Topic: Halving guide for noobs: Why it's not possible for halving to be priced in now - page 12. (Read 16906 times)

You would need to read the entire thread for why I claim the altcoin IOTA is a permissioned ledger extortion scheme (as well as PoS coins) to really understand what constitutes a decentralized currency and what the purpose of mining actually is.

IOTA - Permissioned ledger Russian extortion scheme

https://bitcointalksearch.org/topic/iota-permissioned-ledger-russian-extortion-scheme-1414866

Also, who else called the Bitcoin rise almost perfectly? (went all in a couple days before at $230)


Who else called the Bitcoin dump from $475 almost perfectly in terms of support levels and where it would go? (with the exception of it went in a faster timeline due to Mike Hearn R3 propaganda).  The market then reversed the Mike Hearn propaganda and went back to it's real support level of 410.

So refreshing to see a newbie who is thinking with his own brain. You're already miles ahead of the rest of this thread man. Keep it up.

How are the miners going to get a good price on equipment if the market is flooded with miners?  they might aswell just keep mining at a loss vs having to sell equipment at a loss? both outcomes seem the same but if they sell they have to do more work.

While I like your thinking in general, this is a false dichotomy. You're forgetting that miners can and will SELL THEIR HARDWARE. We all know that mining becomes half as profitable overnight when the reward splits. Then likely the price of mining hardware will drop. If the price of mining hardware drops, couldn't the price of coin drop also, despite the decrease in supply? Do we have a good handle on demand? And what percentage of cash for coin exchange is just miners SELLING TO THEMSELVES to keep the price up?

When I look at exchange traffic and charts, it looks like automated trading to me.

Very nice post OP, as i see it the miners are just as heavily invested if not much more so than the hodlers.  The only thing that can keep the price down is some other random variable and things like govs and banking seem to be playing ball for the most part.

I'm obviously not going to be able to persuade you from your viewpoint, and I'm okay with that.

I'll just add that I do understand the dynamics of mining. I was a miner for over 3 years (4 hardware generations). I shut it down and liquidated the equipment the moment that it became evident that we were approaching a point in time where costs would equal or exceed income, despite your claims in OP that no miner would ever do that.

Thanks for this r0ach. Finally a well reasoned thread on the halving.

First off, you do not understand that Bitcoin has it's own decentralized exchange called mining.  Mining is demand.  There is no "may" about it.  Demand in comparison to supply hugely increases on the demand side and the centralized exchanges are forced to follow

Secondly, most Bitcoins are horded like the movie Leprechaun.  The entire supply of Bitcoin isn't just sitting on the exchange sell side wall.  The float is highly affected by daily mined supply, it's not a small factor.  In the following picture, there's only 16,000 coins until the price is $800 on Finex.  If you just started randomly buying off that wall with the goal of reaching $800, most of them would probably get pulled on the way and you'd only need to buy something like 1/4th of them (at least post halving).  Then all secondary, non-leading exchanges just pull their walls and price goes up without a fight even occurring.

You'll also have people who are just completely stupid and try to short at $450 pumping it to the moon through margin calls.

Nice post. Anyone with any time in the markets knows the market rarely prices things 'in' as efficiently as economists would have us believe.

One small point. The halving reduces coin emission by 50% and reduces the cost of maintaining the network (block subsidy to miners) by half costed in bitcoin.

It isn't quite as simple as you suggest that miners will starve the market to reduce supply and drive up bitcoin unit costs. Over the longer term reduced supply makes a huge difference (favouring a rise in price, demand staying equal).

But markets and prices are set by not just (increasingly insignificant) mining emission, but by the float of bitcoin's on exchanges and overall supply:demand. I hope bitcoin bubbles up again soon (in spite of significant development concerns), but the price could easily crash if speculators decide to sell instead over the shorter term.

Here's hoping for a summer mania.

It's entirely possible for halving to be priced in now.

When you buy bitcoin from an exchange (the action that determines bitcoin price) you aren't buying from miners, you're buying from bitcoin holders. Sure, that could INCLUDE miners, but it's not exclusive.

How non-exclusive is it?

According to bitcoinity.org market charts, every day people buy between 1 million and 1.3 million BTC on the exchanges it tracks. If we exclude Houbi and OKcoin (as their numbers are likely inflated) that number falls dramatically to something closer to 200,000 BTC per day. But Houbi and OKcoin are probably doing greater than 0 volume, so let's just say, conservatively, 300,000 BTC are purchased on exchanges every day.

Miners produce (on average) 3600 new BTC per day. If we assume that every miner everywhere sells 100% of his coins immediately, then mined coins represent 1.2% of the supply. If they hold any amount of those coins, than that number is even less.

