How to understand what the miners are doing

[cocoadreamboy]

I have spent the past year perfecting and honing my fundamental bitcoin algorithm. And now, for the first time I am releasing it on Bitcoin talk!

I believe that the largest players in bitcoin are the established miners. These are the whales. Currently they have around $2.5 billion invested in active infrastructure and they spend around $3.5 million/day in electricity. There is no larger player active and invested in bitcoin than the miners.

To monitor their actions, I have designed the Fundamental Price Floor. With this metric you can see the price they pay to make a bitcoin. The price they pay vs. the bitcoin price will surprise you.

My data will be available to the public until May 24 @ Noon EST. After that, only subscribers to my site will be able to benefit from the metrics.

New high efficiency miners are being released by Bitmain soon. Because these miners are so efficient they will make the price floor drop even more than where it is right now. The algorithm will be updated once the page is locked, and my subscribers will know the new price floor and understand how low bitcoin can go again.

Here is the link to my data:

https://www.amsinger.org/subscriber-data

Please let me know your thoughts. I made this algorithm to understand the risk inherent in bitcoin. I hope that you are able to benefit as much as I have from it.

Aaron

[BQ]

This does actually look interesting, I suggest that you re-organize your post in general I was really sure this was some type of spam 

[cocoadreamboy]

This does actually look interesting, I suggest that you re-organize your post in general I was really sure this was some type of spam 

Thank you! And my bad, I am new to sharing it. I just put the finishing touches on my site yesterday, and now I am beginning my major marketing push.

[Ailmand]

This does actually look interesting, I suggest that you re-organize your post in general I was really sure this was some type of spam 

Thank you! And my bad, I am new to sharing it. I just put the finishing touches on my site yesterday, and now I am beginning my major marketing push.

OP, I think this post best fits to be in the  Mining thread since the topic is focused in mining.

I believe that maybe some of the whales might have some mining farm, but some might be just pure early bitcoin investors who had invested a lot of money in bitcoin since it started, where bitcoin costs less than a dollar.

[cocoadreamboy]

This does actually look interesting, I suggest that you re-organize your post in general I was really sure this was some type of spam 

Thank you! And my bad, I am new to sharing it. I just put the finishing touches on my site yesterday, and now I am beginning my major marketing push.

OP, I think this post best fits to be in the  Mining thread since the topic is focused in mining.

I believe that maybe some of the whales might have some mining farm, but some might be just pure early bitcoin investors who had invested a lot of money in bitcoin since it started, where bitcoin costs less than a dollar.

It is more about understanding how the bitcoin financial market actually works. Miners are the largest active movers in the bitcoin industry. You can't discuss the price without discussing their motivations and actions. If I was talking mining specifics yes, but I am simply explaining the wholesale price of bitcoin.

[Genemind]

This does actually look interesting, I suggest that you re-organize your post in general I was really sure this was some type of spam 

Thank you! And my bad, I am new to sharing it. I just put the finishing touches on my site yesterday, and now I am beginning my major marketing push.

OP, I think this post best fits to be in the  Mining thread since the topic is focused in mining.

I believe that maybe some of the whales might have some mining farm, but some might be just pure early bitcoin investors who had invested a lot of money in bitcoin since it started, where bitcoin costs less than a dollar.

It is more about understanding how the bitcoin financial market actually works. Miners are the largest active movers in the bitcoin industry. You can't discuss the price without discussing their motivations and actions. If I was talking mining specifics yes, but I am simply explaining the wholesale price of bitcoin.

Currently they have around $2.5 billion invested in active infrastructure and they spend around $3.5 million/day in electricity.

Just a question, is it still profitable to mine bitcoin even with numbers of rigs and the electricity cost.
I mean will the number of rigs you have compensate and add to your daily profit, or will it just be a huge waste of resources to mine bitcoin.

