Topic: Think of Bitcoin Financially (Read 476 times)

I don't understand why people have such a visceral response to the idea that bitcoin miners want to make actual money, and care about profit margins and regular business views. Understanding bitcoin financially is the only way to identify prime times to buy such as in February this year, and prime times to sell such as on June 26. Without looking at the miners as people who just want to hold bitcoins, the market actually makes SENSE.

https://www.amsinger.org

Check it out on my site I explain everything there,

Aaron

no, this is what you fundamentally don't understand. if miners were interested in producing goods to sell on the market, they'd invest in widget factories, not bitcoin mines. bitcoin mining is extremely risky---it makes no sense to sell mined bitcoins for marginal gains. you are treating it like a low risk manufacturing business.

mining is the original form of bitcoin investment. those with access to cheap ASIC fabrication and cheap electricity at scale pursue mining operations because it will outperform simply buying bitcoins on the market. it's an arms race among the top miners to hoard from a very small supply. and they are fully intent on withholding coins from the market to drive prices higher.


bitcoins that were mined at much, much lower costs than current prices. if price spent a prolonged period below miner costs, you would be right, and there would be massive pressure to sell. and that's what the 2014 market looked like. but that's not the current situation at all---look at the chart. most miners for the past half year are sitting on massive paper profits and only need to sell a small fraction to cover their operational expenses.

as long as bitcoin retains its bullish trend (see the monthly chart) then miners will keep withholding coins from the market.

That. It's quite funny how he claims to know that miners are selling 1800 coins per day, but doesn't know where to look in order to actually find out what miners are doing with their coins. One would think that it isn't necessary to spoon feed someone that 'knowledgeable'. 

Another important aspect to mining is that in times of uncertainty, miners use platforms such as Bitmex to hedge a potential drop. In this case it's purely done to preserve as much of their fiat value as possible, but without the coins actually touching a spot exchange. Miners are hodlers for the most part, not sellers.

Miner investment isn't in bitcoin. It is in mining bitcoin. To them bitcoin is the product not the investment.

That guy brought up the wallet addresses so I asked him to clarify. I hardly think that is not fair.

I am not saying 1800 bitcoin that were mined today will be sold, but if there is constant pressure of 1800 bitcoin per day some of the 1800 mined a week ago, or a month ago, or a year ago will be sold. Bitcoin has been going for a long time, and every coin in use has been mined. If you wish to ignore the fact that 1800 btc are mined per day that is your business. No one makes a product in order to not sell it especially if it costs millions of dollars of electricity to make.

You need to know this information if you want to protect yourself from losses.

https://www.amsinger.org

Aaron

look at every mined block and see where the coinbase rewards go. if an output doesn't move, it's not being sold. in truth, since you are the one asserting that 1800 mined coins/day are being sold, the burden of proof is on you to show that.


yes but on what timeline? you're not accounting for the fact that miners are collectively investing billions of dollars into their operations. the largest miners are well capitalized with no need to dump BTC to cover their day-to-day costs. they are not investing in mining at the current cost so they can immediately sell their coins for a very marginal profit (or loss). they sell as little as possible to cover overheads while holding the majority for much higher prices.

it would be irrational for miners to bother building capitalized operations only to dump 100% of their investment for extremely marginal returns. they would be better off running laundromats or supermarkets for such low returns. mining is a high risk/high reward venture but you assume that miners are treating it like a high risk/low reward venture. it makes zero sense.

Um, yeah. That's what the difficulty adjustment does. It's a never ending arbiter that pushes out unprofitable miners and allows others to take their place. And it works to absolute perfection.

I've lost count of the number of times people have rolled out the 'mining death spiral' shit. It's junk spouted by people who can't be bothered to spend a few seconds reading. I will never care about mining. I do not need to.

Where are the mining addresses you are speaking of? If you want to promote an idea please bring your facts and data.

