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 Author Topic: Just over \$228,000 per day required to maintain current Bitcoin price.  (Read 4836 times)
Elwar
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 September 28, 2011, 01:28:58 PM

Ok, my numbers are not exact mainly because I am lazy and do not wish to waste my time finding the exact numbers.

I have taken the calculations from this thread for this:
https://bitcointalk.org/index.php?topic=45882.0

I keep seeing how Bitcoin needs over a million USD per month to maintain the current price. Running the numbers based on the amount of Bitcoins created times the current price that would seem like simple math.

In fact, it is not.

Only those who are trading Bitcoin are affecting the price in relation to the various currencies. So everyone else is just using Bitcoin as a currency like it was meant to be.

Doing a broad assumption I am throwing out the figure that there are 1 million Bitcoins in the trade exchanges. This is based on MtGox having 432k BTC back in June and it was estimated that they have around 600k BTC now. And I figured the other exchanges may add up to at most around 400k BTC.

So that makes 1,000,000 BTC being traded at the exchanges. This is out of over 6,000,000 BTC in existence.

This means that 1 million BTC that are traded affect the price of the other 5 million in terms of a currency.

So, taking the figure from the other thread that \$1 million needs to come into the economy each month and divide it by the portion that is actually being traded (1/6th) and you get \$166k. Divide that by 30 and you get \$5,500 per day.

Only 1200 new Bitcoins need to be purchased daily to maintain the current price levels. This is why when we get a sudden influx of people buying BTC the price swings so much.

Over the next year we only need 365 people to invest \$5,500 each to maintain the current price. And then the rate gets cut in half and it will be down to \$2750 per day. That is not much inflation for such a growing community.

If someone wants to tweak my numbers with more accurate findings then I will update the OP.

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the founder
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 September 28, 2011, 01:44:04 PM

I think it's closer to 6 * 24 * \$241.29 = \$34,745.76

6 blocks per hour, 24 hours per day,  \$241.29 printed every block = \$34,745.76

Now if you limit it to just exchanges,  your number might be more accurate,  but I believe you'd be shorting the economy about 30,000 a day hence leading to a few pennies drop every day at that rate.  Eventually those coins will be sold...  you buy something with them on bitmunchies,  they sell them to buy more product...

unless they are hording the coins and then buying the products separately,  but then what they buy separately is added to the 34,000 figure.

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repentance
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 September 28, 2011, 01:50:05 PM

Quote
So everyone else is just using Bitcoin as a currency like it was meant to be.

A lot of the Bitcoins mined to date have never been moved.  I wouldn't assume that the majority of Bitcoins are being used as currency at this point.

All I can say is that this is Bitcoin. I don't believe it until I see six confirmations.
Elwar
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 September 28, 2011, 02:05:03 PM

I think it's closer to 6 * 24 * \$241.29 = \$34,745.76

6 blocks per hour, 24 hours per day,  \$241.29 printed every block = \$34,745.76

Now if you limit it to just exchanges,  your number might be more accurate,  but I believe you'd be shorting the economy about 30,000 a day hence leading to a few pennies drop every day at that rate.  Eventually those coins will be sold...  you buy something with them on bitmunchies,  they sell them to buy more product...

unless they are hording the coins and then buying the products separately,  but then what they buy separately is added to the 34,000 figure.

Divided by 6.

A bitmunchies purchased exchanged for dollars still has to go through the exchange which is what is factored in here.

(7200 blocks per day * 4.7) / 6 = \$5640

Or just: 7200 / 6:
1200 Bitcoins per day.

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 September 28, 2011, 03:04:38 PM

A lot of the Bitcoins mined to date have never been moved.  I wouldn't assume that the majority of Bitcoins are being used as currency at this point.
Bitcoin is like gold. Even though it's much more practical than gold as a medium of exchange, from an economic standpoint it's best as a store of value. Bitcoins that are saved, are in fact Bitcoins that are used as a currency. Not perhaps as a medium of exchange, but still.

I feel that in the future Bitcoins value will rise significantly not only from increased trade but from the fact that more and more people will use it for very-long-term savings. Because it holds value well. This is currently clouded by the fact that the market is so small and speculation has caused wild price swings, but in the long term Bitcoin will be successful as a store of value as long as it's legal and the cryptography behind it remains unbroken.

Of course, I also see Bitcoin developing as a medium of exchange. The anonymity features, the decentralized nature and low fees will attract people and services similar to Bit-Pay will also help to increase trade using Bitcoins. Bitcoin is a practical, digital alternative to gold. It has a good chance of succeeding very well as long as the core fundamentals stay solid, which are legality, reliability and functionality. So far no problems with those.

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 September 28, 2011, 03:12:27 PM

A lot of the Bitcoins mined to date have never been moved.  I wouldn't assume that the majority of Bitcoins are being used as currency at this point.
Bitcoin is like gold. Even though it's much more practical than gold as a medium of exchange, from an economic standpoint it's best as a store of value. Bitcoins that are saved, are in fact Bitcoins that are used as a currency. Not perhaps as a medium of exchange, but still.

