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Author Topic: Stop selling mined coins privately  (Read 3338 times)
AlexWaters (OP)
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September 09, 2014, 07:16:47 PM
 #1

Miners, stop selling privately.  Here is why it is not in your best interest:

-Miners typically need to sell their coin immediately as they have invested in equipment that expects a return

-There are deals for fixed liquidity privately. Where the miners can sell their coins outside the open market at a premium or at a guaranteed price range for a set period of time

-Those deals exist because there are market makers who profit immensely from pulling wool over the miners eyes

For example: the maker can buy 10,000 coins privately, which reduces the volume on the public order books. They can then “splash” the thinner books by selling 2000 coins; thereby bringing the price down. Now they can continue negotiating with miners stating that the market rate is $X - which is significantly lower than the market rate had the miners just sold on the open market. The makers are intentionally trying to keep volume off the open books so that they can keep the price low so that they can continue buying their coins low. Someone with $20,000,000 they want to invest in bitcoin would be able to acquire many more bitcoins by using the above methodology.

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September 10, 2014, 05:35:04 AM
 #2

I think your logic is somewhat flawed. First of all I kind of doubt that there are many miners contracting to sell 10k BTC considering that only 3.6k~ BTC are mined every day. Secondly these brokers are professionals at making markets, and since they have so much money invested in the bitcoin purchased they have a vested interest in trying to keep the price as stable as possible when they sell on the market to avoid being forced to sell at a loss.

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September 10, 2014, 03:47:45 PM
 #3

It wouldn't be very smart to buy 10,000 BTC and then try to cause the price to fall in order to buy more at a lower price.

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September 10, 2014, 04:13:04 PM
 #4

It wouldn't be very smart to buy 10,000 BTC and then try to cause the price to fall in order to buy more at a lower price.

Depends really. It could be. People have done things like that often. Especially when there was less liquidity and the market was smaller. I don't know how effective such manipulation tactics are these days though.
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September 10, 2014, 05:29:41 PM
 #5

It is not about equipment but electricity. Miners usually what they sell pay electricity with.
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September 10, 2014, 08:31:35 PM
 #6

It wouldn't be very smart to buy 10,000 BTC and then try to cause the price to fall in order to buy more at a lower price.

Depends really. It could be. People have done things like that often. Especially when there was less liquidity and the market was smaller. I don't know how effective such manipulation tactics are these days though.

Doubtful. Theoretically, it doesn't work. Even if you ignore the theory, it is still very risky and unlikely to be profitable.

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September 10, 2014, 10:15:05 PM
 #7

Miners, stop selling privately.  Here is why it is not in your best interest:

-Miners typically need to sell their coin immediately as they have invested in equipment that expects a return

-There are deals for fixed liquidity privately. Where the miners can sell their coins outside the open market at a premium or at a guaranteed price range for a set period of time

-Those deals exist because there are market makers who profit immensely from pulling wool over the miners eyes

For example: the maker can buy 10,000 coins privately, which reduces the volume on the public order books. They can then “splash” the thinner books by selling 2000 coins; thereby bringing the price down. Now they can continue negotiating with miners stating that the market rate is $X - which is significantly lower than the market rate had the miners just sold on the open market. The makers are intentionally trying to keep volume off the open books so that they can keep the price low so that they can continue buying their coins low. Someone with $20,000,000 they want to invest in bitcoin would be able to acquire many more bitcoins by using the above methodology.

Seems like your hypothesis falls on deaf ears, mostly.

I agree with the basic idea, it's absolutely possible that this is going on. Allow me to quote myself presenting a similar idead a few days ago...


I don't claim I believe with certainty that this is going on, I am submitting that, if a large enough entity (or several) would plan to buy large amounts of coins, and have some patience, this would probably a scenario worth exploring. In terms of tax efficiency, waiting for the ETF would probably be the better choice, but in terms of price control, the method I described would in principle beat a fund that is, ultimately, positive feedback linked to the markets.