[DreamStage]

Thank you for this article and content concerning your new mining information obtained by your code speculation report.
Indeed it might help new investors or miner ones that want to start going further into that business.
Im glad in seeing more people are embrassing the new technologies for such matters.

[FlightyPouch]

With a lot of big miners in competition, I don't think I will be choosing it before investing. It is true that earning Bitcoin through mining will be stable but the cost of it is the problem. You can't just buy a mining rig and the fact that not all of the people that use Bitcoin can afford it. Another thing is the electric fees that is a big peoblem for miners. Also, let me remind you that while a lot of BTC are grtting mined, the harder it gets and I think it is too late for us to mine BTC, we can't afford to mine BTC nowadays.

[cocoadreamboy]

This does actually look interesting, I suggest that you re-organize your post in general I was really sure this was some type of spam 

Thank you! And my bad, I am new to sharing it. I just put the finishing touches on my site yesterday, and now I am beginning my major marketing push.

OP, I think this post best fits to be in the  Mining thread since the topic is focused in mining.

I believe that maybe some of the whales might have some mining farm, but some might be just pure early bitcoin investors who had invested a lot of money in bitcoin since it started, where bitcoin costs less than a dollar.

It is more about understanding how the bitcoin financial market actually works. Miners are the largest active movers in the bitcoin industry. You can't discuss the price without discussing their motivations and actions. If I was talking mining specifics yes, but I am simply explaining the wholesale price of bitcoin.

Currently they have around $2.5 billion invested in active infrastructure and they spend around $3.5 million/day in electricity.

Just a question, is it still profitable to mine bitcoin even with numbers of rigs and the electricity cost.
I mean will the number of rigs you have compensate and add to your daily profit, or will it just be a huge waste of resources to mine bitcoin.

It depends on the efficiency of the machines you are using. If you are using the previous generation of s15's you are almost doubling your money during this time. If you are doing it on a CPU you are wasting your money. Now is a good time to be a miner, January February and March were not so good. The mega miners mine wait for pump cycles like we are in right now, and sell their inventory for profit to FOMOers.

[cocoadreamboy]

Thank you for this article and content concerning your new mining information obtained by your code speculation report.
Indeed it might help new investors or miner ones that want to start going further into that business.
Im glad in seeing more people are embrassing the new technologies for such matters.

My goal is to help my clients from wasting their money on emotions. Plus I have never seen anyone answer the question of why BTC doesn't go to zero. With my metrics I know why it doesn't go to zero.

[pooya87]

I believe that the largest players in bitcoin are the established miners. These are the whales. Currently they have around $2.5 billion invested in active infrastructure and they spend around $3.5 million/day in electricity. There is no larger player active and invested in bitcoin than the miners.

obviously when you combine thousands of people together, they become whales! when combined, traders have invested $140 billion in bitcoin!

With this metric you can see the price they pay to make a bitcoin. The price they pay vs. the bitcoin price will surprise you.

and how do you calculate that? there is no way you could figure out the cost of mining because there simply is too many variables from the electricity cost to labor costs, cooling cost, rent, and even in some cases bribes. so i am wondering why do you think the numbers you have come up with to build these charts can be correct?

Plus I have never seen anyone answer the question of why BTC doesn't go to zero. With my metrics I know why it doesn't go to zero.

and you would be wrong to rely on that. what you are forgetting is that how much it costs to mine bitcoin (whether it currently is $5000 or $7500) it is determined based on difficulty and that is determined based on bitcoin price itself. so in other words if price fell, difficulty would fall and cost would reduce. similarly it increases with price rise. NOT THE OTHER WAY AROUND!

[cocoadreamboy]

obviously when you combine thousands of people together, they become whales! when combined, traders have invested $140 billion in bitcoin!

That is not how market cap works. Market cap is one of the worst methods for understanding the nature of a financial vehicle. Also exchange volumes are massively inflated:
https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca201901-5164833-183434.pdf

and you would be wrong to rely on that. what you are forgetting is that how much it costs to mine bitcoin (whether it currently is $5000 or $7500) it is determined based on difficulty and that is determined based on bitcoin price itself. so in other words if price fell, difficulty would fall and cost would reduce. similarly it increases with price rise. NOT THE OTHER WAY AROUND!

