Topic: The Value of BTC, in terms of Hardware Purchased and Installed - page 2. (Read 4562 times)

The price can't go to infinity because then I could buy everything in the world with a single satoshi ... and so could everyone else.


My 40k$ worth of purchased bitcoins will always be worth double your 20k$ worth of mined bitcoins regardless of what happens to the difficulty. Spending 40k$ to buy 20k$ worth of newly mined bitcoins makes no sense when you can buy 40k$ worth of previously mined bitcoins.

just... wrong thinking there... Moondust is so damn expensive because it requires a space mission to obtain some.



True however the price would be driven by the increase of hashing power - difficulty to obtain bitcoin. Price will go to infinity only theoreticaly when last bitcoin is mined. Sum of all bitcoins price will be just equal to energy and resources that were required to produce all of those. And since the closer we get to the mining last one of them the more resources and energy are required to produce them. You cannot look at cryptos like you look at ordinary fiat money or gold. In 20 years i can imagine someone buying a miner that will have like 5godzillionhash/sec for 50 bilion dollar just to mine 1 bitcoin which will be worth perhaps 25billion.

Not exactly because you not only mine 20k$ worth bitcoins but you also increase the hashspeed of the pool that will eventualy drive the price up so your bitcoin will be worth more than 20k$ eventualy. Also you have a miner that you can sell for some amount of $ even though it wont mine much but with the new BTC price this "not much" maybe just enough for someone else to profit as the BTC price increases

I totally appreciate miners and without them bitcoin would not exist in its present form.

If nobody wanted that bitcoin, then it might be worth 100...000$ to you, but it would be worth 0$ to everyone else.


If miners stopped selling mined bitcoins, there would still be 12 million bitcoins. The price would not go to infinity. Are you claiming that when the last bitcoin is mined, the price will go to infinity or zero?


A sane person would use 40k$ to buy 40k$ worth of bitcoins instead of buying something that will mine only 20k$ worth of bitcoins.

Well if there would be a single bitcoin mined at the cost of 100000000000000000000000000000$ it would be worth exactly that. For example one gram of a moon dust is worth aproximately 5mln dollars... not because everyone wants to have it but because it's scarce!!! Get it?

Bitcoin is a finite resource and the harder there is to obtain some, the bigger it's price will be. Nobody with any common sense to business would buy a miner for 40k$ just to mine 20k$ worth BTC and sell it for this price. The price drop after the 10 fold increase is just because the fact that miners were waiting to sell their ore. When ore reaches a certain level they sell driving the price down. If none of them would sell and just kept their BTC price would grow expotentialy to infinity because Bitcoin is finite resource! They actualy destabilize it's value by selling BTC on a peak. But it's totally OK to do so because they are going to use newly gained $ to buy a better miner (that will drive price up again in the future).

Call me crazy man but if i could buy a 40k$ miner right now just to harvest 20k$ worth BTC i would buy it right now (unfortunatly i dont have 40k$).

This has nothing to do with how currencies work. It is basic microeconomics. Price affects mining because if the price drops, then fewer people mine because it is no longer profitable for them. The difficulty drops and the costs go down. If the price rises, then more people mine because they can now make a profit. The difficulty goes up and the cost goes up. In the end, the cost of mining is around the value of the bitcoins mined (in theory).

Now, please explain the mechanism behind how the cost of mining affects the price. Keep in mind that the amount of newly mined coins is only a small fraction of the trading volume on the exchanges.

I don't understand why people continue to cling to your belief. Perhaps it is because the miners that are currently mining at a loss (which is most of them right now) pray that their mining will cause the price to rise so they don't feel so bad about it.


Scarcity is a factor, but you have to be careful because demand is an equal factor. If there were only a single bitcoin it would be extremely scarce, but if nobody wanted it, its value would be 0 despite its scarcity.