I disagree that miners would prevent this taking place. No disrespect to miners, they're the backbone of the network, but amateur miners seem to be not necessarily the most economically rational actors. Go look around in this forum how often the fall for the fallacy: 'It's sunk cost anyway, I'll let my outdated miners run as long as they produce coins', and how often more economically minded users need to tell them that the actual calculation needs to be based on total cost of future production of coins (mainly: energy costs) vs. number of coins bought at market for the same costs.

Larger mining operations are undoubtedly much more economically savvy, but I've argued over and over again that I believe that, with the increasing "professionalization" of Bitcoin and Bitcoin mining, short-term profit opportunity will probably outclass long-term speculative investment. In other words: large miners sell more than they hold, especially considering that we are currently nowhere near a new uncontested bull market (which means the ratio of sold vs. held coins can change if the market sentiment changes, and miners might hold more than they sell if they feel it's a sure thing price will go up.)

Finally, we have plenty of evidence that public market price as determined by on exchange trading is a major reference point for off exchange transactions (just one example: the SR coin auction, where every party that spoke on it refered to "the market price" as if it were the obvious metric). Binding a large mining operation to you in a mid to long-term contract, maybe even offering a premium (although, from hearsay, I've only heard of large holders being made sub market offers, off exchange), then using some fraction of the coins to strategically depress price, would seem like a very good strategy to me, and relatively risk free: if it works, market price stays low, and accumulation proceeds at a low cost. If it fails, and price refuses to be depressed, the account value of coins gained so far appreciates, which is a sweet little consolation price.

Arbitrage by miners could throw a spanner in the works of this mechanism, but profits would be comparably marginal: the goal of the accumulator is not to destroy the on-exchange price, just to keep a lid on it. For the arbitreur miner, the reward is small (sold his coins at market price, is able to buy them back slightly below perhaps), and more importantly: for the large operations, the initial problem would re-appear - what to do with a large amount of coins, when you in reality prefer to hold USD (by my assumption that professional mining operations are short-term opportunistic, and not long-term married to Bitcoin success).

It's a tragedy of the commons style scenario: presumably, miners would be better off selling directly on the exchanges, since the higher volume generated there would ultimately drive up price, but individually, they fear the risk of lower profits because of increased selling pressure on exchange, so they seek arrangements off exchange.

I'll say it one more time: The above is (motivated, I think) speculation. I make no claim this is necessarily happening. I only point out that I believe it is a possible, maybe even probable, mechanism taking place, accounting - at least partially - for the current stagnation period.


The key point here is large scale accumulation. The bet is not on immediately rising account value, i.e. quick profits, but based on the idea that some large investors are doing this to get a foothold in crypto without driving price up in the process.

I'm not sure if your "appeal to the miners" will work out, though. As I wrote above, it's a tragedy of the commons style situation: it does make sense for miners to sell privately (fixed price, stability, less counter party risk), but ultimately, they suffer as well because their collective decision (if this actually going on) enables price depression.

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September 10, 2014, 10:25:14 PM
 #8

I don't follow you (@ OP).  You explain that miners might like the ability to sell their bitcoins immediately at a price set and agreed upon in advance.  This seems natural enough to me as otherwise their income would be much more volatile than their costs.

If a wealthy trader is able to offer such a service and make a profit then that's a win-win, classic division of labour.  If a wealthy investor is able to buy more coins more cheaply this way than by buying on the exchanges then this is good for everyone.
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September 10, 2014, 10:59:54 PM
 #9

It wouldn't be very smart to buy 10,000 BTC and then try to cause the price to fall in order to buy more at a lower price.

Depends really. It could be. People have done things like that often. Especially when there was less liquidity and the market was smaller. I don't know how effective such manipulation tactics are these days though.
This may have happened when the price of bitcoin was much lower (and the block subsidy was double what it is now) as much less money would have been involved. I would highly doubt someone would attempt to draw the price lower after investing ~$5 million.

