Topic: [For merit] Discuss the effect mining rewards have on the price of Bitcoin (Read 430 times)

I think it's because you asked only junior members to reply. I didn't respond initially because of that

I think the bitcoin price will not be affected much by halving. The halving has already been priced in by the markets. Mining profitability doesn't have much effect on price either. It's always profitable to mine for someone somewhere and big mining farms are already located in places where they can mine profitably at $3000 as we saw just a few months ago. Very low bitcoin prices may affect mining equipment prices so it may finally kill Bitmain for example.


I think this is somewhat incorrect, sorry for nitpicking. You probably mean the code that was programmed to emit new bitcoins on a certain schedule but the coins themselves were not pre-created at that time. The block reward is created in every block. If everybody stopped mining those coins would never exist.

You must be talking about the coming "halving",
so as a TL;DR, I'd say "it's a FOMO-generating-headline", explanation follows.

We all know that reduction in the supply increment have a positive result in Bitcoin's price as long as the whole cryptocurrency/Bitcoin market cap is stable.
But based from the timing of the previous price-boost effects of halving, the FOMO always comes before it while the trading volume wasn't even affected yet.
Then the "real effects" which was affected by what happened comes after that.

For the next year's (approx May) halving, it's about 6 months from now, yet I haven't seen any good news or "normal" upward market fluctuations.
Just some obvious staged dump from the previous months, just to pump and dump again (the usual).

1. Volatility, perhaps?
2. I think so too; it'll be more easier if you give them the right keywords like "halving".

I don't think they have a lot of effect because its priced in current price always whatever mining reward is.
Best example is when mining rewards will be cut in HALF. Which is huge in theory, but its so known ahead, that its priced in so smooth its invisible literally.
So in theory it have effect, in practice, it doesnt.

From my point of view, this is how mining rewards is affected by a change in price and not the other way around. Although, other factors associated with bitcoins are affected by changes in the market price.
Mining rewards is affected by mining difficulty and this is affected by the availability of miners at a specific time, and this is affected by the price of bitcoin at that time.
But charts shows an increase pattern in the price of bitcoins with each halving process, so does this mean that the price of bitcoins adjusts to keep mining profitable and maintain balance in the network?

I am not applicable to join but i'll give my opinion about the effect of mining rewards on bitcoin's price. Not sure if I understand the topic correctly but here goes nothing. Please let me know if I didn't quite understand the topic.
 
Mining rewards helps maintaining bitcoin’s self-sustaining network, running software that will verify transactions by finding blocks faster. This will make more people use bitcoin because of it and miners get their profit but if the bitcoin's price is low then most of miners will shut off their mining rigs and finding more blocks won't be the same as it was right before the price will decrease again.

The mining rewards, those obtained by generating new blocks, verify the transactions, I think they are too few to move the value of the price, although they should be higher so that there are more incentives for the network is larger, and transactions can be faster that way is that they help the market, so that you do not have to resort to altcoin to make transfers for fee costs and transaction time.

more miners could only mean finding blocks faster (not transactions being faster) and that would only last until next difficulty adjustment. and as for supply, it is still limited by the same limitations even if blocks were being found a little bit faster. and since the increase/decrease is negligible due to the size of the total hashrate, the fluctuations wouldn't be able to affect the market in any palpable way.

the relationship between hashrate (difficulty) and bitcoin price is a lot more complicated than simply saying one causes the other! they go hand in hand, the main effect is from price on the difficulty not the other way around. meaning for example when price increases the same miners with still the same cost would start making more profit, that means the incentive for them to increase their hashrate or for other miners to join in goes up so they do that and as a result difficulty rises.
investors and traders who are participating in the market and eventually set the price don't look at difficulty to make their decisions whether to buy bitcoin or not! they look at price charts instead. miners participate in the market too but they are a very small percentage of the entire market.

Well this thread hasn't really worked, and nobody seems to have addressed the  primary point. I don't believe that miners sell to traders or through the exchanges. They have an interest in maintaining the price, and sales through exchanges can affect the price directly. There are secondary considerations though. If a miner sells coins to an ATM owner, then the purchaser of the coins through the ATM may use the coins for an online purchase from a retailer who exchanges the coins for fiat, and this could influence the price and the reported velocity of Bitcoin.

Maybe I made the topic too complex for this board, but thanks to all who have contributed to the discussion.

