Not to spread FUD or anything, but here's some food for thought

[inca]

Appearances can be deceptive. All we know for sure is that on exchange there are more bitcoins for sale than buyers at the moment. Bitcoin's inbuilt inflation is decelerating with each block halving yet the price has risen throughout that time with bubbles and bursts. Why is this any different from before?

This is starting to remind me of those discussion with jorge, when he wants to find out the definitive "reason" for each rally or crash

Keep in mind, I believe that technicals rule the market, or maybe the slightly weaker claim: market sentiment (which doesn't require external reasons) heavily factors into the interpretation of the fundamentals, to the point where it makes sense to say "technicals rule the market".

So, the answer is probably somewhere in between cyclical market sentiment, professionalization of mining (with higher ratio of coins sold vs. coins held),  professionalization of trading (with more emphasis on short term profits), lasting negative influence on user confidence from mtgox failure (something that this forum is very reluctant to accept, imo), and uncertainty if growth of user adoption is accurately captured by an exponential growth function (I know, hashrate very clearly is, but that's not the same as user adoption).

Sounds about right Oda. Neat summary.

[Wandererfromthenorth]

It has nothing to do with the newly mined coins. Really annoying hearing people spout that nonsense.

Like, totally!

I mean, how on earth could an increase of the monetary base by about 14% this year lead to a lower evaluation per unit if insufficient speculative or usage-driven capital enters the market to counter that inflation.

What a preposterous throught.

It didn't happen with the usd denominated bonds, so why should it, in bitcoin?

Already answered, now in bold.

(The same old disclaimer as always: no, I'm not a "Bitcoin skeptic", or "perma bear". Just pointing out a possible, quite likely in fact, reason for the long price decline we're seeing.)

The point is, the mining of new coins is not causing the drop. Proof: last year new coins were mined at the same or higher rate and the exchange rate increased. New coins create downward pressure but that effect has existed since the dawn of bitcoin.

Do you realise that the Bitcoins mined daily 2 or 3 years ago (and same last year) were worth (in $) a lot less than what they are worth today?
If the BTCs mined every day are worth $5 each instead of $1200 or $400  A LOT LESS of $ worth of buy support is needed to sustain or increase the exchange rate.

Right now 3'400 BTCs are mined every day. That's the equivalent of 1.3 million $ every day of buy support (new money) that is needed to just sustain the current price.

Of course miners don't just dump all the BTCs as soon as they are mined every day, but that's beyond the point. It's just more and more supply that is being created that at the current price makes for a quite a lot of money (for the BTC demand BTC that there seems to be right now that is) needed to sustain it.

[Wandererfromthenorth]

It has nothing to do with the newly mined coins. Really annoying hearing people spout that nonsense.

Like, totally!

I mean, how on earth could an increase of the monetary base by about 14% this year lead to a lower evaluation per unit if insufficient speculative or usage-driven capital enters the market to counter that inflation.

What a preposterous throught.

It didn't happen with the usd denominated bonds, so why should it, in bitcoin?

Already answered, now in bold.

(The same old disclaimer as always: no, I'm not a "Bitcoin skeptic", or "perma bear". Just pointing out a possible, quite likely in fact, reason for the long price decline we're seeing.)

The point is, the mining of new coins is not causing the drop. Proof: last year new coins were mined at the same or higher rate and the exchange rate increased. New coins create downward pressure but that effect has existed since the dawn of bitcoin.

Alright, I'll paraphrase: There is a strong pull downwards by the inflation inherent to Bitcoin's emission phase. Without major influx of new capital, this will greatly depress price. It appears that this year the influx of capital is not sufficient to overcome the downward pull from emission.

But I suppose your question is: what is causing the reduced influx of new capital, compared to 2013, for example.

Exactly.

Appearances can be deceptive. All we know for sure is that on exchange there are more bitcoins for sale than buyers at the moment. Bitcoin's inbuilt inflation is decelerating with each block halving yet the price has risen throughout that time with bubbles and bursts. Why is this any different from before?