I feel that in the future Bitcoins value will rise significantly not only from increased trade but from the fact that more and more people will use it for very-long-term savings. Because it holds value well. This is currently clouded by the fact that the market is so small and speculation has caused wild price swings, but in the long term Bitcoin will be successful as a store of value as long as it's legal and the cryptography behind it remains unbroken.

Of course, I also see Bitcoin developing as a medium of exchange. The anonymity features, the decentralized nature and low fees will attract people and services similar to Bit-Pay will also help to increase trade using Bitcoins. Bitcoin is a practical, digital alternative to gold. It has a good chance of succeeding very well as long as the core fundamentals stay solid, which are legality, reliability and functionality. So far no problems with those.

I have to give this s +1

I believe in the future, btc will be on par with gold..  the only difference is that you can dig more gold up, you cannot create more btc after 21M

1jimbitm6hAKTjKX4qurCNQubbnk2YsFw
ampirebus
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 September 28, 2011, 04:07:20 PM

thats only if everyne sells every single new bitcoin mined right? what about if people dont sell any at all? or ift hey only sell 25% of them? or 50%?

Elwar
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 September 28, 2011, 05:56:34 PM

thats only if everyne sells every single new bitcoin mined right? what about if people dont sell any at all? or ift hey only sell 25% of them? or 50%?

From what it looks like right now, only about one sixth of the Bitcoin economy is used for trading currencies.

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the founder
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 September 28, 2011, 05:59:03 PM

thats only if everyne sells every single new bitcoin mined right? what about if people dont sell any at all? or ift hey only sell 25% of them? or 50%?

From what it looks like right now, only about one sixth of the Bitcoin economy is used for trading currencies.

Actually it's 100% is used for trading currencies...   the other 5/6 are used to store to eventually trade,  buy and the seller then trades or stored to trade... eventually every single one of those coins are traded.

unless someone wants to die with a USB stick in his pocket filled with unspent bitcoins.

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indio007
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 September 28, 2011, 06:05:30 PM

Ok, my numbers are not exact mainly because I am lazy and do not wish to waste my time finding the exact numbers.

I have taken the calculations from this thread for this:
https://bitcointalk.org/index.php?topic=45882.0

I keep seeing how Bitcoin needs over a million USD per month to maintain the current price. Running the numbers based on the amount of Bitcoins created times the current price that would seem like simple math.

In fact, it is not.

Only those who are trading Bitcoin are affecting the price in relation to the various currencies. So everyone else is just using Bitcoin as a currency like it was meant to be.

Doing a broad assumption I am throwing out the figure that there are 1 million Bitcoins in the trade exchanges. This is based on MtGox having 432k BTC back in June and it was estimated that they have around 600k BTC now. And I figured the other exchanges may add up to at most around 400k BTC.

So that makes 1,000,000 BTC being traded at the exchanges. This is out of over 6,000,000 BTC in existence.

This means that 1 million BTC that are traded affect the price of the other 5 million in terms of a currency.

So, taking the figure from the other thread that \$1 million needs to come into the economy each month and divide it by the portion that is actually being traded (1/6th) and you get \$166k. Divide that by 30 and you get \$5,500 per day.

Only 1200 new Bitcoins need to be purchased daily to maintain the current price levels. This is why when we get a sudden influx of people buying BTC the price swings so much.

Over the next year we only need 365 people to invest \$5,500 each to maintain the current price. And then the rate gets cut in half and it will be down to \$2750 per day. That is not much inflation for such a growing community.

If someone wants to tweak my numbers with more accurate findings then I will update the OP.

Your assuming that people sell all coins mined every single day. That's a false assumption because that does not happen.
Elwar
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 September 28, 2011, 06:13:05 PM

thats only if everyne sells every single new bitcoin mined right? what about if people dont sell any at all? or ift hey only sell 25% of them? or 50%?

From what it looks like right now, only about one sixth of the Bitcoin economy is used for trading currencies.

Actually it's 100% is used for trading currencies...   the other 5/6 are used to store to eventually trade,  buy and the seller then trades or stored to trade... eventually every single one of those coins are traded.

unless someone wants to die with a USB stick in his pocket filled with unspent bitcoins.

I suppose I was unclear in my wording. By "trading currencies" I mean that they are being traded on the exchange for money.

If someone mines Bitcoins and then trades it for something that is then traded in Bitcoins and kept within the currency, then it is not being traded on the exchange. At this point about 5/6th of Bitcoins are either being traded among each other or being held on to.

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Elwar
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 September 28, 2011, 06:14:36 PM

Your assuming that people sell all coins mined every single day. That's a false assumption because that does not happen.

Not at all. I assume that only 1/6th of all coins mined are sold for a currency. Which is in line with the amount of Bitcoins held at the exchanges.

