Think of Bitcoin Financially

[cocoadreamboy]

Bitcoin is not a stock, an annuity, a simple commodity, or a currency. It is a combination of all these things. In order to properly understand this fusion called bitcoin new metrics and analysis are necessary. To take control over bitcoin and grow confident you must know 2 concepts:

Creation Cost - The amount that is costs to make a bitcoin.

• This cost represents the lowest price that bitcoin can functionally go.

• It represents the combined investment of all the businesses that are active in bitcoin.

• The creators of bitcoin will support this price as they did from Dec 2018 to March 2019. They will not give up their golden goose.

• This price can change minute by minute because it is based on the hash rate of the network (the amount of active servers) and the efficiency of the machines that are active.

Cash flow - The amount of longterm investment needed to maintain the current price.

• 1800 bitcoin are created every day

• If the price of bitcoin is $13,800 it costs $24.8 million of long term investment to maintain that price.

• This is why bitcoin goes up very fast, and slowly drains back down.

• This is why the 19k bitcoin of Dec 2017 didn’t stay. It was impossible to maintain, so it drained back down because $34.2 million of longterm investment is not feasible.

Bitcoin operates like an unregulated, manipulated commodity. The only way to profit from it (and not get rekt) is to understand how it works and take advantage of prime opportunities to buy and sell. It is not difficult, in fact, it is quite simple.

In hind sight we all know that it was a good to sell at $19k and $13.8k as well as buy at $3.2k last December. Wouldn’t you have liked to know this information during those times?

If you'd like request some analysis or research from me here:

https://www.amsinger.org

Much love and hard work,


Aaron

[Febo]

Bitcoin is not a stock, an annuity, a simple commodity, or a currency. It is a combination of all these things. In order to properly understand this fusion called bitcoin new metrics and analysis are necessary. To take control over bitcoin and grow confident you must know 2 concepts:

Creation Cost - The amount that is costs to make a bitcoin.

• This cost represents the lowest price that bitcoin can functionally go.

You already misunderstand something here. Cost to mine bitcoin can go to almost zero. If everyone stop mining and only you mine with your cpu, then you will get 1.5 BTC every 10 minutes quite cheap.  

When price is high new miners join to mine. That is what mainly happens. When price gets lower no new miners join. When price goes under mining cost of some miners, they might or not stop mining. Since no new join that means that less miners compete for those 12.5btc a 10 minutes and that way costs to mine 1 btc decreases on average. [/list]

[Reid]

That is some analysis that would better suit the trading discussion.

Yes it is easy to understand the flow but there are a lot of times that even analysts gets it wrong. Why?
The volatility of bitcoin doesnt go as what you will always be expect.

It will be easier if there is only one exchange but that is not what is happening right now.

[cocoadreamboy]

You already misunderstand something here. Cost to mine bitcoin can go to almost zero. If everyone stop mining and only you mine with your cpu, then you will get 1.5 BTC every 10 minutes quite cheap.  

When price is high new miners join to mine. That is what mainly happens. When price gets lower no new miners join. When price goes under mining cost of some miners, they might or not stop mining. Since no new join that means that less miners compete for those 12.5btc a 10 minutes and that way costs to mine 1 btc decreases on average. [/list]

You can't mine with a CPU anymore, unless every person with a busted up ASIC throws it away. You need to have specialized ASIC's to mine now, and not everyone can just "jump in". Do you truly believe that enough miners "jumped in" to sustain $13,800 or how about in 2017 @ $19,500?

I know exactly how many miners "jumped in" during the boom. I monitor this situation every day, and I can tell you 13,800 wasn't supported in the slightest.

https://www.amsinger.org

I monitor downside and mitigate risk for my clients.

Aaron

[cocoadreamboy]

That is some analysis that would better suit the trading discussion.

Yes it is easy to understand the flow but there are a lot of times that even analysts gets it wrong. Why?
The volatility of bitcoin doesnt go as what you will always be expect.

It will be easier if there is only one exchange but that is not what is happening right now.

Creation cost is a novel concept that bitcoin and crypto people need to start thinking about. I am not speculating here, I am speaking of the business reality of bitcoin. Creation cost and cash flow, the cornerstone of understanding risk levels in crypto.

Aaron

https://www.amsinger.org

[gentlemand]

I've been in BTC for many years. At no point have I ever given the slightest shit about mining. It's not my problem. It's not my concern. I pay it zero attention.

Miners take care of themselves. The algorithm takes care of the economics of mining. What it costs them is their problem. If they can't take it someone else will.

Any miner attempting to defend a price will wind up ruined in a very short period of time. At heart miners are service providers. They follow the price, not lead it.