This is starting to remind me of those discussion with jorge, when he wants to find out the definitive "reason" for each rally or crash

Keep in mind, I believe that technicals rule the market, or maybe the slightly weaker claim: market sentiment (which doesn't require external reasons) heavily factors into the interpretation of the fundamentals, to the point where it makes sense to say "technicals rule the market".

So, the answer is probably somewhere in between cyclical market sentiment, professionalization of mining (with higher ratio of coins sold vs. coins held),  professionalization of trading (with more emphasis on short term profits), lasting negative influence on user confidence from mtgox failure (something that this forum is very reluctant to accept, imo), and uncertainty if growth of user adoption is accurately captured by an exponential growth function (I know, hashrate very clearly is, but that's not the same as user adoption).

Agreed.

[NotLambchop]

...
Do you realise that the Bitcoins mined daily 2 or 3 years ago (and same last year) were worth (in $) a lot less than what they are worth today?
If the BTCs mined every day are worth $5 each instead of $1200 or $400  A LOT LESS of $ worth of buy support is needed to sustain or increase the exchange rate.
...

Bingo.

[Wandererfromthenorth]

Wanderfromthenorth, I'm afraid that if you are looking for some objective discussion on this topic, you're going to be very frustrated trying to find it here.

I know that as a long term bull, I have been.

The perma-bulls just want to keep shouting "Relax, everything is fine, buy buy buy! You really don't get what's going on!" in a very callous, condescending manner.  Without any discussion or evidence backing up their reasoning at all.  Or they continue to shout "Bitcoin is still up 400% from last year!"
Reason: They just don't fkn know what the market is doing right now, and apparently don't care because supposed 'cheap coins'.  But cheap is completely relative month to month. Never mind the fact that there doesn't appear to be much real support at this level, and previous support from May @ $420 has been broken.  And nobody that bought since Jan 1st. really cares what the price was last year, at all.

The bear-trolls, well, they're just as useless.  The above post is a clear example.
Reason: Because the trolling has gotten so bad here with throwaway accounts that it's virtually impossible to separate the true trolls from the objective bears.  And some of the object bears that I might have listened to in the past have completely disappeared from this forum of late.

So what are we left with?  Yourself.  Just listen to your own intuition, buy if you think we're close to the bottom, or hold off if you think we're going much lower.

3 months ago I would have concluded that where we are currently is the bottom.  But now I just don't know anymore, and the whale traders seem to absolutely not give a shit.  They will dump this market into the ground if it suits them.  I'm just hoping they will eventually stop when they've had enough and can't find any more real buyers.

Yes a lot of trolls in here, but some people like you and oda etc can be constructive to talk to as we can see.

I have the impression that a lot of trolls here call themselves "investors" but they don't seem to care much about trading (because they are convinced"daytrading is just gambling") or the dynamics that rule the price, demand, supply etc. If they are not interested by those aspects fine, but at least quit the trolling  
I think they should try to inform themselves, because it's not rocket science and they could learn something new as with anything.

[johnyj]

But I suppose your question is: what is causing the reduced influx of new capital, compared to 2013, for example.

My personal feeling as a broker: The amount of capital buying bitcoins from me have increased 3X since last summer, but the price has increased by 4x, so there is a little bit room for downside movement, not too much

[bassclef]

Right now 3'400 BTCs are mined every day. That's the equivalent of 1.3 million $ every day of buy support (new money) that is needed to just sustain the current price.

There is certainly not 1.3 million dollars coming in every day, yet the price doesn't crash to the ground. There doesn't have to be x amount of money injected into the market to support a particular price level, that's not how it works. Market price is what buyers/sellers agree on at one point in time, nothing more.

[gog1]

the mtgox fraud plus chinese speculator push prices to unprecedented levels.  the deflation will be long and painful.

other than speculative reasons, there's little incentive for the average joe to buy BTC - traditional fiat / credit card is still superior as a payment method than BTC at the moment.

[wilth1]

I suspect the price will continue trending down toward the current cost of mining absent buy pressure driven by news or market manipulation.

