Why is the value dropping?

[Mervyn_Pumpkinhead]

If mining costs $10 trillion per day, then bitcoin would have to cost $10 trillion / 3600 = 312 500 000$, and to sustain this price, bitcoin would need to increase $10 trillion dollars every day. If it won't get this amount, then it will take it from the present market cap.

This is completely wrong.

Perhaps this is why people think PoW is bad.

If every miner takes the 3600 bitcoins and cashes them out each day, it does not matter if the price is $1/BTC or $300,00,000/BTC. They cannot take out more than 3600 bitcoins.

The only way this is possible is that if you assume that the miners have a buttload of bitcoins that they have been hoarding that they will cash out. Which..once they cash out...would lead right back to only 3600 bitcoins per day.

The bitcoins they take will be converted to dollars.
Can you understand that?

[Elwar]

If mining costs $10 trillion per day, then bitcoin would have to cost $10 trillion / 3600 = 312 500 000$, and to sustain this price, bitcoin would need to increase $10 trillion dollars every day. If it won't get this amount, then it will take it from the present market cap.

This is completely wrong.

Perhaps this is why people think PoW is bad.

If every miner takes the 3600 bitcoins and cashes them out each day, it does not matter if the price is $1/BTC or $300,00,000/BTC. They cannot take out more than 3600 bitcoins.

The only way this is possible is that if you assume that the miners have a buttload of bitcoins that they have been hoarding that they will cash out. Which..once they cash out...would lead right back to only 3600 bitcoins per day.

The bitcoins they take will be converted to dollars.
Can you understand that?

Yes, worst case scenario...3600 bitcoins per day are converted to dollars by miners.

[Mervyn_Pumpkinhead]

If mining costs $10 trillion per day, then bitcoin would have to cost $10 trillion / 3600 = 312 500 000$, and to sustain this price, bitcoin would need to increase $10 trillion dollars every day. If it won't get this amount, then it will take it from the present market cap.

This is completely wrong.

Perhaps this is why people think PoW is bad.

If every miner takes the 3600 bitcoins and cashes them out each day, it does not matter if the price is $1/BTC or $300,00,000/BTC. They cannot take out more than 3600 bitcoins.

The only way this is possible is that if you assume that the miners have a buttload of bitcoins that they have been hoarding that they will cash out. Which..once they cash out...would lead right back to only 3600 bitcoins per day.

The bitcoins they take will be converted to dollars.
Can you understand that?

Yes, worst case scenario...3600 bitcoins per day are converted to dollars by miners.

Dollars were wasted by mining, so dollars are needed for profit or at least ROI. Those miners who are wealthier, can hoard bitcoins for some time, with covering the losses from their own wallets. They can just accumulate and hope for better times, but no one will indefinitely wait and accumulate. Standard business practices is that you don't wait very long on a bad investment, with throwing more money at it. You cut your losses and move on. The more coins that will accumulate for better times, the bigger the avalanche will be when hope will finally fracture.

Bitcoin is also a promise of value. Right now 1 bitcoin promises you about 323$ of value. If there are too many people who are expecting promised value, then there is ability to fill these promises, then a crash is inevitable and can only be postponed.

[Elwar]

Dollars were wasted by mining, so dollars are needed for profit or at least ROI. Those miners who are wealthier, can hoard bitcoins for some time, with covering the losses from their own wallets. They can just accumulate and hope for better times, but no one will indefinitely wait and accumulate. Standard business practices is that you don't wait very long on a bad investment, with throwing more money at it. You cut your losses and move on. The more coins that will accumulate for better times, the bigger the avalanche will be when hope will fracture.

Bitcoin is also a promise of value. Right now 1 bitcoin promises you about 323$ of value. If there are too many people who are expecting promised value, then there is ability to fill these promises, then an crash is inevitable and can only be postponed.

All true.

It still does not mean that high mining costs take more out of bitcoin than 3600 bitcoins per day.

If miners are losing money, it will not lower the price of Bitcoin.

[Mervyn_Pumpkinhead]

Dollars were wasted by mining, so dollars are needed for profit or at least ROI. Those miners who are wealthier, can hoard bitcoins for some time, with covering the losses from their own wallets. They can just accumulate and hope for better times, but no one will indefinitely wait and accumulate. Standard business practices is that you don't wait very long on a bad investment, with throwing more money at it. You cut your losses and move on. The more coins that will accumulate for better times, the bigger the avalanche will be when hope will fracture.