[exstasie]

Sigh. This guy again?

Go sell your snake oil somewhere else.

[cocoadreamboy]

I've been in BTC for many years. At no point have I ever given the slightest shit about mining. It's not my problem. It's not my concern. I pay it zero attention.

Miners take care of themselves. The algorithm takes care of the economics of mining. What it costs them is their problem. If they can't take it someone else will.

Any miner attempting to defend a price will wind up ruined in a very short period of time. At heart miners are service providers. They follow the price, not lead it.

If you don't care about mining you ignore the true financial investment in bitcoin. Do you assume they are $10 operations with zero buying power or foresight?

Aaron

https://www.amsinger.org

[cocoadreamboy]

Sigh. This guy again?

You should really tell your boss about my site. It would be very good for him/her.

[Febo]

You already misunderstand something here. Cost to mine bitcoin can go to almost zero. If everyone stop mining and only you mine with your cpu, then you will get 1.5 BTC every 10 minutes quite cheap.  

When price is high new miners join to mine. That is what mainly happens. When price gets lower no new miners join. When price goes under mining cost of some miners, they might or not stop mining. Since no new join that means that less miners compete for those 12.5btc a 10 minutes and that way costs to mine 1 btc decreases on average. [/list]

You can't mine with a CPU anymore, unless every person with a busted up ASIC throws it away. You need to have specialized ASIC's to mine now, and not everyone can just "jump in". Do you truly believe that enough miners "jumped in" to sustain $13,800 or how about in 2017 @ $19,500?

That is exactly what I am talking about. If price of Bitcoin goes close to zero. Then all miners will get turned off and difficulty will drop and it will end by one guy mining it with CPU. This is the scenario I was writing about. And this  shows clearly that there is no minimum price for Bitcoin that is set by miners.  


For your question hmm. When price of Bitcoin went from $1k to $20k in 2017. Miners starting building up their farms. It cant be instant. They expand and new farms got opened. In December 2017 when BTC price went down, this did not end. They keep expanding since were not sure if price will stay low or will go back to $20k and also costs of mining were way under $12k as was price back then. So new mining farms and expanding of already existing ere going on for whole 2018. Although price went to $6k. Once price fall to $3k, that ended. Some farms that were in areas with high electricity cost even stopped mining in December 2018.   But as soon price jump back to $6k hash rate growth started growing again.  This is how it is and is same for last 10 years.

Lets assume that in December price of Bitcoin would stay on $3k from some who knows what reason. Something fundamental should change in Bitcoin. And when 2019 would start price would start falling further down to $2000 and then to $1000.   No new mining farm would get open anymore. No existing farm would buy more miners. All farms that are in areas with expensive electricity would start closing down. And harsh rate would decrease and difficulty would decrease and existing miners would get more Bitcoins for their hash given.  This is how PoW works and this is why Satoshi chose it to secure our money.

[BitHodler]

It will be easier if there is only one exchange but that is not what is happening right now.

That means more centralization. I am actually quite happy with how well distributed the crypto exchanges are. If there was just one single exchange it would be quite easy for regulators to shut it down.

Another benefit is that more competition means better quality of service and lower fees. The stock market is everything people shouldn't want the crypto market to transform into.

Sure, it allows the crappy exchanges to emerge too, but that's something you just have to accept, and you can always decide not to use these crappy exchanges because there is always a better alternative available.

[exstasie]

I notice you don't use either of the words "supply" and "demand" once.

This is how you know this guy is a joke.

He assumes every single BTC ever mined is getting dumped for fiat, LOL. As if miners were investing in these operations so they could immediately dump to eek out a tiny short term fiat profit!

His entire analysis is nothing more than "OMG, who would put that much money into BTC? Impossible!"

And that's why he's been short since the $8,000s. If he's lucky, he might be able to get back to his break-even.

[cocoadreamboy]

L
M
A
O

I notice you don't use either of the words "supply" and "demand" once.

This is how you know this guy is a joke.

very cute you have used no numbers or logic, so what are you?

[cocoadreamboy]

He assumes every single BTC ever mined is getting dumped for fiat, LOL. As if miners were investing in these operations so they could immediately dump to eek out a tiny short term fiat profit!

His entire analysis is nothing more than "OMG, who would put that much money into BTC? Impossible!"

And that's why he's been short since the $8,000s. If he's lucky, he might be able to get back to his break-even.

I'm not kidding bro, tell your boss about me. He could make some good money. With the insider information plus my financial analysis, your boss would make out like a bandit

https://www.amsinger.org

How do you like my redesign?