Current mining bubble is arguably the result of investment made 8-10 months ago

[raid_n]

Appearances can be deceptive. All we know for sure is that on exchange there are more bitcoins for sale than buyers at the moment. Bitcoin's inbuilt inflation is decelerating with each block halving yet the price has risen throughout that time with bubbles and bursts. Why is this any different from before?

This is starting to remind me of those discussion with jorge, when he wants to find out the definitive "reason" for each rally or crash

Keep in mind, I believe that technicals rule the market, or maybe the slightly weaker claim: market sentiment (which doesn't require external reasons) heavily factors into the interpretation of the fundamentals, to the point where it makes sense to say "technicals rule the market".

So, the answer is probably somewhere in between cyclical market sentiment, professionalization of mining (with higher ratio of coins sold vs. coins held),  professionalization of trading (with more emphasis on short term profits), lasting negative influence on user confidence from mtgox failure (something that this forum is very reluctant to accept, imo), and uncertainty if growth of user adoption is accurately captured by an exponential growth function (I know, hashrate very clearly is, but that's not the same as user adoption).

I also agree with you on the sentiment that you can't just reduce a complex situation to an almost binary statement such as "mining is the cause".
This is almost as bad as "it's the gox coins, it's exchanges manipulating, it's the government".

So the supply of bitcoin is increasing around 14% a year at the moment? If during that time bitcoin adoption grows by 14% the effect should cancel out.
Also why is it always assumed that the coins mined are immediately (well, after maturing of course) sold?
You'd think that a reasonable miner would try to get the most out of their coins if they wanted to sell them.
Dumping bitcoin to the ground is a totally counter-intuitive move (let's leave out the conspiracy theories of miners trying to force others out of the business).

I don't know a lot about trading but from what I gather shorts are up significantly at the moment.
It is the general market sentiment that things are bearish so people try and profit from that.
This sentiment can and is creating much more downward pressure than miners could ever make

[kutaka]

Right now 3'400 BTCs are mined every day. That's the equivalent of 1.3 million $ every day of buy support (new money) that is needed to just sustain the current price.

There is certainly not 1.3 million dollars coming in every day, yet the price doesn't crash to the ground. There doesn't have to be x amount of money injected into the market to support a particular price level, that's not how it works. Market price is what buyers/sellers agree on at one point in time, nothing more.

I am sorry but in this case Wandererfromthenorth is right. If we consider miners' profitability, and estimate mining cost of one bitcoin to, let's say, 300$, it means that 75% of daily supply must be dumped or miners gets on red.

[Erdogan]

It has nothing to do with the newly mined coins. Really annoying hearing people spout that nonsense.

Like, totally!

I mean, how on earth could an increase of the monetary base by about 14% this year lead to a lower evaluation per unit if insufficient speculative or usage-driven capital enters the market to counter that inflation.

What a preposterous throught.

The monetary base of bitcoin is fixed, only that all coins have not been found yet. They are there, somewhere in the integer space.

[oda.krell]

It has nothing to do with the newly mined coins. Really annoying hearing people spout that nonsense.

Like, totally!

I mean, how on earth could an increase of the monetary base by about 14% this year lead to a lower evaluation per unit if insufficient speculative or usage-driven capital enters the market to counter that inflation.

What a preposterous throught.

The monetary base of bitcoin is fixed, only that all coins have not been found yet. They are there, somewhere in the integer space.

It is fixed as a point of convergence more than 100 years into the future. Which is more than the life time of even the youngest market participants right now. That's 'increasing the monetary base' for all practical considerations of a market participant.

Not indefinitely, of course - which is the "sound money" promise of a Bitcoin future. But  until then, it's inflation all the way.

[sbrzol]

Good points

I doubt if there are still some people that buy mining gears to mine coin and dump them directly, this is a proven way of going broke since April

if i were a chinese billionaire\millionaire who want to leave China with their wealth then bitcoin mining would be a perfect solution.
You buy the mining hardware and pay everything with yuan and get dollar after selling bitcoin 

the price does not matter,  so you will continue to mine with a loss too , (if the mining cost of 1 BTC is more than its price)  10%-20%  no matter  ,
who cares , if you can convert yuan to dollar without any limit

^ Exactly this is the point! Now imagine you have a mining farm and can provide this special kind of relocation assistance service to wealthy Chinese countrymen.
I have read an article a few days ago that some Chinese miners even use "free" electricity by installing rogue mining farms in government-owned facilities. The minted bitcoins can be bought in Yuan, transferred to foreign Exchanges and converted to USD. This business model could work for a very long time, even if the BTC is down at 50$ or less and difficulty goes up even higher.

