Altcoin News: Storing Wealth in Bitcoin Currently Estimated at 2.1% per Year

October 14, 2019, by Marko Vidrih on ALTCOIN MAGAZINE

According to the calculations of the independent Bitcoin developer Tamas Blummer, the cost of operations in BTC is growing and now amounts to about 2.1% annually.

Tamas Bloommer presented his analysis of the cost of transactions in BTC in a publication on Medium. According to his estimates, the cost of ownership of cryptocurrency is currently an average of 2.1% per year.

He notes that the most obvious costs are fees associated with moving BTC to and from wallets. The total amount in bitcoin paid in the form of commissions for transactions amounted to about 50,000 BTC at the end of 2016. However, by the end of 2019, the total volume of commissions had grown to more than 200,000 BTC.

Bloommer explains that newly mined coins increase the supply on the market and will reduce the size of commissions unless other factors that dominate price movements appear. One such factor is capital inflows when fiat currencies flow into the Bitcoin economy during the bull market and leave it during the bear market.

Mining costs are also considered a significant factor, as mining companies constantly have to sell part of their coins to cover expenses. Changes in mining profits can be observed through changes in complexity, notes Bloommer.

If market prices are not high enough to support mining, miners partially shut down equipment, which reduces complexity due to falling competition.

“The most recent example where mining difficulty recovered from a longer downturn was in January 2019 at a bitcoin price of 3400 USD. I suggest to assume this as the most recent estimate of bitcoin mining costs for a unit,” says Bloommer.

Thus, at the current price just below $8400, the profit from one mined BTC is $5000 dollars. At 12.5 BTC, the mining industry’s profit margin is currently $9 million per day. Dividing this figure by BTC’s current market capitalization of $150 billion, we get a 2.1% per year cost of owning Bitcoins plus operating expenses, which are still negligible.

“Storage cost of wealth in bitcoin is therefore currently 2.1% annually plus transaction cost that is negligible for now. Storage cost will drop significantly with halving as that will cut into miners’ profitability,” says Bloommer.

Short-term speculation may make the cost of ownership negligible for users, but investors should be aware of these estimates, Blummer concludes.

Recall that in June of this year, the complexity of Bitcoin mining reached a record high, demonstrating growing competition for new blocks among miners.

Author: Marko Vidrih