unless you can find a logical explanation (based on your theory of course) about why price fell down from $20000 to $3200 (-84%) in 2018 or from $1200 to $150 (-87.5%) in 2014 or all the other ridiculously big drops that we had in the past, you don't have a "theory".
in all of these "cycles" the cost of mining was a lot higher than the bottom of the price that we reached but it still got there. of course the cost was never near the peak but it was at least 70% of the peak but price fell a lot lower than that.
so how do you explain that?
and here is another thing to think about, if "the bottom is set by miners" then why so many of them leave each time price drops?
you can't have a rule if it has a lot of exceptions, that is no longer a rule it is a coincidence.
Topic: How do miners affect the price of Bitcoin? - page 2. (Read 319 times)
Saying never? I would like that this can be true, but, it always can be a 1% of chance for the opposite scenario
It would give, if the mining cost will become non profit for all mining facilities, than there will be no confirmed transactions, so the value of the miner is for me always in front of all
You are aware there's a handy algorithm that always makes sure mining adjusts to costs, right? That forever deals with profitability. There will never be a scenario where it's not profitable for anyone.
The market doesn't give a shit about mining cost
It would give, if the mining cost will become non profit for all mining facilities, than there will be no confirmed transactions, so the value of the miner is for me always in front of all
Miners don't set the price. They follow it. They're slaves, not masters. They don't control a 'base price', the market does. The miners have to suck up what the market forces on them and adapt accordingly.
The market doesn't give a shit about mining cost, or whether miners go out of business. It's not its problem. It's theirs. No one else needs to care. There'll always be someone out there willing to mine and who can do it for a profit.
The only area where miners have any influence over price is the coins they mine and own and what they do with them which makes them just another market participant.
The market doesn't give a shit about mining cost, or whether miners go out of business. It's not its problem. It's theirs. No one else needs to care. There'll always be someone out there willing to mine and who can do it for a profit.
The only area where miners have any influence over price is the coins they mine and own and what they do with them which makes them just another market participant.
The effects of miners are mostly just:
1. Hashrate: increased security, higher mining difficulty
2. Selling pressure: it's safe to assume that most miners(especially the mining businesses) need to sell the bitcoin they mine, for them to be able to pay for hardware and electricity(and probably taxes and stuff) and to remain a profitable business(or gig, for the smaller miners).
Mostly, it's just point #2. While prices are NEVER guaranteed to increase(because it's still completely depends on supply and demand regardless of supply distribution), this is the reason why a lot of people are assuming that the mining difficulty approximately a month and a half from now is going to pump bitcoin's price because the selling pressure from miners is going to be cut in half because the bitcoin that's going to be"minted" rewarded per block to miners is going to be halved(hence why it's called the "halving").
For more information about the halving: https://www.bitcoinblockhalf.com/
1. Hashrate: increased security, higher mining difficulty
2. Selling pressure: it's safe to assume that most miners(especially the mining businesses) need to sell the bitcoin they mine, for them to be able to pay for hardware and electricity(and probably taxes and stuff) and to remain a profitable business(or gig, for the smaller miners).
Mostly, it's just point #2. While prices are NEVER guaranteed to increase(because it's still completely depends on supply and demand regardless of supply distribution), this is the reason why a lot of people are assuming that the mining difficulty approximately a month and a half from now is going to pump bitcoin's price because the selling pressure from miners is going to be cut in half because the bitcoin that's going to be
For more information about the halving: https://www.bitcoinblockhalf.com/
Well, miners don't set the price.
Bitcoin price is just supply and demand (and manipulation). If a miner can no longer mine while remaining profitable, he can:
There is no way to know what the actual mining cost is... Some miners in China have big "factories" and pay pennies per Kwh, have a direct link with the ASIC manufacturer (without customs charges or big shipping costs) and pay their workers only a fraction of what a western worker would cost. For them, the actual "cost" of one bitcoin is pretty low.
Compare this with a miner in my country, where the power costs 0.27€/kwh, where you have to pay big bucks to get an ASIC into the country, where the minimum wage is >1500€/month. For this miner, the actual "cost" is pretty high. It's only when the diff falls really low, and the odds of a 51% attack rises, the price can actually be influenced by miners. Offcourse, miners do have some indirect effect on the price: whenever they start a mining war, or decide not to mine 0 fee transactions, they push down the price due to the negative press.
So, it's basically the other way around: the market dictates the price, the miner decides if he can mine at the current price, or if he has to shut down his operation.
Bitcoin price is just supply and demand (and manipulation). If a miner can no longer mine while remaining profitable, he can:
- Stop mining, sell his hardware
- Stop mining, keep his hardware in case the price goes up or the diff goes down
- Keep mining at a loss, hodl the mined BTC
- Keep mining at a loss, sell the mined BTC
There is no way to know what the actual mining cost is... Some miners in China have big "factories" and pay pennies per Kwh, have a direct link with the ASIC manufacturer (without customs charges or big shipping costs) and pay their workers only a fraction of what a western worker would cost. For them, the actual "cost" of one bitcoin is pretty low.
Compare this with a miner in my country, where the power costs 0.27€/kwh, where you have to pay big bucks to get an ASIC into the country, where the minimum wage is >1500€/month. For this miner, the actual "cost" is pretty high. It's only when the diff falls really low, and the odds of a 51% attack rises, the price can actually be influenced by miners. Offcourse, miners do have some indirect effect on the price: whenever they start a mining war, or decide not to mine 0 fee transactions, they push down the price due to the negative press.
So, it's basically the other way around: the market dictates the price, the miner decides if he can mine at the current price, or if he has to shut down his operation.
In a reply to a post I made before, franky1 mentioned about "mining cost" and that got me curious. So lately, I've been reading some articles about mining and how it affects the price of bitcoin. Before I continue with the topic, know that I am not a miner, if it's not obvious yet, and I don't completely understand how bitcoin mining works. If I say something inaccurate, please point it out.
Here's what I understand for now:
Miners set the mining cost as a "base price" for Bitcoin. The mining cost is also known as the cost required to produce bitcoin and it basically consists of hardware cost + electricity. If we are going to compare this to a private manufacturing company, they also have what they call as "manufacturing cost", which consists of materials + labor + overhead, for every product they produce. A private company would never allow the price of the product go below its manufacturing cost and, I think, the same can also be said to miners. Collectively, they will never allow the price go below the mining cost.
If miners can set a base price or better understood as "bottom" by some at a particular period, how do you think this affects the reputation of Bitcoin as an investment asset? I've always believed that nobody completely controls the price but it can be swayed up or down by different parties based on good or bad news and rumors.
P.S.
If you notice, I did not discuss the mining technical details like hash rates and difficulty since I don't completely understand it yet as I said before. If you want to discuss it in the comments, feel free to do so.
Here's what I understand for now:
Miners set the mining cost as a "base price" for Bitcoin. The mining cost is also known as the cost required to produce bitcoin and it basically consists of hardware cost + electricity. If we are going to compare this to a private manufacturing company, they also have what they call as "manufacturing cost", which consists of materials + labor + overhead, for every product they produce. A private company would never allow the price of the product go below its manufacturing cost and, I think, the same can also be said to miners. Collectively, they will never allow the price go below the mining cost.
If miners can set a base price or better understood as "bottom" by some at a particular period, how do you think this affects the reputation of Bitcoin as an investment asset? I've always believed that nobody completely controls the price but it can be swayed up or down by different parties based on good or bad news and rumors.
P.S.
If you notice, I did not discuss the mining technical details like hash rates and difficulty since I don't completely understand it yet as I said before. If you want to discuss it in the comments, feel free to do so.
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