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September 11, 2014, 05:27:59 AM
 #10

-There are deals for fixed liquidity privately. Where the miners can sell their coins outside the open market at a premium or at a guaranteed price range for a set period of time

Care to provide any examples? I haven't heard of such "deals". Any proof that what you describe is in fact happening on any significant scale?
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September 13, 2014, 07:57:20 AM
 #11

-There are deals for fixed liquidity privately. Where the miners can sell their coins outside the open market at a premium or at a guaranteed price range for a set period of time

Care to provide any examples? I haven't heard of such "deals". Any proof that what you describe is in fact happening on any significant scale?
They are not. There are simply not large enough miners for them to have this kind of need. The OP likely got his "idea' from a recent article about coin brokers charging 5% for dealing in large amounts of bitcoin off exchanges.
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September 13, 2014, 03:12:57 PM
 #12

Miners that dump and dont save most of their gains will kill themselves when 1 btc is worth 10K.
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September 13, 2014, 05:21:56 PM
 #13

It is an issue worth considering that is for sure.  One of those things people tend to over look or just forget about, especially if you not a miner.

Miners that dump and dont save most of their gains will kill themselves when 1 btc is worth 10K.

Well I hope that isn't the case.  They will be very distraught and I'll feel bad for them when that time comes.  It can be a hard choice for some who are deciding whether to hold or have the extra fiat in their hands.
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September 13, 2014, 05:26:00 PM
 #14

Are there someone who can sell so high amounts of bitcoins privately, I don't think so.
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September 14, 2014, 09:04:41 AM
 #15

If all the miners do dump their coins on exchanges, it will further drive down prices. So not selling mined coins privately will not support the price.
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September 14, 2014, 09:05:39 AM
 #16

Miners, stop selling privately.  Here is why it is not in your best interest:

-Miners typically need to sell their coin immediately as they have invested in equipment that expects a return

-There are deals for fixed liquidity privately. Where the miners can sell their coins outside the open market at a premium or at a guaranteed price range for a set period of time

-Those deals exist because there are market makers who profit immensely from pulling wool over the miners eyes

For example: the maker can buy 10,000 coins privately, which reduces the volume on the public order books. They can then “splash” the thinner books by selling 2000 coins; thereby bringing the price down. Now they can continue negotiating with miners stating that the market rate is $X - which is significantly lower than the market rate had the miners just sold on the open market. The makers are intentionally trying to keep volume off the open books so that they can keep the price low so that they can continue buying their coins low. Someone with $20,000,000 they want to invest in bitcoin would be able to acquire many more bitcoins by using the above methodology.

I dont get what you are trying to say, isn't selling it one exchange and selling it private the same?
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September 15, 2014, 12:31:32 AM
 #17

Miners that dump and dont save most of their gains will kill themselves when 1 btc is worth 10K.
I don't think this is true. Miners need to pay for current expenses (like electricity) and need to repay themselves the cost of the miner. If a miner thought that the price of bitcoin will outright increase like this then they would be better off simply buying it on an exchange

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September 15, 2014, 05:25:00 AM
 #18

Miners, stop selling privately.  Here is why it is not in your best interest:

-Miners typically need to sell their coin immediately as they have invested in equipment that expects a return

-There are deals for fixed liquidity privately. Where the miners can sell their coins outside the open market at a premium or at a guaranteed price range for a set period of time

-Those deals exist because there are market makers who profit immensely from pulling wool over the miners eyes

For example: the maker can buy 10,000 coins privately, which reduces the volume on the public order books. They can then “splash” the thinner books by selling 2000 coins; thereby bringing the price down. Now they can continue negotiating with miners stating that the market rate is $X - which is significantly lower than the market rate had the miners just sold on the open market. The makers are intentionally trying to keep volume off the open books so that they can keep the price low so that they can continue buying their coins low. Someone with $20,000,000 they want to invest in bitcoin would be able to acquire many more bitcoins by using the above methodology.