They need to sell to pay for their expenses. That is business. You are arguing that car companies will warehouse EVERY car they make just to keep the supply of available cars down, so the price stays high. Complete illogical thought.

https://www.amsinger.org

Aaron

It's true that you can't stop sellers from selling, but it's not true that miners will or are dumping 1800 coins every day. If you doubt this, then go check the mining addresses and you'll see that only a smaller fraction of these coins are actually sent over to an exchange. Bitcoin's transparency is wonderful, which means that you don't have to trust on my anyone's information, but can check for yourself.

If miners would really dump all their mining rewards every day, the price would have gone back to $6000 again by now, or even lower. In the end, miners are incentivized to not hurt the price too much by selling, otherwise their operations will suffer too.

I really just practice on here. My main marketing focus is Linkedin. You are simply a manipulator who wants people to buy buy buy to add liquidity to the market. You don't care if they get screwed or lose 40% of their principal. You just want people to buy buy buy. Anyone who speaks of logic and numbers is your natural enemy.

https://www.amsinger.org

Aaron

1800 X $13k = 24.8 million per day

Love how you introduced or promote your service to analyze Bitcoin but I really don't buy it. The OP talks Bitcoin more of its economical side rather than talk about its technical side which already gives me a hint that you will just talk about demand and supply when they avail your services. Talking about demand and supply is the most inaccurate way to forecast the price of Bitcoin specially when its a volatile asset compared to others no one really knows the exact target price for it as things could easily shift with just one FOMO or FUD.

you are a newcomer otherwise you wouldn't have made such ridiculous claims.
hashrate rises when new miners enter the space, it requires them to either already have ASICs and turn them on or go buy some and start using them to mine bitcoin. that takes time so you can't expect hashrate to just jump each time bitcoin price jumps! it will slowly rise right after the price rise. and if you look at the hashrate charts versus the price you could clearly see that!

it is interesting that everyone is disapproving your whole speculation and yet you are hostile towards everyone and at the same time want to sell your services!!!

I am really missing some of your calculations here.
How do you calculate that it costs 24.8m if it costs 13k? What is the calculation behind this metrics? Because it seems like you are using a long term period that I am not getting.

From your view, it is miners who are the service providers. The same way if everyone thinks then it won't take time for the network go down. Mining function on its algorithm, but there needs to be investment expecting return. On last year's market there isn't any big profiting for miners while the equipments were high priced. That's true even when they tried for a block size concensus finally everything got winded in a short.

complete and total fantasy. you can't stop sellers from selling. and miners will dump 1800/day bitcoins so unless bitcoin is absorbing more than $30million per day it is not sustainable.

https://www.amsinger.org

I think it is quite possible to sustain as long as there is money coming into bitcoin however the reality is that "unregulated" brings in another opponent with decentralization. Its not regulated but it also doesn't have to be, it has decentralized system which makes it require no trust at all.

So, when banks can leverage the hell out of their positions with no money at all and get 100 dollars from you while give 1000 dollar loans based on that, bitcoin requires straight up money to buy and can't buy with anything else.

However, you are forgetting that money doesn't have to be going into bitcoin to get to 19k, you can literally have sellers denying to give up that much and you can have people buying bitcoin as much as the miners easily since its already x100 times that size so in the end you will just have some people buying bitcoin from miners and the price would be skyrocketing. All we need is stop sellers from selling.

The creation cost changes from minute to minute based on the hash rate. The spot price is affected by the market dynamics. People don't always want to buy at super high prices like $13k, so the liquidity at those levels drop and the price falls.

1800 coins being made a day signifies a large amount of downward pressure. The whales can manipulate the price quickly in moments, but they can not sustain overly inflated prices for long periods of time. The nature of the market is more powerful than the manipulators.

If you want to learn more, check out my site and request information. It is really quite beautiful how the bitcoin market actually works.

https://www.amsinger.org

Aaron

The price changes from minute to minute because of the hash rate? I thought bitcoin was  a free market and the price depends on the demand and supply. Coins being dumped for cheap which increases the supply causing the price to slightly fall and then at the same moment other people buying it back in high volume which increases the demand causing the price to go back and rise and then the circle keeps on going on until a whale comes in and dumps all their coins or starts buying everything causing massive fall or surge of the price.