Difficulty isn't based on bitcoin price but hash rate. There is a reason professionals exist, they do things other people can't. They do things that are hard. I've spent over a year perfecting my metrics. If you would rather fly blind without instruments that is your prerogative. I will use my altimeter thank you.

[pooya87]

Difficulty isn't based on bitcoin price but hash rate. There is a reason professionals exist, they do things other people can't. They do things that are hard. I've spent over a year perfecting my metrics. If you would rather fly blind without instruments that is your prerogative. I will use my altimeter thank you.

difficulty is based on hashrate but affected by the price, it doesn't move as fast as price moves during rises and falls but it moves in accordance with it.
and i am not "flying blind", i am asking what makes you think you could calculate cost of mining and what makes it accurate enough to be considered reliable. you can't expect us to take any data presented to use blindly! specially when you are not the first one to come up with this...

[cocoadreamboy]

Difficulty isn't based on bitcoin price but hash rate. There is a reason professionals exist, they do things other people can't. They do things that are hard. I've spent over a year perfecting my metrics. If you would rather fly blind without instruments that is your prerogative. I will use my altimeter thank you.

difficulty is based on hashrate but affected by the price, it doesn't move as fast as price moves during rises and falls but it moves in accordance with it.
and i am not "flying blind", i am asking what makes you think you could calculate cost of mining and what makes it accurate enough to be considered reliable. you can't expect us to take any data presented to use blindly! specially when you are not the first one to come up with this...

Hash rate is only affected by the amount of miners that are active on it. The hash rate operates independently of the price of bitcoin. When the price increases it gets more profitable to mine, but if the price of bitcoin went to 100k the hash rate even at max capacity couldn't reach anywhere near that right now. Calculating the cost of mining is as easy as calculating the processing speed of a comp. How many cores at how many hertz, it really isn't too complicated.

It is amazing how much push back I've gotten for presenting a logical number to bitcoin people, when they slurp up CMC volume lies on a daily basis. I literally present my data on my site, you can recreate my algo if you really care to.

[CryptoBry]

Indeed, this is very interesting and I am sure there are people who can benefit with this information plus the site is recommending  the optimal time to buy either Bitcoin, Ethereum or Bitcoin Cash. It is good to note that more efficient mining rigs can be coming to the market. I am just wondering if the Fundamental Price Floor can be connected somehow to the so-called intrinsic value of bitcoin...

[cocoadreamboy]

Indeed, this is very interesting and I am sure there are people who can benefit with this information plus the site is recommending  the optimal time to buy either Bitcoin, Ethereum or Bitcoin Cash. It is good to note that more efficient mining rigs can be coming to the market. I am just wondering if the Fundamental Price Floor can be connected somehow to the so-called intrinsic value of bitcoin...

Dude, I just did a preliminary calc. The number will shock you. It shocked me, but I gotta save it for my clients :O

In my view the Fundamental Price Floor is the intrinsic value of bitcoin. It acts like a professional cash flow assessment by the most experienced players in the bitcoin game. These are the people that secure the investment and sustain the price. They maintain the infrastructure and the entire bitcoin network. I just want to monitor what they are doing. Radar for the whales (maybe I can beach one and eat their blubber! It's chewy!).

[odolvlobo]

...
To monitor their actions, I have designed the Fundamental Price Floor. With this metric you can see the price they pay to make a bitcoin. The price they pay vs. the bitcoin price will surprise you.
...

The cost of mining depends on the price. It is not the other way around as you suggest.

It is easy to understand. If the price goes up, miners will spend more to mine the same amount of BTC. If the price goes down, they will spend less. Regardless of how much they spend, they produce the same amount of BTC. The idea that "they will only sell their BTC at a profit" defies reason as they must sell their BTC to pay for their operating costs (whether they sell at a profit or not).