Bitcoin is also a promise of value. Right now 1 bitcoin promises you about 323$ of value. If there are too many people who are expecting promised value, then there is ability to fill these promises, then an crash is inevitable and can only be postponed.

All true.

It still does not mean that high mining costs take more out of bitcoin than 3600 bitcoins per day.

If miners are losing money, it will not lower the price of Bitcoin.

I haven't said that high mining costs take out more bitcoins then 3600. I told that high mining costs take out dollars from the bitcoin market, also meaning the value of one bitcoin. This is what I have been trying to explain..

Higher cost of mining rises the amount of dollars that miners need to take out of the market.

[Elwar]

Higher cost of mining rises the amount of dollars that miners need want to take out of the market.

FTFY

If the cost of mining is $10 trillion per day and the cost of 3600 bitcoins is only $1 million. Miners will only be able to re-coup $1 million of that $10 trillion cost.

[Mervyn_Pumpkinhead]

Higher cost of mining rises the amount of dollars that miners need want to take out of the market.

FTFY

If the cost of mining is $10 trillion per day and the cost of 3600 bitcoins is only $1 million. Miners will only be able to re-coup $1 million of that $10 trillion cost.

They need it if they wouldn't want to operate with a loss. And I can't imagine anyone wanting to operate with a loss.
As said before, some people can operate a little longer with paying for the losses from their own wallets and some people less. But eventually everyone will face the inevitable.

If an coin would cost 10 times less to mine, then there would be 10 times less the need to convert the coins to dollar. That coin wouldn't be so addicted to constant growth and it could handle stability during times when the flow of new money is scarce.
PoW mining is artificially making something expensive that should be cheap, by adding the cost of useless work. Useless work shouldn't be rewarded. The future of money is in efficiency, and PoW mining is far from it.

[Elwar]

They need it if they wouldn't want to operate with a loss. And I can't imagine anyone wanting to operate with a loss.
As said before, some people can operate a little longer with paying for the losses from their own wallets and some people less. But eventually everyone will face the inevitable.

If an coin would cost 10 times less to mine, then there would be 10 times less the need to convert the coins to dollar. That coin wouldn't be so addicted to constant growth and it could handle stability during times when the flow of new money is scarce.
PoW mining is artificially making something expensive that should be cheap, by adding the cost of useless work. Useless work shouldn't be rewarded. The future of money is in efficiency, and PoW mining is far from it.

This is why mining difficulty follows the cost, not the other way around.

When the price drops, difficulty drops. People stop operating at a loss.

Mining cost does not affect Bitcoin price. Bitcoin price affects mining output.

[Mervyn_Pumpkinhead]

They need it if they wouldn't want to operate with a loss. And I can't imagine anyone wanting to operate with a loss.
As said before, some people can operate a little longer with paying for the losses from their own wallets and some people less. But eventually everyone will face the inevitable.

If an coin would cost 10 times less to mine, then there would be 10 times less the need to convert the coins to dollar. That coin wouldn't be so addicted to constant growth and it could handle stability during times when the flow of new money is scarce.
PoW mining is artificially making something expensive that should be cheap, by adding the cost of useless work. Useless work shouldn't be rewarded. The future of money is in efficiency, and PoW mining is far from it.

This is why mining difficulty follows the cost, not the other way around.

When the price drops, difficulty drops. People stop operating at a loss.

Mining cost does not affect Bitcoin price. Bitcoin price affects mining output.

Have you even looked at the charts for 1y difficulty increase and compared it to the price movement?
I can't tell anymore if you are trolling me or being serious.

If the price has dropped, then difficulty has still increased. People need their ROI with initial equipment purchase. If operating the machinery costs even a little less then electricity, then miners will continue, to at least make some money back from.their initial investment of buying the equipment. And they operating will cause the selling pressure as described above.

[Elwar]

https://en.bitcoin.it/wiki/Myths
Bitcoin Myths:

The value of bitcoins are based on how much electricity and computing power it takes to mine them
This statement is an attempt to apply to Bitcoin the labor theory of value, which is generally accepted as false. Just because something takes X resources to create does not mean that the resulting product will be worth X. It can be worth more, or less, depending on the utility thereof to its users.