I am not a newcomer, you have no clue how hash rate works. You have no clue how difficulty works. If you "assessment" was correct then the week that btc was up 40% the hash rate would have followed 40% up in a week. You have used no data. You have used no actual bitcoin infrastructure (ASICs). You are a manipulator.

If you want to listen to this guy be my guest and throw your money down the drain.

https://www.amsinger.org

Aaron

This seems like an odd assumption. Doesn't that assume that every single BTC mined is immediately dumped onto the market? Why would that be?

No miner dumps everything. The entire point of mining is to sell as little as possible in the short term. Otherwise they would just use their capital to buy BTC. The OP doesn't seem to grasp that miners are Bitcoin investors, first and foremost.

you are wrong.
bitcoin is a currency and nothing else. and because this currency is new and is still growing and being adopted, its price rises which means it attracts speculators who invest in this currency. that doesn't change the nature of bitcoin though.

you are very wrong about this.
and history has proven many times that price can and will fall below the creation cost (aka mining cost) of bitcoin as it has always fallen big time after its bubbles while the mining cost remains much higher.
in other words creation cost has nothing to do with how low price can go or how much it should be.

you are wrong again.
and it is a very common mistake among newcomers. the thing is you are looking at it upside down. price doesn't change based on cost, the cost changes based on price!
meaning if price is $10 then the cost will be a little less than $10
if price went up to $20 then the cost adjusts and will be a little less than $20
and if price fell down to $5 then the cost again readjusts and will be a little less than $5

I cant. I suffered gate-keeping today, and this forced my hand to use litecoin to make a purchase, which in turn made me buy more litecoin to replace what I spent.

You would understand this if you lived in a third world country, but I guess you dont.

I'm not kidding bro, tell your boss about me. He could make some good money. With the insider information plus my financial analysis, your boss would make out like a bandit

https://www.amsinger.org

How do you like my redesign?

very cute you have used no numbers or logic, so what are you?

He assumes every single BTC ever mined is getting dumped for fiat, LOL. As if miners were investing in these operations so they could immediately dump to eek out a tiny short term fiat profit!

His entire analysis is nothing more than "OMG, who would put that much money into BTC? Impossible!"

And that's why he's been short since the $8,000s. If he's lucky, he might be able to get back to his break-even.

That means more centralization. I am actually quite happy with how well distributed the crypto exchanges are. If there was just one single exchange it would be quite easy for regulators to shut it down.

Another benefit is that more competition means better quality of service and lower fees. The stock market is everything people shouldn't want the crypto market to transform into.

Sure, it allows the crappy exchanges to emerge too, but that's something you just have to accept, and you can always decide not to use these crappy exchanges because there is always a better alternative available.

That is exactly what I am talking about. If price of Bitcoin goes close to zero. Then all miners will get turned off and difficulty will drop and it will end by one guy mining it with CPU. This is the scenario I was writing about. And this  shows clearly that there is no minimum price for Bitcoin that is set by miners.  


For your question hmm. When price of Bitcoin went from $1k to $20k in 2017. Miners starting building up their farms. It cant be instant. They expand and new farms got opened. In December 2017 when BTC price went down, this did not end. They keep expanding since were not sure if price will stay low or will go back to $20k and also costs of mining were way under $12k as was price back then. So new mining farms and expanding of already existing ere going on for whole 2018. Although price went to $6k. Once price fall to $3k, that ended. Some farms that were in areas with high electricity cost even stopped mining in December 2018.   But as soon price jump back to $6k hash rate growth started growing again.  This is how it is and is same for last 10 years.