If "weak" miners surrender it wouldn't really affected market pressure. Because current Bitcoin circulation on the market is large enough. Current Bitcoin circulation hit 18,049,588 BTC. If 30% of weak miners leave, Bitcoin still have 18.049.588. It's mean, miners not really give important effect on Bitcoin price. IMO, Market and Miners have different zone, the most affected Bitcoin price is how trader keeps their Bitcoin when price going down and not become a FUD victim it will bring a new era to Bitcoin price. If miners keep their rewards on their wallet, it can hold additional BTC in circulation, but it doesn't guarantee bring the Bitcoin price to going up.

Scenario on halving:

Miners get smaller rewards, if he wants to make a profit some day, he must hold their BTC. While, traders will buy more Bitcoin because halving event, market circulation will decrease, because trader and miners hold their Bitcoin and make halving as the fundamental factor to make Bitcoin price increase. Because cheap sell order decreased, new trader and whales act to increase his offer and make Bitcoin price going up to double their profits on halving event.



If, miners selling their rewards because have a plan to leave as miners and inexperienced traders responded this condition as bad fundamental, of course, sell order on an exchange will increase, trader offer their Bitcoin with low price. But, the most important to this condition is traders who have a most important role in Bitcoin circulation and price.

CMIIW

sorry JC, not answering - but wanted to post quickly.

great idea for a thread, these 3 are trying and you cant merit them as the replies ain't the best, but for trying ill give em some merit and hopefully it will encourage some other newbies to try

In a word: Capitulation.

Capitulation of miners often occurs in bear market or around halving time, when they surrender because of low income from mining (they feel mining income is not enough to pay for electricity bill in particular and production cost in general) or they feel shock when their mining rewards and income plummeted half by block halving.

When capitulation occurs - Difficulty ribbons compress or negatively flip - it is a very good signal of bottom price or very closely to the range of bottom price. Market needs to have a bit accumulation before blasting off.

Naturally, when most of weak miners surrender and leave the network, there are less pressure on the market (from their weak selling) and gradually price will become more stable and blast off later.

In other words, when the game changes from major to minor, it is the final stage of bear market and bull market will pop up to boost the price.

Mining could be said to be the one that supplies the BTC to the market. Now with each halving, the rewards get reduced and miners are now more lets say, forced, to improve their equipment or quantity of miners to be able to produce more BTC blocks.

Plus, with how more miners are entering the scene, the difficulty of mining spikes because BTC adjusts it's difficulty based on how large the computing power is used on mining a bitcoin, to at the very least, maintain block production at a stable rate.

Additionally, with how the mining rewards are being halved, and how the supply is being more and more limited, naturally, Miners will have more and more problems in fighting over blocks because all of them are now fighting over resources. When BTC was launched, everyone with a mining rig could have taken one block to solve and no one would've fought for it, but with each passing halving, supply halves, rewards halves, and miners have to fight others now to earn their keep.

Mining is a fundamental part of bitcoin. In a very simple manner mining of bitcoin is when individual(s) called miners find a way to deal with some mathematical problems and this miners are rewards with bitcoins This puts bitcoin in circulation.

  Mining rewards sure do have an effect on the price of bitcoin for example if there are more miners transcations would be faster and more bitcoin would be in circulation but if the reverse is the case then it's the opposite effect.

 But mining has challenges and this challenges has an effect on the price of bitcoin.
Challenges like cost of mining~ mining of bitcoin  is not a walk in the park it requires high cost because it consumes large amount of energy and not every has the resources to go ahead with it.

I can say if the rewards of bitcoin mining is high the price of bitcoin would be reduced it could be as a result of more bitcoin in circulation, more miners getting involved.

 I would make a quote "since the beginning of 2019 – near the depths of the bear market – while mining difficulty has increased 33%, the bitcoin price has increased a huge 100% – pointing to a robust and healthy incentive for miners to maintain the bitcoin network"  source https://datalight.me/blog/researches/longread/how-mining-difficulty-affects-bitcoin-price/

Bitcoin mining rewards can reduce the price of bitcoin if the reward are on a high level

This thread is designed to help new and junior members to earn some merit. If you are above Junior rank, then please don't post within the first 5 replies. This will allow newer members to do a bit of research, and open a discussion. It will be interesting to see their perception of Bitcoin sales or disposals by miners. Don't forget that rewards consist of transaction fees, as well as payments from the pool of Bitcoin that was created when the genesis block was laid.

After the first 5 posts, I'd be grateful if more experienced members could pitch in and correct any misunderstandings, and contribute their own opinions about miner influenced price movements.

New members are welcome to ask questions if they aren't sure about block mining rewards.