Topic: How does bitcoin's math work? (Read 167 times)

The question itself is completely irrelevant, the only ones that would be interested in knowing that information in real time are the traders trying to predict what the price will do, but this is not really possible to do as you cannot possibly get information from every single exchange out there about the fiat being used to buy bitcoin and the bitcoin available to them, so if you need this information for some kind of trading strategy you might as well start all over as you will never get it, and if you are just curious about it you will have to simply accept you cannot get the answer you are looking for.

The market cap may have to increase truly from where we are now to something higher and bigger, but nevertheless, we may not have to see it being doubled before this could be achieved, the adoption rate and the buying and selling also play more important roles in seeing that the value of the coin increases.

firstly stop thinking about the market cap number.. its meaningless.. bitcoins price is not based on some $1.3t stored somewhere and then divided down to each bitcoin

bitcoins price is calculated by people placing orders in the centralised markets for small amounts of bitcoin for even little as 0.001, which people only pay $67.01 for and then when someone pays $67.02 for the next order of 0.001 this raises the market price of a whole bitcoin by $10
yep 0.001 sold for $67.01 or $67.02 is the equivalent of the market price of a whole coin moving in market price by $67,010 to $67,010
in essense 1 penny/cent can change the market price of a bitcoin by $10.. or the silly irrelevant market cap by $198,596,875
yep one cent higher trade of a small amount of 3rd decimal bitcoin can make the market cap useless number change by nearly $200mill

the market cap is not a valuation of holdings, its just a number that got multiplied by taking current price of one coin and multiplying it by all coins n circulation..

so when the bitcoin price can change to $137k its not because another $1.3t entered the market. its because alot of small buyers decided to pay double for small amounts of decimals of one coin


it can be within minutes(time to move coin from a darkpool market to a public market).. or it can be never(where they dont arbitrage from OTC to CEX)

In this situation, Bitcoin pricing works a little differently. In addition to real coins (there are less than 21,000,000 of them), there are a large number of derivatives.

For example, shares of spot Bitcoin ETF funds are derivatives on Bitcoin. Bitcoin wrapped in one of the "innovative" blockchains is a derivative on Bitcoin. Michael Saylor shares and bonds are derivatives on Bitcoin. Shares and bonds of mining companies are derivatives on Bitcoin. "Virtual" Bitcoin on cryptocurrency exchanges is a derivative on Bitcoin.

The capitalization of derivatives, that is, "paper Bitcoin", is much greater than the capitalization of real Bitcoin. At the same time, the price of Bitcoin is controlled mainly through derivatives.

Therefore, your mathematical calculations, unfortunately, are not correct - in practice, everything is much more complicated.

It depends on a lot of factors; liquidity in exchanges and market sentiment, to name a few. I don't think we can estimate without knowing at least what's the liquidity in most exchanges. It's entirely possible that $100M in buy orders are taken, and increase the market cap by more than $10B, just as it's possible someone buys in secret $100B, and does not drive the market cap by more than $100B.

I also posted about lost bitcoin, that it can make the price to increase. I also posted that the bitcoin that people will lose now will not be huge, unlike in the past that many people got the opportunity to have bitcoin but think its price will not rise much and lost the private key. People are now holding their coins like gold. Lost bitcoin will reduce unlike before. Also my post is not about what can happen in the future. My post is more about letting the OP to understand how lost bitcoin and remaining bitcoin that is mined and entering into circulation can have effect on bitcoin price.

Well, that's true in theory, but we gotta think about the other factors as well - for example the concept of a "lost bitcoins." A lot of people have lost access to their bitcoins for all kinds of reasons - lost passwords or private keys, busted hard drives, etc.  These coins are essentially gone for good so they reduce the total number out there.

Some people may already know about this "free float supply" idea that Coin Metrics came up with.  They try to estimate how many coins are actually lost to get a better sense of how many are really circulating and tradeable.   

So even though there's close to 20 million bitcoins out there now, the number that people can actually buy and sell is much lower.   

In fact, according to Coin Metrics' estimate, that free float supply number has been droppin the past few years.


Source: https://charts.coinmetrics.io/crypto-data/?id=661

Your thread title is somewhat misleading when you're mainly focussed on development of exchange rate or economics of Bitcoin. Consider to change it.

I've the impression that your premise is that most or a substantial amount of bitcoins are hodled and thus somewhat removed from being available for trades. Some amount of coins are lost, some amount of coins are hodled and we don't know at which threshold a hodler might consider to sell some of its coins to pour them back into market circulation.

We also have a good amount that's actively traded on various markets, that's where the rates are made, supply and demand. The rate of new supply of coins by mining is deflationary due to halving the block reward after 210,000 issued blocks. Roughly 94.15% of all Bitcoins have already been supplied as of now.