I dont get what you are trying to say, isn't selling it one exchange and selling it private the same?
I would personally argue that it is, however the OP seems to disagree.

If you trade privately then the person you sell to will either not purchase bitcoin on an exchange they otherwise would have bought to or will sell bitcoin that they would not have otherwise sold
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September 15, 2014, 05:38:55 AM
 #19

I think your logic is somewhat flawed. First of all I kind of doubt that there are many miners contracting to sell 10k BTC considering that only 3.6k~ BTC are mined every day. Secondly these brokers are professionals at making markets, and since they have so much money invested in the bitcoin purchased they have a vested interest in trying to keep the price as stable as possible when they sell on the market to avoid being forced to sell at a loss.

with the exception of your volume consideration, your logic is flawed. Market Makers want to create a market that is stable for them only. Once they have their side of it, they want to move the market.

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September 15, 2014, 05:41:14 AM
 #20

Miners, stop selling privately.  Here is why it is not in your best interest:

-Miners typically need to sell their coin immediately as they have invested in equipment that expects a return

-There are deals for fixed liquidity privately. Where the miners can sell their coins outside the open market at a premium or at a guaranteed price range for a set period of time

-Those deals exist because there are market makers who profit immensely from pulling wool over the miners eyes

For example: the maker can buy 10,000 coins privately, which reduces the volume on the public order books. They can then “splash” the thinner books by selling 2000 coins; thereby bringing the price down. Now they can continue negotiating with miners stating that the market rate is $X - which is significantly lower than the market rate had the miners just sold on the open market. The makers are intentionally trying to keep volume off the open books so that they can keep the price low so that they can continue buying their coins low. Someone with $20,000,000 they want to invest in bitcoin would be able to acquire many more bitcoins by using the above methodology.

I dont get what you are trying to say, isn't selling it one exchange and selling it private the same?
I would personally argue that it is, however the OP seems to disagree.

If you trade privately then the person you sell to will either not purchase bitcoin on an exchange they otherwise would have bought to or will sell bitcoin that they would not have otherwise sold

Which results in the price you or I see being inaccurate, because activity is going on but it won't be reflected in the public price we're seeing on any open exchange. The OP's logic is accurate, whether it's actually happening is another story. I don't know enough about how many miners there are to know how realistic this scenario could be.

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September 15, 2014, 06:35:14 AM
 #21

OP is exactly the reason why people deal off the exchanges.

All I hear is 'stop dealing to your advantage and buy over priced on exchanges so I can line my own pocket!'

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September 18, 2014, 05:23:45 AM
 #22

Miners, stop selling privately.  Here is why it is not in your best interest:

-Miners typically need to sell their coin immediately as they have invested in equipment that expects a return

-There are deals for fixed liquidity privately. Where the miners can sell their coins outside the open market at a premium or at a guaranteed price range for a set period of time

-Those deals exist because there are market makers who profit immensely from pulling wool over the miners eyes

For example: the maker can buy 10,000 coins privately, which reduces the volume on the public order books. They can then “splash” the thinner books by selling 2000 coins; thereby bringing the price down. Now they can continue negotiating with miners stating that the market rate is $X - which is significantly lower than the market rate had the miners just sold on the open market. The makers are intentionally trying to keep volume off the open books so that they can keep the price low so that they can continue buying their coins low. Someone with $20,000,000 they want to invest in bitcoin would be able to acquire many more bitcoins by using the above methodology.

I dont get what you are trying to say, isn't selling it one exchange and selling it private the same?
I would personally argue that it is, however the OP seems to disagree.