...
New high efficiency miners are being released by Bitmain soon. Because these miners are so efficient they will make the price floor drop even more than where it is right now. The algorithm will be updated once the page is locked, and my subscribers will know the new price floor and understand how low bitcoin can go again.
...

It seems to me that switching to new minering equipment will increase infrastructure costs simply because miners must pay to replace their current equipment. Also, more efficient hardware doesn't lead to lower costs. It leads to higher difficulty as miners increase their hash rates.

In my opinion, if you can't get these right, there is no reason to believe that any of your analysis is correct.

[cocoadreamboy]

...
To monitor their actions, I have designed the Fundamental Price Floor. With this metric you can see the price they pay to make a bitcoin. The price they pay vs. the bitcoin price will surprise you.
...

The cost of mining depends on the price. It is not the other way around as you suggest.

It is easy to understand. If the price goes up, miners will spend more to mine the same amount of BTC. If the price goes down, they will spend less. Regardless of how much they spend, they produce the same amount of BTC. The idea that "they will only sell their BTC at a profit" defies reason as they must sell their BTC to pay for their operating costs (whether they sell at a profit or not).

...
New high efficiency miners are being released by Bitmain soon. Because these miners are so efficient they will make the price floor drop even more than where it is right now. The algorithm will be updated once the page is locked, and my subscribers will know the new price floor and understand how low bitcoin can go again.
...

It seems to me that switching to new minering equipment will increase infrastructure costs simply because miners must pay to replace their current equipment. Also, more efficient hardware doesn't lead to lower costs. It leads to higher difficulty as miners increase their hash rates.

In my opinion, if you can't get these right, there is no reason to believe that any of your analysis is correct.

Your first point is patently false the cost of mining depends on the hash rate not the btc price. That is like saying the cost of farming is based upon the price of corn. No farming corn is based on the cost to make corn. Mining bitcoin is based on the cost to make bitcoin not the price of bitcoin.

Your second point is also patently false. That is like saying buying a tractor that can till 50% more land that costs 10% more than the old tractor did (but is 50% more efficient) increases infrastructure costs because you have to pay for a new tractor. You sell the old tractor and buy a new tractor and then you can till 50% more land and make 50% more produce. With more produce on the market the spot price of produce goes down. Mining is no different.

Just to refute both points with logic: you assume miners are altruistic buddhist monks who throw their money away every day just so people like you can have a bitcoin? Do you also think Mcdonalds/google/facebook doesn't make a profit off of you?

You would be greatly helped by my site:

https://www.amsinger.org/subscriber-data

[odolvlobo]

Your first point is patently false the cost of mining depends on the hash rate not the btc price. That is like saying the cost of farming is based upon the price of corn. No farming corn is based on the cost to make corn. Mining bitcoin is based on the cost to make bitcoin not the price of bitcoin.

Your second point is also patently false. That is like saying buying a tractor that can till 50% more land that costs 10% more than the old tractor did (but is 50% more efficient) increases infrastructure costs because you have to pay for a new tractor. You sell the old tractor and buy a new tractor and then you can till 50% more land and make 50% more produce. With more produce on the market the spot price of produce goes down. Mining is no different.

Those statements show your lack of understanding about the economics of mining. The cost of growing corn may not be dependent on the price, but mining BTC is different. Unlike corn, the total amount of bitcoin that is mined is fixed at 1800 per day, and that number does not depend on the cost or the difficulty. Corn farmers can spend more to produce more corn, but if miners (as a whole) spend more, they do not increase the production of BTC. They simply increase the difficulty.