In fact the causality is the reverse of that (this applies to the labor theory of value in general). The cost to mine bitcoins is based on how much they are worth. If bitcoins go up in value, more people will mine (because mining is profitable), thus difficulty will go up, thus the cost of mining will go up. The inverse happens if bitcoins go down in value. These effects balance out to cause mining to always cost an amount proportional to the value of bitcoins it produces.

A sampling of charts. Difficulty (blue) goes up after price rises. Difficulty comes down after the price crashes.

[NotLambchop]

Higher cost of mining rises the amount of dollars that miners need want to take out of the market.

FTFY

If the cost of mining is $10 trillion per day and the cost of 3600 bitcoins is only $1 million. Miners will only be able to re-coup $1 million of that $10 trillion cost.

They need it if they wouldn't want to operate with a loss. And I can't imagine anyone wanting to operate with a loss.
As said before, some people can operate a little longer with paying for the losses from their own wallets and some people less. But eventually everyone will face the inevitable.

If an coin would cost 10 times less to mine, then there would be 10 times less the need to convert the coins to dollar. That coin wouldn't be so addicted to constant growth and it could handle stability during times when the flow of new money is scarce.
PoW mining is artificially making something expensive that should be cheap, by adding the cost of useless work. Useless work shouldn't be rewarded. The future of money is in efficiency, and PoW mining is far from it.

Re. "useless work":  Bitcoin is butting up against the main problem of algorithmically-determined inflation--it's hardwired, and thus by definition can't adjust to change.

Mined coin=inflation rate of Bitcoin's monetary supply.  When Satoshi chose the block reward halving rate six years ago, he had to guess the future state of Bitcoin economy.  Literally guess.  The real economy, fiat economy, constantly adjusts the inflation of the monetary supply.  I'm not sure how many here fully appreciate the gravity of this shit.

[Mervyn_Pumpkinhead]

https://en.bitcoin.it/wiki/Myths
Bitcoin Myths:

The value of bitcoins are based on how much electricity and computing power it takes to mine them
This statement is an attempt to apply to Bitcoin the labor theory of value, which is generally accepted as false. Just because something takes X resources to create does not mean that the resulting product will be worth X. It can be worth more, or less, depending on the utility thereof to its users.

In fact the causality is the reverse of that (this applies to the labor theory of value in general). The cost to mine bitcoins is based on how much they are worth. If bitcoins go up in value, more people will mine (because mining is profitable), thus difficulty will go up, thus the cost of mining will go up. The inverse happens if bitcoins go down in value. These effects balance out to cause mining to always cost an amount proportional to the value of bitcoins it produces.

A sampling of charts. Difficulty (blue) goes up after price rises. Difficulty comes down after the price crashes.

This is the reality after ASICs:


The cost of network rises and the value of coin drops.
Anyway, I think that we're done here.

[Mervyn_Pumpkinhead]

Higher cost of mining rises the amount of dollars that miners need want to take out of the market.

FTFY

If the cost of mining is $10 trillion per day and the cost of 3600 bitcoins is only $1 million. Miners will only be able to re-coup $1 million of that $10 trillion cost.

They need it if they wouldn't want to operate with a loss. And I can't imagine anyone wanting to operate with a loss.
As said before, some people can operate a little longer with paying for the losses from their own wallets and some people less. But eventually everyone will face the inevitable.

If an coin would cost 10 times less to mine, then there would be 10 times less the need to convert the coins to dollar. That coin wouldn't be so addicted to constant growth and it could handle stability during times when the flow of new money is scarce.
PoW mining is artificially making something expensive that should be cheap, by adding the cost of useless work. Useless work shouldn't be rewarded. The future of money is in efficiency, and PoW mining is far from it.

Re. "useless work":  Bitcoin is butting up against the main problem of algorithmically-determined inflation--it's hardwired, and thus by definition can't adjust to change.

Mined coin=inflation rate of Bitcoin's monetary supply.  When Satoshi chose the block reward halving rate six years ago, he had to guess the future state of Bitcoin economy.  Literally guess.  The real economy, fiat economy, constantly adjusts the inflation of the monetary supply.  I'm not sure how many here fully appreciate the gravity of this shit.