If you trade privately then the person you sell to will either not purchase bitcoin on an exchange they otherwise would have bought to or will sell bitcoin that they would not have otherwise sold

Which results in the price you or I see being inaccurate, because activity is going on but it won't be reflected in the public price we're seeing on any open exchange. The OP's logic is accurate, whether it's actually happening is another story. I don't know enough about how many miners there are to know how realistic this scenario could be.
Not necessarily. If a seller values their privacy then they will not want their trade reflected on an exchange and will utilize a broker to execute their trade. Not only will their trade not be reflected on the exchanges but the transaction will not have a connection to the exchanges (via the blockchain or otherwise).
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September 20, 2014, 03:18:40 AM
 #23

OP is exactly the reason why people deal off the exchanges.

All I hear is 'stop dealing to your advantage and buy over priced on exchanges so I can line my own pocket!'


There are advantages and disadvantages to both dealing with exchanges and dealing in private. I would say that the vast majority of trading occurs on exchanges due to the fact that exchanges have reputation and most private brokers do not (at least do not have as much reputation). As a result what the OP is describing is really not relevant to the price of bitcoin

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September 20, 2014, 09:48:09 PM
 #24

"-Miners typically need to sell their coin immediately as they have invested in equipment that expects a return"

Can someone please clarify for me, in layman's terms, how the investment a miner makes to acquire a coin is any more at risk than the investment a trader makes to acquire a coin?   Once the coin is in your wallet, the relative return on that coin, once sold, is identical for both cases isn't it?

Miner:  Spent $10 on equipment costs, $90 on power and cooling, received one Bitcoin worth $100

Speculator:  Spent $90 on some exchange, $10 on fees,  received one Bitcoin worth $100

Why are these two individuals in any different situation once they have turned their non-coin assets into coin?  Up until the moment the coin landed in their wallet, their pre-coin assets could have performed wildly different to each other.  But once they have been converted to coin, they perform the same?  Or am I making the mistake of thinking miners do not see themselves as speculators but as something like 'manufacturers' and are thus not using disposable risk capital to set up their operations? 
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September 20, 2014, 11:37:43 PM
 #25

"-Miners typically need to sell their coin immediately as they have invested in equipment that expects a return"

Can someone please clarify for me, in layman's terms, how the investment a miner makes to acquire a coin is any more at risk than the investment a trader makes to acquire a coin?   Once the coin is in your wallet, the relative return on that coin, once sold, is identical for both cases isn't it?

Miner:  Spent $10 on equipment costs, $90 on power and cooling, received one Bitcoin worth $100

Speculator:  Spent $90 on some exchange, $10 on fees,  received one Bitcoin worth $100

Why are these two individuals in any different situation once they have turned their non-coin assets into coin?  Up until the moment the coin landed in their wallet, their pre-coin assets could have performed wildly different to each other.  But once they have been converted to coin, they perform the same?  Or am I making the mistake of thinking miners do not see themselves as speculators but as something like 'manufacturers' and are thus not using disposable risk capital to set up their operations? 
The miner would likely have spent a lot more then $10 in your scenario in buying their miner, but this is not the point.

The miner likely did not plan on investing in bitcoin via the electric company when they purchased their miner. They were likely hoping that the difficulty would rise at a slow enough pace such that they would be able to mine more bitcoin then the miner would cost plus the cost of electricity.

Also a trader would generally only purchase bitcoin on a one time basis, while the miner would be contentiously be buying bitcoin via the electric company. If they already had as much bitcoin as they needed/wanted then they would still need to purchase additional bitcoin because if they do not they would lose out on part of their investment as miners are a deprecating asset. 

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September 21, 2014, 02:38:07 AM
 #26

"-Miners typically need to sell their coin immediately as they have invested in equipment that expects a return"

Can someone please clarify for me, in layman's terms, how the investment a miner makes to acquire a coin is any more at risk than the investment a trader makes to acquire a coin?   Once the coin is in your wallet, the relative return on that coin, once sold, is identical for both cases isn't it?

