Could not have said it better myself, lol
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