You can apply basic economics and if interest and demand doesn't go down faster than coins are available for trades, value should go up in long term. Within about 115 years from now there will be a smaller and smaller supply of in total only ~1,226,576 new bitcoins.

Someone already mentioned the issue that miners are facing. Hashrate still goes up because new gear is added or new miners join. As difficulty is therefore still on an upward trend, every miner needs to put more and more work/energy into the game. The cost of energy and gear doesn't fall to compensate the hashrate trend. We'll have to see how this will play out. There will be a diversion point where the current trend can't continue as we've seen until now. I don't believe there's an automatism that somewhat magically will raise Bitcoin's value to suit the miners.

I'm hoping and counting on it that Bitcoin's value is slowly going up. I'm also fine with some ups and downs as those are opportunities to trade with gains when you're lucky to do it right. Though, I don't believe in any predictability or chart magic.


In my understanding OTC trades are decoupled from spot market, they're not affecting the orderbook. But that's just my puny understanding of trade market mechanics. I'm no expert on this field.

There could be side effects because the trading partners of an OTC trade both need to have the required liquidity of assets (coins and money or whatever the traded assets are).

It will take more funds for the price to go high as the marketcap is increasing. But check the second reply to get the answer to your question. Do not be confused.

Provided if some circulatory supply is burned or lost and also if there is no more new coins mined. Bitcoin is now an asset that is well known that people do not want to lose. Although some people may still lose it but it may not be that significant as the amount lost in total may be small.

Bitcoin is still introduced into circulation from mining, this makes the supply to increase which will make more marketcap to be needed instead for the price increase.

It's true that it is difficult to predict how much it is and in addition to your explanation is that there could be another coins that may lost and that will surely change the total of capital and if someone did able to recover their old wallets that have been in it for years and recently opened then it will also change once again and there's also new coins that will be mined.

How might the bitcoin halving impact BTC’s price?



It is not yet clear how the next halving will impact bitcoin’s price. Many commentators believe that the price will follow a similar pattern to the previous three halvings, rising after the event itself as the supply of new coins is constrained.

However, any price rise will depend on how demand for bitcoins shapes up over the course of the halving. Demand is by no means certain to increase – or even remain static – as the market has matured significantly since the last halving in 2020, and there are now many more well-established cryptocurrencies competing for users.

Source link: https://www.ig.com/en/bitcoin-btc/bitcoin-halving

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The price of Bitcoin will basically depend on several stages including the number of Bitcoin blocks, the lower it falls the higher the price of Bitcoin will be. It started with 50 blocks in 2009 and the halving in 2020 is 6.25, and the halving in 2024 is 3.125 New Bitcoin per  will work as a block.  So no one can determine its price till now, but if it touches that time in the future, it will know how far the price of Bitcoin will touch. So the future price of Bitcoin is still uncertain.

I guess it's difficult to predict exactly how much capital would be needed to double the price of Bitcoin. It boils down to the ratio of long-term holders versus short-term traders.  With more folks just parking their coins for years on end, it presumably don't take tons of cash to move the price. On the other hand, if there are a lot of short-term speculators buying and selling, it could take more capital to move the price.

There will be more bitcoins released from Bitcoin mining in Bitcoin block subsidy till 2140. Bitcoin won't become more scarce in future, because it is inflationary till 2140.

I only agree if you say that there will be two things in future: less bitcoin in block rewards and more people who will become Bitcoin investors; that means demand will increase more than future supply of Bitcoin.

You can say it with Bitcoin, but it is not true to say with altcoins. Altcoins can have total supplies smaller than Bitcoin total supply that is 21 million, but altcoin values and prices won't increase because of basic economic rules or any economic recession.

They are useless from ideas to create these coins so no value, price will be zero with time. Altcoin prices can be high in a cryptocurrency bull market, in altcoin season but when these times gone, altcoins will lose most of their prices like 90% or 99% from ATHs.

Bitcoin is currently trading at $67,000 at the time of this post, with a market cap of $1.3 trillion.

As bitcoin becomes more and more bought up and gets more scarce, it would take less and less funds invested to push the spot price higher. That would be due to the hard cap supply of 21 million coins, if I am not mistaken.

Basic economics tells us that the more scarce an asset becomes, the more expensive it becomes due to greater increasing demand creating less and less supply of a scarce asset, where the supply of that asset is permanently fixed.

So for the price of bitcoin to double from $67K to $134K, it would take significantly less than $2.6 trillion ($1.3T x 2) to make it double if I am not mistaken. The question is, how much?




....An unrelated question is, how long does it take for an OTC purchase (or sale) to have an effect on the spot price of bitcoin?