Miner:  Spent $10 on equipment costs, $90 on power and cooling, received one Bitcoin worth $100

Speculator:  Spent $90 on some exchange, $10 on fees,  received one Bitcoin worth $100

Why are these two individuals in any different situation once they have turned their non-coin assets into coin?  Up until the moment the coin landed in their wallet, their pre-coin assets could have performed wildly different to each other.  But once they have been converted to coin, they perform the same?  Or am I making the mistake of thinking miners do not see themselves as speculators but as something like 'manufacturers' and are thus not using disposable risk capital to set up their operations? 

Miners would like to continue mining and earn bitcoins. So their bills have to be paid out.


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dzust
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September 21, 2014, 08:36:02 AM
 #27

"-Miners typically need to sell their coin immediately as they have invested in equipment that expects a return"

Can someone please clarify for me, in layman's terms, how the investment a miner makes to acquire a coin is any more at risk than the investment a trader makes to acquire a coin?   Once the coin is in your wallet, the relative return on that coin, once sold, is identical for both cases isn't it?

Miner:  Spent $10 on equipment costs, $90 on power and cooling, received one Bitcoin worth $100

Speculator:  Spent $90 on some exchange, $10 on fees,  received one Bitcoin worth $100

Why are these two individuals in any different situation once they have turned their non-coin assets into coin?  Up until the moment the coin landed in their wallet, their pre-coin assets could have performed wildly different to each other.  But once they have been converted to coin, they perform the same?  Or am I making the mistake of thinking miners do not see themselves as speculators but as something like 'manufacturers' and are thus not using disposable risk capital to set up their operations? 

Miners would like to continue mining and earn bitcoins. So their bills have to be paid out.

Someone have a very big bill to pay and mining is some kind of investmet.
snappa4ever
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September 22, 2014, 05:25:28 AM
 #28

"-Miners typically need to sell their coin immediately as they have invested in equipment that expects a return"

Can someone please clarify for me, in layman's terms, how the investment a miner makes to acquire a coin is any more at risk than the investment a trader makes to acquire a coin?   Once the coin is in your wallet, the relative return on that coin, once sold, is identical for both cases isn't it?

Miner:  Spent $10 on equipment costs, $90 on power and cooling, received one Bitcoin worth $100

Speculator:  Spent $90 on some exchange, $10 on fees,  received one Bitcoin worth $100

Why are these two individuals in any different situation once they have turned their non-coin assets into coin?  Up until the moment the coin landed in their wallet, their pre-coin assets could have performed wildly different to each other.  But once they have been converted to coin, they perform the same?  Or am I making the mistake of thinking miners do not see themselves as speculators but as something like 'manufacturers' and are thus not using disposable risk capital to set up their operations? 

Miners would like to continue mining and earn bitcoins. So their bills have to be paid out.
This is why miners need to sell some amount of their bitcoin when they mine. If they do not then they will have bills that they are unable to otherwise pay

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September 22, 2014, 04:41:39 PM
 #29

"-Miners typically need to sell their coin immediately as they have invested in equipment that expects a return"

Can someone please clarify for me, in layman's terms, how the investment a miner makes to acquire a coin is any more at risk than the investment a trader makes to acquire a coin?   Once the coin is in your wallet, the relative return on that coin, once sold, is identical for both cases isn't it?

Miner:  Spent $10 on equipment costs, $90 on power and cooling, received one Bitcoin worth $100

Speculator:  Spent $90 on some exchange, $10 on fees,  received one Bitcoin worth $100

Why are these two individuals in any different situation once they have turned their non-coin assets into coin?  Up until the moment the coin landed in their wallet, their pre-coin assets could have performed wildly different to each other.  But once they have been converted to coin, they perform the same?  Or am I making the mistake of thinking miners do not see themselves as speculators but as something like 'manufacturers' and are thus not using disposable risk capital to set up their operations? 

Miners would like to continue mining and earn bitcoins. So their bills have to be paid out.

Someone have a very big bill to pay and mining is some kind of investmet.