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nighteyes
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 September 28, 2011, 06:19:16 PM

From my perch it needs everything every day thrown at it....Im in the back of the pelaton somewhere and its moving slowww...you got the work spent by the front of the pack slowing down at least from regulation....We dont need \$5,500...we need products, value....stuff to sell that people need. We dont need charity. We got an able-bodied group capable of moving forward....just have to keep the nose to the grindstone...err to keep in the bicycle race analogy, to keep grinding those gears. Now get moving up this cat 1 climb you knuckleheads Let the rest of em jeer you and wonder why you suffer to set an example of hard work ,when you could be enjoying yourself at the beach and then just press a button like everyone else and jobs will appear and everything will be like christmas.
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 September 28, 2011, 08:38:55 PM

thats only if everyne sells every single new bitcoin mined right? what about if people dont sell any at all? or ift hey only sell 25% of them? or 50%?

But because there is a liquid market for the bitcoin they mine, they are actively choosing to forgo that money today, and hold bitcoin instead.  Either way, they have to invest resources into acquiring bitcoin. They (miners) in fact make up legitimate demand.  So just include miners and how much you think they are willing to implicitly buy in your analysis.

"It is, quite honestly, the biggest challenge to central banking since Andrew Jackson." -evoorhees
Elwar
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 September 29, 2011, 10:44:07 AM

thats only if everyne sells every single new bitcoin mined right? what about if people dont sell any at all? or ift hey only sell 25% of them? or 50%?

But because there is a liquid market for the bitcoin they mine, they are actively choosing to forgo that money today, and hold bitcoin instead.  Either way, they have to invest resources into acquiring bitcoin. They (miners) in fact make up legitimate demand.  So just include miners and how much you think they are willing to implicitly buy in your analysis.

It is factored in. 1/6th of Bitcoins are traded at the exchanges at a time.

This is similar to taking a poll of 1000 people to find out how Americans may want to vote in an election. What those 1000 people say has a lot of impact on the implied vote of the other millions of Americans.

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Andrew Bitcoiner
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 September 29, 2011, 06:35:30 PM

Chump change.

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the founder
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 September 29, 2011, 06:46:55 PM

thats only if everyne sells every single new bitcoin mined right? what about if people dont sell any at all? or ift hey only sell 25% of them? or 50%?

From what it looks like right now, only about one sixth of the Bitcoin economy is used for trading currencies.

Actually it's 100% is used for trading currencies...   the other 5/6 are used to store to eventually trade,  buy and the seller then trades or stored to trade... eventually every single one of those coins are traded.

unless someone wants to die with a USB stick in his pocket filled with unspent bitcoins.

I suppose I was unclear in my wording. By "trading currencies" I mean that they are being traded on the exchange for money.

If someone mines Bitcoins and then trades it for something that is then traded in Bitcoins and kept within the currency, then it is not being traded on the exchange. At this point about 5/6th of Bitcoins are either being traded among each other or being held on to.

If they exchange bitcoins for services,  then that adds to the money needed per day which is still \$34,745.76..  remember it was measuring the bitcoin economy,  not what's traded at the exchanges...

You can append a dollar or bitcoin figure to any transaction...  perhaps the best way to phrase it...  Adam goes out and builds an ecommerce site that does 10 BTC in commerce per day...   that is roughly 50 dollars of economic growth the BTC community has... and effectively the economy grew by 50 dollars.. per day...    this would be subtracted from the 34,000 that must grow per day for the community.

The exchanges are only PART of what the bitcoin economy is,  and as you stated.. really only 1/6th of the total value.

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Elwar
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 September 29, 2011, 07:58:32 PM

Adam goes out and builds an ecommerce site that does 10 BTC in commerce per day...   that is roughly 50 dollars of economic growth the BTC community has... and effectively the economy grew by 50 dollars.. per day...    this would be subtracted from the 34,000 that must grow per day for the community.

The exchanges are only PART of what the bitcoin economy is,  and as you stated.. really only 1/6th of the total value.

If he did 10 BTC in commerce a day that involved someone transferring their dollars into BTC then that WOULD require the exchanges.

If Adam has an apple tree and Lisa has an orange tree and they trade apples to oranges all the time. Then Joe offers \$1 for one of the apples, all of the apples become worth \$1. If Adam grows ten apples a day and continues to trade with Lisa for oranges but has 1 extra apple each day that he trades with Joe then the apple community needs \$1 per day to maintain the current price. Even though he creates 10 apples per day, only 1 accounts for its dollar price. He does not need \$10 per day to maintain the \$1 price.

If Joe and Tim show up and want that one apple, they might bid the price up to \$2. He does not now need \$20 per day in sales to maintain the \$2 price.

The dollar price is set on the portion of Bitcoins that are being traded for dollars. And that is currently 1/6th.

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Elwar
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 October 03, 2014, 12:28:40 PM

Updating the numbers:
(3600 blocks per day * \$380) / 6 = \$228,000

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S4VV4S
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You make me laugh!

 October 03, 2014, 12:39:38 PM

Updating the numbers:
(3600 blocks per day * \$380) / 6 = \$228,000