Will Bitcoin fail when the block reward drops to 25BTC?

[blablahblah]

Fear based thinking is characteristic of much of what I see pass for discourse on this forum. That's one reason why FUD is such an appealing concept to scared little sheep.

Seriously kiddies, your life is as likely to be a fucked up disappointment that you will regret every day as it is to be anything else, and no matter that, you are likely to die painfully in complete hopelessness and slide down that long gray tunnel into forever darkness without ever knowing why. Oh, and you can't take it with you, even if it is a deflationary currency 

So buck up, you sound like a bunch of little girls. Coach Satani signing out 

Jolly good to see that you're raising the standards by contributing to the substance of the debates instead of whinging!

[1715040638]

1715040638

[1715040638]

1715040638

[1715040638]

1715040638

[cunicula]

No, he is just an arrogant person who thinks he is so much smarter than anyone else on this forum.

FTFY

[Dutch Merganser]

No, he is just an arrogant person who thinks he is so much smarter than anyone else on this forum.

Well then he needs to take a number like the rest, he has plenty of company here, it's rather like a support group without any trained guidance or oversight 

[cunicula]

Bitcoins are completely durable. A fully anticipated decrease in supply of a durable good cannot cause price to increase any faster than the real interest rate (1-3% per annum) + a risk premium for holding bitcoin. If not, then speculators would want to invest in the durable good now, store it, and sell it at a profit after the supply drop. Competition among speculators drives the expected price increase down to the real interest rate + risk premium. Any price effect due to falling block reward is already loaded into the current market price.

If the supply decrease was unanticipated or bitcoins were not durable, then this would be a different story.

EDIT: include risk premium

[norulezapply]

also, we should all probably just put cunicula on ignore because all we're doing is bumping this FUDlicious thread.

I agree. My OP was definitely FUD. But I'm not trying to trick anyone. I just wanted other people's opinions and theories.

All anyone ever does in this Speculation sub-forum is shout "FUD FUD FUD!"... It's why I usually don't bother reading it.

[Technomage]

Bitcoins are completely durable. A fully anticipated decrease in supply of a durable good cannot cause price to increase any faster than the real interest rate (1-3% per annum). If not, then speculators would want to invest in the durable good now, store it, and sell it at a profit after the supply drop. Competition among speculators drives the expected price increase down to the real interest rate. Any price effect due to falling block reward is already loaded into the current market price.

If the supply decrease was unanticipated or bitcoins were not durable, then this would be a different story.

It's not this simple, for one simple reason. Bitcoin market is so volatile for a large number of reasons that you can't look at this in a vacuum. If speculator x thinks the price might go down in the near future for a reason not related to this, he is not going to be buying now. I don't believe that this particular event is well priced in at this point. It will become priced in once this event is a bigger issue in people's minds. Right now it's still far away, so far in Bitcoin time that for all we know we might have a super bubble and a bust before it even happens.

To hammer my point in clearer, it's easy to anticipate a resulting price increase because of the reward drop. But from where? From where it was before. Here is the problem, we don't really know if a price of $5 is high or low. Maybe we're at $3 in August, good luck for those who priced in the price increase now. Bitcoin is so full of questions that it would be sort of super bullish to price in the reward drop price increase at this point because it's not certain we're even this high in the months before the drop.

So I'd say that people buying now are buying for a wide variety of reasons, this one in particular having little effect. In the months before the event, many will be buying solely for this reason. That is the difference. It does add to the overall bullishness of already bullish market players but closer to the event this alone will cause significant rallies because people expect that. It's a self-fulfilling prophecy, just like everything else in an environment like this.

[blablahblah]

All anyone ever does in this Speculation sub-forum is shout "FUD FUD FUD!"... It's why I usually don't bother reading it.

Well it is a child forum.

[blablahblah]

Bitcoins are completely durable. A fully anticipated decrease in supply of a durable good cannot cause price to increase any faster than the real interest rate (1-3% per annum). If not, then speculators would want to invest in the durable good now, store it, and sell it at a profit after the supply drop. Competition among speculators drives the expected price increase down to the real interest rate. Any price effect due to falling block reward is already loaded into the current market price.

If the supply decrease was unanticipated or bitcoins were not durable, then this would be a different story.