Mining is an investment, which requires coins to be turned around. I would think it is like some kind of working capital cycle.
mikeymillie
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September 22, 2014, 08:32:03 PM
 #30

"-Miners typically need to sell their coin immediately as they have invested in equipment that expects a return"

Can someone please clarify for me, in layman's terms, how the investment a miner makes to acquire a coin is any more at risk than the investment a trader makes to acquire a coin?   Once the coin is in your wallet, the relative return on that coin, once sold, is identical for both cases isn't it?

Miner:  Spent $10 on equipment costs, $90 on power and cooling, received one Bitcoin worth $100

Speculator:  Spent $90 on some exchange, $10 on fees,  received one Bitcoin worth $100

Why are these two individuals in any different situation once they have turned their non-coin assets into coin?  Up until the moment the coin landed in their wallet, their pre-coin assets could have performed wildly different to each other.  But once they have been converted to coin, they perform the same?  Or am I making the mistake of thinking miners do not see themselves as speculators but as something like 'manufacturers' and are thus not using disposable risk capital to set up their operations? 

Miners would like to continue mining and earn bitcoins. So their bills have to be paid out.

So do traders, I still do not see how a trader and a miner are in fundamentally different circumstances. 
One buys bitcoins from an exchange in hopes of selling them for a profit. 
The other buys bitcoins through a combination of a mining equipment company and the electric company, in hopes of selling them for a profit. 

The responses I am getting so far seem to imply that miners live paycheck to paycheck (or bitcoin to bitcoin) and cannot afford to sit on even a single mined satoshi, but instead must immediately sell each one to pay their bills instead of waiting for a better price when a better price is likely to come.  Do traders not have bills to pay as well? Their investment capital didn't come from nowhere either, and has to be replaced as well.   

Also there are, what, like 60% of all mined bitcoins in the blockchain that have as of yet, no unspent outputs?  Wouldn't this seem to be, in large part, the result of miners who are clearly not selling coins they mine right away?  I don't think Satoshi and a few people who lost or forgot about their Bitcoin account for such a large figure.
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September 24, 2014, 03:56:09 AM
 #31

"-Miners typically need to sell their coin immediately as they have invested in equipment that expects a return"

Can someone please clarify for me, in layman's terms, how the investment a miner makes to acquire a coin is any more at risk than the investment a trader makes to acquire a coin?   Once the coin is in your wallet, the relative return on that coin, once sold, is identical for both cases isn't it?

Miner:  Spent $10 on equipment costs, $90 on power and cooling, received one Bitcoin worth $100

Speculator:  Spent $90 on some exchange, $10 on fees,  received one Bitcoin worth $100

Why are these two individuals in any different situation once they have turned their non-coin assets into coin?  Up until the moment the coin landed in their wallet, their pre-coin assets could have performed wildly different to each other.  But once they have been converted to coin, they perform the same?  Or am I making the mistake of thinking miners do not see themselves as speculators but as something like 'manufacturers' and are thus not using disposable risk capital to set up their operations? 

Miners would like to continue mining and earn bitcoins. So their bills have to be paid out.

So do traders, I still do not see how a trader and a miner are in fundamentally different circumstances. 
One buys bitcoins from an exchange in hopes of selling them for a profit. 
The other buys bitcoins through a combination of a mining equipment company and the electric company, in hopes of selling them for a profit. 

The responses I am getting so far seem to imply that miners live paycheck to paycheck (or bitcoin to bitcoin) and cannot afford to sit on even a single mined satoshi, but instead must immediately sell each one to pay their bills instead of waiting for a better price when a better price is likely to come.  Do traders not have bills to pay as well? Their investment capital didn't come from nowhere either, and has to be replaced as well.   

