Topic: 'Short' Got Screwed (Read 2403 times)

C'mmon people, try to keep up.

Fact A. Mining difficulty follows price, at a certain delay needed to provision hardware, etc.
Fact B. Cost of mining is directly proportional to difficulty
Fact C. The majority of miners are not long in Bitcoins and seek short term guaranteed profit

Put A, B and C together and you should see a stable high price for more than a few months will force miners to sell most of their inventory to stay in business.

Regarding C, even if you cover mining expenses out of your own pocket, that's still a capital inflow that enters Bitcoin. You just bypass the market, that's all. The miners simply can't do that long term for any arbitrary price. Say you cover the price of rig today, and it's wonderfully profitable. 6 months from now the cost of running your rig is the same but the share of hashing power and corresponding btc revenue has dropped to the point where you can just break even. But the rest of hashing power growth is in the hands of miners who aren't long and will hit the exchange every day.

That turns them into speculators, and speculators add no value.



So, how much value is added by bitcoin per day?   

Costs, we can easily estimate, and we can even be sure that they grow as the price of bitcoin grows. 

Can you say the same for value added? 

Speculation adds no value, if you bought bitcoin in hope that you will sell it later, that money must come from some other fool, perhaps a greater fool than you.

If you value bitcoin with a simple method of discounting future cash flow, since there is none, you come up with 0.

I would say 99% of bitcoin purchases in last 3 months are speculation.  Do you think people buy in for $100k to buy stuff in the bitcoin store?

I'm so tired of hearing this argument.

A. Not all, possibly not even a majority of miners are selling
B. If the asks happened to thin out for some reason, 10ç could maintain the price at $100 so long as there was only 10ç worth of orders to buy, or if they grew enormous, $100 million a day couldn't sustain a $100 price
C. Economies grow by having value added so this pretty much invalidates and obviates your entire premise

Gravity perhaps?

Too many bitcoins in your wallet and it becomes too heavy to move?

And that $180k will always work in a single direction, every day for the next 1000 days or more. (If the price stays at $100)

Cue metaphors about rivers carving the Grand Canyon or gravity being 10**39 times weaker than electromagnetic force.

You're delusional.  Nowhere near all of the miners are cashing out all of their (daily) earned coins at Mt. Gox.  It just isn't happening and isn't going to happen.  

 I wasted a bunch of my life and money getting an education and a job. Read: I pay for my hardware and power costs with the job I go to everyday.  Not one coin I've earned over the last year and a half has been sold for any of these purposes.  In fact, my recent ASIC investments were paid in BTC that I bought from an (not Mt. Gox) exchange the day prior to placing my order.

 I still have 80% of the coins I've ever mined and I'm not letting them go any time soon.  Also, it's still very profitable to mine with GPU's.  In fact, during the recent "bubble" it's been the most profitable (albeit in unrealized gains) that I've ever encountered.

 What? Please explain this gem.

$360,000 dollars a day is a drop in the ocean in the global scheme of things. Especially considerng the amount of global media attention Bitcoin has just recently.

Also you are assuming that all miners will immediately dump their coins on the market. Realistically about half would, so the figure to sustain $100/BTC would be more like $180,000 a day.

$96 now, pretty damn close to your $95 buy-in price.  you may want to just take the small loss and buy now

I'm saying that $100 will make miners put a cashflow pressure on the exchanges that they weren't historically able to fill without a media induced mania; in a regular day there's simply not enough fiat entering the bitcoin system to cover the expense of mining at $100. Yes, bitcoin's security costs an amount proportional to the price of bitcoins, and someone needs to foot that hardware and electricity bill.

Sure, for the short term, miners can play the market and hold those coins - after a sudden price increase the difficulty is still low. But on the medium term, due to the competitive nature of the mining market, the difficulty will go up and the effective price to mine will follow the BTC price. There's nothing miners can do about this, difficulty will eventually catch up and eat their large profit margin until only the most efficient miners survive which are forced by the laws of physics to sell.

Note, I'm not saying that $100 is a "wrong price", there's no such thing with Bitcoin. I've acquired at 5-10$, sold at various 100$+ points, got back in an 50$ and liquidated at 100$. It's all in the timing. $100 might be a great price if you are expecting a speculative upswing, but $100 long term ? I don't think so, not if something fundamental changes in the immediate future.

I think $100 is the new $17.

Assuming that all miners would sell all coins each day at this one exchange...

What are you getting at with this post? It's hard to tell.

$100 means that 360.000 new dollars need to enter the market every day just to cover the mining revenues, never mind short term speculators cashing out. A typical day of Mtgox trading during Sept-Nov last year moved $500.000, before the media frenzy. That's total volume, including day traders or older depositors who shift back and forth. Let those figures sink in for a while.

Nice to hear.

It will most likely be a lot of movements in the price. I am pretty sure the general trend will be downwards for a month or more, but with spikes.
Like tomorrow when new money enters the system.

In a longer view, I think it will go back up again, and there will be new all time highs.

Got back in at 93 during the current dip.   

You'll be fine if you purchase now. This coming week will see a bunch of new incoming money due to the MSM coverage of the Winklevoss story. Buy now, hold until the end of the week, sell Friday at 150-160 if you want a quick profit, or continue to hold long term.

the men who stare at gox

Stop staring at the charts  

Bumping this again because of increased worry. As of posting I've lost over 10% :\

$100 is the new $10