I think Robert Shiller is wrong. I dont think he understands the algorythm behind bitcoin. He just uses technical analysis for bitcoin market price which in fact looks like a bubble.

I think you are right and i came up with same conclusion couple of days ago. Its the scaresity that drives it price not the present market usefullness (which is great by the way).

I totally disagree! The model you are talking about works for fiat currency. It's not going to work with cryptos. Cryptos are the exact oposite of fiat so you have to reverse your thinking aproach.

Last summer was last summer. That is a million years ago in bitcoinland. The bitcoin price was increasing crazily. There wasn't much hash rate. You have to live in the present, not last year.

10K is very hard to even imagine. I mean,come on,people are gonna lose BTC the second it reaches 2k or something. You saw the sell-walls at the 1k mark a few weeks ago.

The cost to mine doesn't create the price of bitcoin, that's the market's job.

If it was the mining cost that decided the price of bitcoin, bitcoin would be over $1000 now because most miners are losing money.

The cost of mining has very little (if any) effect on the price of Bitcoins. Instead, the price determines the cost of mining (except these days when people seem to be happy to mine at a loss).

I was trying to estimate the value of the hardware that has been purchased by BTC Miners so far.  By doing some back-of-the-enveloppe calculations, I came up with some interesting figures:

1.  If we assume that cost of GPU is about $2000/Gh/s ($400 for 200 Mh/s) which was the norm until early 2013 - up to network speed of 33 TH/s
2.  If we assume that cost of ASIC was about $200 / GH/s between March 2013 to Dec 2013 (up to network speed of 2400 TH/s)
3.  If we assume that cost of ASIC is now about $20 / GH/s (up to 19 000 TH/s)
4.  If we assume that cost of ASIC will be about $3 / GH/s (ref new 1 TH/s Cointerra rigs).

Then the cost of the current installed hardware to mine Bitcoins would have been (33 000 GH x $2000) + (2 400 000 x $200) + (19 000 000 x $20) = $926M for 12M coins, about $77 per coin. If we add the electricity cost and some PCs in there, we could reach the $100 value that BTC was going for, in the most part of 2013.

Just in January, 10 PH/s was added to the network, to produce an additional 110k BTC.  At $10-20 per GH, that is $100M-200M for 110k coins - or $909-1800 per coins.

The next generation will allow about $3 per GH - but at one TH/s per machine added to the network - the network speed will increase by another 100 fold by October (ref TheGenesisBlock).  So, another 2 000 000 000 GH/s at $3 ($6B), for an additional 1M coins - $6 000 per coin...  

Therefore, it is very conceivable that BTC will be worth $5 000 to $10 000 by the end of 2014.  Just by the value of the hardware added to the network. In addition, that "investment" in hardware will probably be THE reason why the bitcoin network will not die anytime soon.

EDIT:  This adds another dimension to Bitcoin - we have estimated that there has been about $1B spent already on this "experiment".  That is very close to the birth of an industry - it is hardware, software, electricity production, new ventures, etc.  Another $6B in expenditure is expected for 2014.  For the politicians out there, Bitcoin is more than just a "bubble" - Bitcoin creates jobs ! - talk to the ButterflyLabs, Cointerra, KNC of this world!  Even AMD never sold so many high-end Graphic cards in history!

EDIT2: New graph!

The red line is the Bitcoin Hashrate over the last 4 years (on a log scale - values are on the left of the graph).  The hash rate can also translate in $$$ injected in the Bitcoin economy.

The blue line is the Bitcoin market price over the last 4 years (also on a log scale - values are on the right of the graph).  

Which one is leading which?

Data courtesy of Blockchain.info.


https://i.imgur.com/20KcPEb.png

My opinion?  I believe the hash rate knows where it is going (miners) - the market follows, or tries to keep up with the pace, and gets distracted along the way by good/bad news, by market manipulation attempts, heist on websites, government acceptance/rejects, silk road, etc.  But eventually, gets back on track!