Also there are, what, like 60% of all mined bitcoins in the blockchain that have as of yet, no unspent outputs?  Wouldn't this seem to be, in large part, the result of miners who are clearly not selling coins they mine right away?  I don't think Satoshi and a few people who lost or forgot about their Bitcoin account for such a large figure.
Most of the mined bitcoin with no unspent outputs were mined in the days before pools. Even if a miner is to "save" his bitcoin the bitcoin he owns will likely have inputs that are not from block subsidies (they are from previous inputs)

I would think of it as the miners are being forced to buy a certain amount of bitcoin, more then they can afford to buy, so they need to sell some of it. For example, if a miner can only afford to spend $100 per month buying bitcoin but uses up $1,000 worth of electricity then he will need to sell at least $900 worth so he does not buy (on a net effect) more then he can afford
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September 24, 2014, 03:57:24 AM
 #32

It's bad because there's no competition and no way to determine the acurately
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September 24, 2014, 03:58:52 AM
 #33

OP is exactly the reason why people deal off the exchanges.

All I hear is 'stop dealing to your advantage and buy over priced on exchanges so I can line my own pocket!'



That's true. When a miner wants to get rid of large quantities the exchange might not be the best place he can sell.
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September 24, 2014, 10:19:04 PM
 #34

Imagine you have to sell 10000 BTC... you are going to break the market if you do it in an exchange, if you do it subtletly with tons of small sells to not create a big wall, you'll take ages. So contacting some rich person privately is the best way.
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September 25, 2014, 12:32:25 PM
 #35

You won't break bitcoin price if you sell privately
But you must buy bitcoin from exchanger to raise the price  Grin

But i don't want someone use that method to get a lot of profit  Angry

OP is exactly the reason why people deal off the exchanges.

All I hear is 'stop dealing to your advantage and buy over priced on exchanges so I can line my own pocket!'



I think that's true
And some people thinking just like the OP

Imagine you have to sell 10000 BTC... you are going to break the market if you do it in an exchange, if you do it subtletly with tons of small sells to not create a big wall, you'll take ages. So contacting some rich person privately is the best way.

But, it's difficult to search rich person who want buy 10000 BTC privately  Sad

Kemampuanku Tidak semua orang memiliki dan dapat melakukannya . Tidak memakan kaum sendiri . dan mempunyai kode etik yang tidak masuk akal.
BIGbangTheory
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September 26, 2014, 04:11:36 AM
 #36

"-Miners typically need to sell their coin immediately as they have invested in equipment that expects a return"

Can someone please clarify for me, in layman's terms, how the investment a miner makes to acquire a coin is any more at risk than the investment a trader makes to acquire a coin?   Once the coin is in your wallet, the relative return on that coin, once sold, is identical for both cases isn't it?

Miner:  Spent $10 on equipment costs, $90 on power and cooling, received one Bitcoin worth $100

Speculator:  Spent $90 on some exchange, $10 on fees,  received one Bitcoin worth $100

Why are these two individuals in any different situation once they have turned their non-coin assets into coin?  Up until the moment the coin landed in their wallet, their pre-coin assets could have performed wildly different to each other.  But once they have been converted to coin, they perform the same?  Or am I making the mistake of thinking miners do not see themselves as speculators but as something like 'manufacturers' and are thus not using disposable risk capital to set up their operations? 
The risk the miner is taking is when they buy their machine. They attempt to ROI on this investment by pocketing the difference between the cost of running the machine and the value of what the machine is able to produce
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September 26, 2014, 10:57:48 PM
 #37

You won't break bitcoin price if you sell privately
But you must buy bitcoin from exchanger to raise the price  Grin

But i don't want someone use that method to get a lot of profit  Angry

OP is exactly the reason why people deal off the exchanges.

All I hear is 'stop dealing to your advantage and buy over priced on exchanges so I can line my own pocket!'



I think that's true
And some people thinking just like the OP

Imagine you have to sell 10000 BTC... you are going to break the market if you do it in an exchange, if you do it subtletly with tons of small sells to not create a big wall, you'll take ages. So contacting some rich person privately is the best way.

But, it's difficult to search rich person who want buy 10000 BTC privately  Sad

There are OTC markets which help you find such buyers. Of course, they will take a 5% cut.
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