ˇ

Yeah, I think that most of the users here aren't exactly educated nor experienced in the world of finance. Fixed coin supply can never offer stability. Coin supply has to be dynamic to be on par with the economy, that is dynamic. Supply has to be regulated with the availability of resources, so that money can keep stable value. And without stability, money has very little use. The main characteristic of a low quality currency is instability, because it's almost impossible to make any solid plans when you rely on a currency that's value can't be predicted. That's why bitcoin is more of a gimmick and a lot more development has to be done before open sourced monetary systems become truly practical.

[apider]

Higher cost of mining rises the amount of dollars that miners need want to take out of the market.

FTFY

If the cost of mining is $10 trillion per day and the cost of 3600 bitcoins is only $1 million. Miners will only be able to re-coup $1 million of that $10 trillion cost.

They need it if they wouldn't want to operate with a loss. And I can't imagine anyone wanting to operate with a loss.
As said before, some people can operate a little longer with paying for the losses from their own wallets and some people less. But eventually everyone will face the inevitable.

If an coin would cost 10 times less to mine, then there would be 10 times less the need to convert the coins to dollar. That coin wouldn't be so addicted to constant growth and it could handle stability during times when the flow of new money is scarce.
PoW mining is artificially making something expensive that should be cheap, by adding the cost of useless work. Useless work shouldn't be rewarded. The future of money is in efficiency, and PoW mining is far from it.

Re. "useless work":  Bitcoin is butting up against the main problem of algorithmically-determined inflation--it's hardwired, and thus by definition can't adjust to change.

Mined coin=inflation rate of Bitcoin's monetary supply.  When Satoshi chose the block reward halving rate six years ago, he had to guess the future state of Bitcoin economy.  Literally guess.  The real economy, fiat economy, constantly adjusts the inflation of the monetary supply.  I'm not sure how many here fully appreciate the gravity of this shit.

ˇ

Yeah, I think that most of the users here aren't exactly educated nor experienced in the world of finance. Fixed coin supply can never offer stability. Coin supply has to be dynamic to be on par with the economy, that is dynamic. Supply has to be regulated with the availability of resources, so that money can keep stable value. And without stability, money has very little use. The main characteristic of a low quality currency is instability, because it's almost impossible to make any solid plans when you rely on a currency that's value can't be predicted. That's why bitcoin is more of a gimmick and a lot more development has to be done before open sourced monetary systems become truly practical.

Exactly to the point there, in my opinion.
That's why we're probably going into nothingness on this experiment, as interesting and inspiring as the concept might be...

[ravenjt]

That's why the best monetary systems regulate the price level, by targeting a certain rate of inflation, whilst ignoring everything else.

[smalltimer]

bullshit. Just cut the inflation. Your conclusions are wrong. You don't need a variable coinsupply, you need a lower inflation.

[sublime5447]

Only one reason really, PoW mining expense

Thats not the reason but is a big part of it. The reason the price is dropping is because one the price never really went that high, it was really just because of manipulation at the mt gox. exchange, see this report (willyreport.wordpress.com/) and secondly the price is falling because it was sold to the public as a currency which it is not, bitcoin is a digital collectible it is the equivalent of a digital baseball card and you cant price an economy in baseball cards.   

[smalltimer]

i said it on the other thread. I say it here again:

mining becomes centralised, small miners are driven out of buisiness, few large miners dump harder than many small ones would, thus the price drops more, the competition becomes harder, more are driven out and thus centralisation is enforced more. This is a spiral with no way out.

It comes down to: 3600 btc a day was too high inflation.
Less inflation would have provided more stable prices, higher prices and less centralisation in mining.

This volatility is caused by the inflation. People say you need the coins to secure the network. Guess what: if miners would get less coins a day the price would be higher and it would be about the same for them.
Now you have the situation where the network is driven by incredible hardware and electricitycost - way more than need to be.  These days nobody in their right mind would want to buy bitcoin because it's really just a miners-scam to make the miners rich.

read my lips: Inflation leads to destruction of wealth and centralisation. There is no excuse for it. Inflation is poison - you should know that!

[smalltimer]

lol @ the idea of bitcoin with variable coinsupply. lmao
Fiat is better than that for sure

[sublime5447]

lol @ the idea of bitcoin with variable coinsupply. lmao
Fiat is better than that for sure

Price stability requires an elastic supply, currency is a system of measurement, we dont limit the number of inches and we shouldn't limit the number of units of value.