Lets assume that in December price of Bitcoin would stay on $3k from some who knows what reason. Something fundamental should change in Bitcoin. And when 2019 would start price would start falling further down to $2000 and then to $1000.   No new mining farm would get open anymore. No existing farm would buy more miners. All farms that are in areas with expensive electricity would start closing down. And harsh rate would decrease and difficulty would decrease and existing miners would get more Bitcoins for their hash given.  This is how PoW works and this is why Satoshi chose it to secure our money.

You should really tell your boss about my site. It would be very good for him/her.

If you don't care about mining you ignore the true financial investment in bitcoin. Do you assume they are $10 operations with zero buying power or foresight?

Aaron

https://www.amsinger.org

Sigh. This guy again?

Go sell your snake oil somewhere else.

I've been in BTC for many years. At no point have I ever given the slightest shit about mining. It's not my problem. It's not my concern. I pay it zero attention.

Miners take care of themselves. The algorithm takes care of the economics of mining. What it costs them is their problem. If they can't take it someone else will.

Any miner attempting to defend a price will wind up ruined in a very short period of time. At heart miners are service providers. They follow the price, not lead it.

Creation cost is a novel concept that bitcoin and crypto people need to start thinking about. I am not speculating here, I am speaking of the business reality of bitcoin. Creation cost and cash flow, the cornerstone of understanding risk levels in crypto.

Aaron

https://www.amsinger.org

You can't mine with a CPU anymore, unless every person with a busted up ASIC throws it away. You need to have specialized ASIC's to mine now, and not everyone can just "jump in". Do you truly believe that enough miners "jumped in" to sustain $13,800 or how about in 2017 @ $19,500?

I know exactly how many miners "jumped in" during the boom. I monitor this situation every day, and I can tell you 13,800 wasn't supported in the slightest.

https://www.amsinger.org

I monitor downside and mitigate risk for my clients.

Aaron

That is some analysis that would better suit the trading discussion.

Yes it is easy to understand the flow but there are a lot of times that even analysts gets it wrong. Why?
The volatility of bitcoin doesnt go as what you will always be expect.

It will be easier if there is only one exchange but that is not what is happening right now.

You already misunderstand something here. Cost to mine bitcoin can go to almost zero. If everyone stop mining and only you mine with your cpu, then you will get 1.5 BTC every 10 minutes quite cheap.  

When price is high new miners join to mine. That is what mainly happens. When price gets lower no new miners join. When price goes under mining cost of some miners, they might or not stop mining. Since no new join that means that less miners compete for those 12.5btc a 10 minutes and that way costs to mine 1 btc decreases on average. [/list]

Bitcoin is not a stock, an annuity, a simple commodity, or a currency. It is a combination of all these things. In order to properly understand this fusion called bitcoin new metrics and analysis are necessary. To take control over bitcoin and grow confident you must know 2 concepts:

Creation Cost - The amount that is costs to make a bitcoin.

• This cost represents the lowest price that bitcoin can functionally go.

• It represents the combined investment of all the businesses that are active in bitcoin.

• The creators of bitcoin will support this price as they did from Dec 2018 to March 2019. They will not give up their golden goose.

• This price can change minute by minute because it is based on the hash rate of the network (the amount of active servers) and the efficiency of the machines that are active.

Cash flow - The amount of longterm investment needed to maintain the current price.

• 1800 bitcoin are created every day

• If the price of bitcoin is $13,800 it costs $24.8 million of long term investment to maintain that price.

• This is why bitcoin goes up very fast, and slowly drains back down.

• This is why the 19k bitcoin of Dec 2017 didn’t stay. It was impossible to maintain, so it drained back down because $34.2 million of longterm investment is not feasible.

Bitcoin operates like an unregulated, manipulated commodity. The only way to profit from it (and not get rekt) is to understand how it works and take advantage of prime opportunities to buy and sell. It is not difficult, in fact, it is quite simple.

In hind sight we all know that it was a good to sell at $19k and $13.8k as well as buy at $3.2k last December. Wouldn’t you have liked to know this information during those times?

If you'd like request some analysis or research from me here:

https://www.amsinger.org

Much love and hard work,


Aaron