[fabiorem]

I cant. I suffered gate-keeping today, and this forced my hand to use litecoin to make a purchase, which in turn made me buy more litecoin to replace what I spent.

You would understand this if you lived in a third world country, but I guess you dont.

[Herbert2020]

Bitcoin is not a stock, an annuity, a simple commodity, or a currency. It is a combination of all these things.

you are wrong.
bitcoin is a currency and nothing else. and because this currency is new and is still growing and being adopted, its price rises which means it attracts speculators who invest in this currency. that doesn't change the nature of bitcoin though.

Creation Cost - The amount that is costs to make a bitcoin.
This cost represents the lowest price that bitcoin can functionally go.

you are very wrong about this.
and history has proven many times that price can and will fall below the creation cost (aka mining cost) of bitcoin as it has always fallen big time after its bubbles while the mining cost remains much higher.
in other words creation cost has nothing to do with how low price can go or how much it should be.

This price can change minute by minute because it is based on the hash rate of the network (the amount of active servers) and the efficiency of the machines that are active.

you are wrong again.
and it is a very common mistake among newcomers. the thing is you are looking at it upside down. price doesn't change based on cost, the cost changes based on price!
meaning if price is $10 then the cost will be a little less than $10
if price went up to $20 then the cost adjusts and will be a little less than $20
and if price fell down to $5 then the cost again readjusts and will be a little less than $5

[illyiller]

If the price of bitcoin is $13,800 it costs $24.8 million of long term investment [daily] to maintain that price.

This seems like an odd assumption. Doesn't that assume that every single BTC mined is immediately dumped onto the market? Why would that be?

No miner dumps everything. The entire point of mining is to sell as little as possible in the short term. Otherwise they would just use their capital to buy BTC. The OP doesn't seem to grasp that miners are Bitcoin investors, first and foremost.

[cocoadreamboy]

Bitcoin is not a stock, an annuity, a simple commodity, or a currency. It is a combination of all these things.

you are wrong.
bitcoin is a currency and nothing else. and because this currency is new and is still growing and being adopted, its price rises which means it attracts speculators who invest in this currency. that doesn't change the nature of bitcoin though.

Creation Cost - The amount that is costs to make a bitcoin.
This cost represents the lowest price that bitcoin can functionally go.

you are very wrong about this.
and history has proven many times that price can and will fall below the creation cost (aka mining cost) of bitcoin as it has always fallen big time after its bubbles while the mining cost remains much higher.
in other words creation cost has nothing to do with how low price can go or how much it should be.

This price can change minute by minute because it is based on the hash rate of the network (the amount of active servers) and the efficiency of the machines that are active.

you are wrong again.
and it is a very common mistake among newcomers. the thing is you are looking at it upside down. price doesn't change based on cost, the cost changes based on price!
meaning if price is $10 then the cost will be a little less than $10
if price went up to $20 then the cost adjusts and will be a little less than $20
and if price fell down to $5 then the cost again readjusts and will be a little less than $5

I am not a newcomer, you have no clue how hash rate works. You have no clue how difficulty works. If you "assessment" was correct then the week that btc was up 40% the hash rate would have followed 40% up in a week. You have used no data. You have used no actual bitcoin infrastructure (ASICs). You are a manipulator.

If you want to listen to this guy be my guest and throw your money down the drain.

https://www.amsinger.org

Aaron

[adzino]

The price changes from minute to minute because of the hash rate? I thought bitcoin was  a free market and the price depends on the demand and supply. Coins being dumped for cheap which increases the supply causing the price to slightly fall and then at the same moment other people buying it back in high volume which increases the demand causing the price to go back and rise and then the circle keeps on going on until a whale comes in and dumps all their coins or starts buying everything causing massive fall or surge of the price.

[cocoadreamboy]

The price changes from minute to minute because of the hash rate? I thought bitcoin was  a free market and the price depends on the demand and supply. Coins being dumped for cheap which increases the supply causing the price to slightly fall and then at the same moment other people buying it back in high volume which increases the demand causing the price to go back and rise and then the circle keeps on going on until a whale comes in and dumps all their coins or starts buying everything causing massive fall or surge of the price.

The creation cost changes from minute to minute based on the hash rate. The spot price is affected by the market dynamics. People don't always want to buy at super high prices like $13k, so the liquidity at those levels drop and the price falls.

1800 coins being made a day signifies a large amount of downward pressure. The whales can manipulate the price quickly in moments, but they can not sustain overly inflated prices for long periods of time. The nature of the market is more powerful than the manipulators.

If you want to learn more, check out my site and request information. It is really quite beautiful how the bitcoin market actually works.

https://www.amsinger.org

Aaron