As we all know, price fluctuations are a result of the ebbs and flows in the bitcoin supply versus demand. So the argument that the reward halving is going to reduce the supply and thus increase the price of bitcoin is indeed valid, but let's not get carried away with 50->100% price increase projections. Remember that people holding coins are not going to have their coins halved, and they represent 98.8% of the daily supply.

So what will happen to the supply (strictly as a result of mining reward halving)?

Well, we're at ~300,000 now, which includes a 3600 mining reward. If we assume once again that all miners everywhere sell 100% of their coins, the biggest impact we could see is a drop of 1800 BTC on the supply side, bringing us down to ~298,200 (or -0.6%).

If everything else stays the same, this would result in a very modest price incline. The deficit is cumulative every day, so in theory the price would have to inch upward to make up for this new 0.6% discrepancy in supply and demand until a new equilibrium is found, but that would not be discernible from normal price movement in all likelihood.

The catch here is that everything else is NOT likely to stay the same. As you can see, there are people that believe that the bitcoin supply will be halved, or that the price will increase 100% immediately after the halving. These beliefs create demand. Demand also rises the price. So while almost nothing is happening on the supply side, we MAY see more significant movements on the demand side.

So why might the halving be already priced in then?

Well, the halving is an event that represents a 0.6% (max.) reduction in the bitcoin supply, something that would warrant a very modest price rise. Meanwhile people have been talking about it and anticipating it for over a year. This means that over that course of time, demand has risen as a result of speculation. Remember that price is set as a function of supply versus demand. Supply going down has the same effect as demand going up in regards to the price. Therefore it can be assumed that any price change that would have happened as a result of the supply side shrinking would have been assumed the moment it could be anticipated on the demand side, which is always immediately with bitcoin.

This doesn't mean that the price WON'T rise immediately before or after the halving. As we saw recently with litecoin, misinformation and hype are powerful (albeit temporary) forces on supply and demand. This is always a possibility, but this would not be a result of the actual halving, only people's perceptions on what a halving will do to the market. After the hype and misinformation phase subsided, the actual supply and demand found it's equilibrium once again roughly 12-14% higher than before the halving (priced in BTC).

This is also how I feel - extremely bullish.

* Tons of weak hands have already sold their positions last two years, wich is proven by relatively small effect of Mike Hearn little shameful move.

Meaning those who hold, hold for good, and those who sold are probably looking for a good oppurtunity to buy again... If Segwit + halvening doesn't do the trick... well they'll probably never buy again....

* Part of the demand for BTC is composed of ppl buying stuff priced in $. They technically don't care much about the price : if the price is 2x, they'll simply buy 50% less, but they'll still buy !

Are you sure ... ?

I've never heard it described this way and never really thought of it to be honest.

You're saying that Bitcoin is based on the exchange of miners trading their energy/work for a digital token (BTC) and the Bitcoin network, being p2p, therefore handles this in a decentralized way. Correct?

If I am off on my interpretation of what you're saying please elaborate further. I think this is a really cool way of viewing things. Typically we only think of the exchange of BTC between wallets or the exchange of fiat and BTC in centralized exchanges.

Thanks for this excellent post!

finally a decent topic in this section that you can call speculation with some reason and not just spam and fud which has been going on here.

Difficulty continues to increase, so the miners are ready to keep hashing come the halving.

Let's face it: bitcoin is going up.

QFT

The halving maybe partially priced in psychologically but practically it wont affect the market until 3-6 months after halving.

r0ach is correct when he says
The cost of production floor set by well-capitalised miners' unwillingness to sell at a loss (or even go to buy at the market) is the great secret of bitcoin that prevents it from collapsing totally during downswings.

Halving the block reward effectively doubles the cost of production overnight, thus raising the floor. Without an equivalent decrease in difficulty, it then takes some months to work through the system that bitcoins will 'never' be that cheap to acquire again.

As far as I know there was this big Litecoin Ponzi scheme going on in china.That was the reason why the price rose.And as that Ponzi collapsed right before the halving, the price declined and halving had no further influence.

By the way here is some interesting old thread regarding first halving 2012.
https://bitcointalksearch.org/topic/halving-block-reward-will-not-double-the-price-101485

it is always like this, there is a flat line with a nearly stable price (maybe small sparks here and there) and everybody accumulating and then something happens (and it doesn't matter what if you ask me) and then price explodes.

i say this time it is going to be the block size after halving. whether it is segwit, lightning network or classic; as soon as it becomes certain the price will explode.