I agree that the cost of mining depends on the hash rate, but the hash rate depends on the price. Assuming that a miner is rational, they will increase their hash rate in order to take as much of the total BTC production as they can, but they will not pay more than the price of a bitcoin to mine a bitcoin. Thus, if the cost of mining a bitcoin is less than the price, a miner will increase their hash rate, and if the cost is higher they will stop mining. The overall effect is that if the cost of mining a bitcoin is less than the price, miners will increase their hash rates and raise the difficulty until the cost approaches the price, and if the cost of mining a bitcoin is greater than the price, the least efficient miners will stop mining and lower the difficulty until the cost of mining is below the price. There you have it. The cost of mining depends on the price.

[cocoadreamboy]

Those statements show your lack of understanding about the economics of mining. The cost of growing corn may not be dependent on the price, but mining BTC is different. Unlike corn, the total amount of bitcoin that is mined is fixed at 1800 per day, and that number does not depend on the cost or the difficulty. Corn farmers can spend more to produce more corn, but if miners (as a whole) spend more, they do not increase the production of BTC. They simply increase the difficulty.

I agree that the cost of mining depends on the hash rate, but the hash rate depends on the price. Assuming that a miner is rational, they will increase their hash rate in order to take as much of the total BTC production as they can, but they will not pay more than the price of a bitcoin to mine a bitcoin. Thus, if the cost of mining a bitcoin is less than the price, a miner will increase their hash rate, and if the cost is higher they will stop mining. The overall effect is that if the cost of mining a bitcoin is less than the price, miners will increase their hash rates and raise the difficulty until the cost approaches the price, and if the cost of mining a bitcoin is greater than the price, the least efficient miners will stop mining and lower the difficulty until the cost of mining is below the price. There you have it. The cost of mining depends on the price.

My friend, this is a really difficult concept. It took me 6 months since Nov 2018 (a time I lost a hearty chunk o cash) to really grasp how miner efficiency upgrades can tank the bitcoin price. I even was an s9 miner in 2017. Now I am trying to make others aware of what I learned.

The total amount of bitcoin blocks mined is limited to 2016 per fortnight (1800btc/day). The competition to mine blocks is intense and, when the hash rate is growing, it keeps getting more intense. The bitcoin miners are on a treadmill that is continually going faster. The reason no one can mine on a CPU anymore is because the introduction of ASIC miners made it too difficult for a CPU to mine btc. The ASIC eradicated the CPU competition.

With the advent of more efficient ASIC miners they are eradicating previous generations of ASIC miners just like they eradicated CPU miners. When S9's originally came out they costed 2k/unit. After Nov 2018 an S9 costed as low as $200/unit. With the release of the new S17's it will make S9 mining completely obsolete just like CPU's.

If I could make a magical ASIC that could seize 100% market share of the hash power of the network for $100 and get free electricity. I could create bitcoins for near zero cost, and I could dump 1800 bitcoins per day on the markets for PURE profit until the price of bitcoin goes to near zero.

These new efficient machines will make it so their owners can make bitcoin for VERY low prices even at higher hash rates than now. When efficiencies are not able to be increased a higher hash rate means a high bitcoin price, but when efficiencies increase a higher hash rate does NOT mean a higher bitcoin price, and depending on the degree of efficiency upgrade it can and will incentivize new miners to tank the price for greater MARKET SHARE of the 1800 bitcoin.

If you are using a horse to pull a plow it may cost 3k for that horse and all you need to feed it is hay (or grass or whatever) it may cost 50$/bushel of corn. But if your neighbor gets a 200hp tractor to till his field he would get 200x more area and it may only cost him $5/bushel of corn. He will very quickly cost you out of the market by selling his corn for $10/bushel.

Accordingly, the people in the city that were buying corn futures based on your farm at $50/bushel will also be screwed when your neighbor starts dumping his $10/bushels on the market. Bitcoins are basically futures contracts on the bitcoin mining network. People are currently buying $7800 dollar bitcoin futures contracts, not knowing that your neighbor is gassing up his tractor RIGHT NOW.

I made a post on my site explaining the floor price better here:

https://www.amsinger.org/writings

I hope you find it interesting