[Tzupy]

This model in which Chinese buy BTC directly from the miners in order to get $ out of China by dumping on foreign exchanges
is not just bearish, but worrisome for the future recovery. Eventually the Chinese authorities will stop it and seller pressure will lessen.

[NotLambchop]

...
So the supply of bitcoin is increasing around 14% a year at the moment? If during that time bitcoin adoption grows by 14% the effect should cancel out.
...

It depends on what you mean by "adoption grows by 14%.

If 14% more people learn about Bitcoin this year, and each one bought just one Satoshi, that doesn't do much.  And simply spending 14% more $ doesn't do much either--BTC price has quadrupled since a year ago, so what's needed is (14 x 4)= 56% more fiat.
Oversimplified, but you get the drift.

[fred1111]

Whatever the direction, things are going to look very different one year from now. Either we'll hover arround 50-200, or at 10-15k. Has anyone calculated the necessary bitcoin price for today's use excluding speculation / store of value (which is mostly black market, I imagine)?

[raid_n]

...
So the supply of bitcoin is increasing around 14% a year at the moment? If during that time bitcoin adoption grows by 14% the effect should cancel out.
...

It depends on what you mean by "adoption grows by 14%.

If 14% more people learn about Bitcoin this year, and each one bought just one Satoshi, that doesn't do much.  And simply spending 14% more $ doesn't do much either--BTC price has quadrupled since a year ago, so what's needed is (14 x 4)= 56% more fiat.
Oversimplified, but you get the drift.

What I meant is that if the bitcoin economy as a whole grows by 14%, not user adoption counted in individuals.
The point is that as long as we have real growth of over 14% per year you can neglect the additional coins from miners and price comes down to speculation and usefulness and of course more scarcity if we do grow over 14%


[edit] with all the talks about fake volume on chinese exchanges etc it would be really interesting to know solid facts.
As much as Jorge is trolling he does raise some points when it comes to that. All it takes is one big exchange to "tweak" the charts and the sheep (in this case the traders ) will follow. Looking at the gox fiasko in hindsight really makes me wonder how much trust I should place in the markets. Either way I see miners not as a major driving force for price.

[oda.krell]

Whatever the direction, things are going to look very different one year from now. Either we'll hover arround 50-200, or at 10-15k. Has anyone calculated the necessary bitcoin price for today's use excluding speculation / store of value (which is mostly black market, I imagine)?

That's the question amorous cow-herder asked a while ago. The summary of my answer in that thread is:

That question is nearly impossible to answer, because BTC is de facto used as a store of value by some early adopters, but at the same time, their decision to use it as such is motivated by the, ultimately speculative, assumption that BTC will succeed. So, in my opinion, the question what is the purely "non-speculatve value" per coin can't be answered because usage and speculation are not entirely separable.

If the question is, what is the current value purely motivated by transactional usage, then based on my very, very back of the napkin calculation in the thread above, I don't see current commercially motivated transactional volume at much higher than 1 billion USD per year, which together with some conservative assumptions about velocity of money and free float available for transactional usage, leads to a value below $100 per coin.

Btw, I don't think black market usage is still as dominant as it was two years ago maybe, but it probably still makes up a relevant share, together with a portion of BTC denominated online gambling. Very crudely again I'd say gambling + black market add up to less, but not much less than 50% of total commercial TV.

Big fat disclaimer: I'm not saying "that's the fair price for BTC right now".  I'm just saying that this is the result of my calculation which coin price is necessary to support current commercial transactional value that occurs on-blockchain.

[kwukduck]

Not to spread FUD or anything, but here's some food for thought i'm gonna do it anyway!

There, fixed that for you.