It's not this simple, for one simple reason. Bitcoin market is so volatile for a large number of reasons that you can't look at this in a vacuum. If speculator x thinks the price might go down in the near future for a reason not related to this, he is not going to be buying now. I don't believe that this particular event is well priced in at this point. It will become priced in once this event is a bigger issue in people's minds. Right now it's still far away, so far in Bitcoin time that for all we know we might have a super bubble and a bust before it even happens.

To hammer my point in clearer, it's easy to anticipate a resulting price increase because of the reward drop. But from where? From where it was before. Here is the problem, we don't really know if a price of $5 is high or low. Maybe we're at $3 in August, good luck for those who priced in the price increase now. Bitcoin is so full of questions that it would be sort of super bullish to price in the reward drop price increase at this point because it's not certain we're even this high in the months before the drop.

So I'd say that people buying now are buying for a wide variety of reasons, this one in particular having little effect. In the months before the event, many will be buying solely for this reason. That is the difference.

Congrats to cunicula for providing a serious reply. However, I'm not sure if his analysis is fully valid in this case. The supply can't be anticipated -- a large speculator could already be holding a large number of Bitcoins and refuse to tell anyone when (if ever) she'll sell them. His earlier point (about inertia) has merit because there could be lots of those speculators, and since each could be similarly unpredictable, the supply is likely to get averaged out anyway. Nonetheless, there is a difference between anticipating the creation of coins, versus anticipating the availability of said coins.

[barbarousrelic]

I am looking forward to buying a bunch of mining equipment at firesale prices after the reward drops.

[ElectricMucus]

How about this:

Difficulty will rise from new technology (tons of gamers with new gpus, plus fpgas) and panic not to get left behind, some people mining at a loss regardless.
Prices drop because of hoarded coins from the early years being dumped on the market. (They hold out this long, "now or never")

I'm not saying this will happen, but just to remind you guys that tons of scenarios are possible. Don't freakin act like you have the magic crystal ball.

[Transisto]

As an 8 month+ miner I have to decide whether I finance that ASIC / FPGA rig with earned Bitcoin or pour in new money.

Summer is awfully unbearable within say 10 feet of 10 GPUs.  Maintenance, cooling, and space constrain are adding up making it an unprofitable waste of time beyond 2-4 (GPU) aka. single gaming rig.

Any moderately tech savvy investor (50k$ & more) looking to get into BTC will choose ASIC/FPGA boxes and will buy a few cheap BTC. (before the halving)

Overall the network will only be stronger and will be able to tolerate temporary drop to even 50c per BTC
I applaud BFL, LargeCoin and the likes for making this possible.

[Bro]

with those tiny FPGA rigs, there will be a shitload of people mining for free at their work

it should keep the price low

[Crypt_Current]

Are you completely unfamiliar with the concept of burden of proof? Are you some kind of creationist or something?

I lold!   

[Crypt_Current]

with those tiny FPGA rigs, there will be a shitload of people mining for free at their work

it should keep the price low

^Word.

Hopefully the supply of FPGA rigs will increase with demand...  to keep price of the rigs affordable...

[Stephen Gornick]

Don't discount the composition of that hashing power though.  Individuals mining today on their gaming rigs are getting squeezed out by difficulty increases versus a stable exchange rate.  They aren't going to be buying FPGAs so the operators of these larger GPU farm ops and 25 ghash/s mini-rigs will representing a greater and greater share of the hashing.

It would take a drop of something like 95% or a rise of something like 5000% to materially change the strength of the network.

That's the key point.  Currently, it's like having the equivalent of armed snipers every ten feet around a Fort Knox protecting only a few bags of pennies, nickels and dimes located inside.  Send half of them home and the pennies aren't left any less secure than before.

[norulezapply]

Very good analogy! I like analogies

Don't discount the composition of that hashing power though.  Individuals mining today on their gaming rigs are getting squeezed out by difficulty increases versus a stable exchange rate.  They aren't going to be buying FPGAs so the operators of these larger GPU farm ops and 25 ghash/s mini-rigs will representing a greater and greater share of the hashing.

It would take a drop of something like 95% or a rise of something like 5000% to materially change the strength of the network.

That's the key point.  It like having the equivalent armed snipers every ten feet around a Fort Knox protecting only a few bags of pennies, nickels and dimes located inside.  Send half of them home and the pennies aren't left any less secure than before.