fastandfurious



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Full MemberActivity: 224Merit: 100 Re: Bitcoin simply are not worth ($10 or $9 or $8) August 13, 2011, 03:22:10 PM #4 Quote from: Ridi on August 13, 2011, 02:58:04 PM [Reddit] The Real cost of Bitcoin? - Breaking Down the Math I agree with a few of the posters that the numbers are manipulated in the fact that the bitcoin system can handle many more transactions than what is currently used, without any increased overall cost, resulting in a decreased cost per transaction.



This highlights a problem with 'miners' though. Their supply far exceeds the demand. They have to consume massive resources in order to obtain the 50 BTC reward and in order to become profitable they need to sell BTC at gouged rate on the markets. The plain fact of the matter is that BTC is not worth that much, and that much power is not necessary to sustain the system.



It's expected that after the mining pool is tapped at 21,000,000 BTC that the miners will hemorrhage unnecessary miners as supply falls to meet demand levels. The current situation though is that as 'miners' pump more processing power into the pool, they will have to gouge the price of BTC to keep running at a profit.



Quite simply I don't think it's ethical to be purchasing BTC at these rates unless you have a legitimate need for them. I also speculate that this will catch up with miners, they are essentially pegging the bitcoin to the electricity and equipment involved (not unreasonable) and then throwing in as much electricity and equipment as they can get their hands on (in essence, the decentralized bank can do stupid shit too when the buyers let it.)

I've been reading this thread https://bitcointalk.org/index.php?topic=36687.0 I agree with a few of the posters that the numbers are manipulated in the fact that the bitcoin system can handle many more transactions than what is currently used, without any increased overall cost, resulting in a decreased cost per transaction.This highlights a problem with 'miners' though. Their supply far exceeds the demand. They have to consume massive resources in order to obtain the 50 BTC reward and in order to become profitable they need to sell BTC at gouged rate on the markets. The plain fact of the matter is that BTC is not worth that much, and that much power is not necessary to sustain the system.It's expected that after the mining pool is tapped at 21,000,000 BTC that the miners will hemorrhage unnecessary miners as supply falls to meet demand levels. The current situation though is that as 'miners' pump more processing power into the pool, they will have to gouge the price of BTC to keep running at a profit.Quite simply I don't think it's ethical to be purchasing BTC at these rates unless you have a legitimate need for them. I also speculate that this will catch up with miners, they are essentially pegging the bitcoin to the electricity and equipment involved (not unreasonable) and then throwing in as much electricity and equipment as they can get their hands on (in essence, the decentralized bank can do stupid shit too when the buyers let it.)

Welcome to the game, I have been saying this for a month now. The direct buyer at the exchange are feeding the miners fat and happy. The problem is that the direct buyer doesn't understand economics. My tip is to start reading the mining sector of this forum. Welcome to the game, I have been saying this for a month now. The direct buyer at the exchange are feeding the miners fat and happy. The problem is that the direct buyer doesn't understand economics. My tip is to start reading the mining sector of this forum.

fastandfurious



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Full MemberActivity: 224Merit: 100 Re: Bitcoin simply are not worth ($10 or $9 or $8) August 13, 2011, 03:35:58 PM

Last edit: August 13, 2011, 05:19:14 PM by fastandfurious #6 Quote from: brocktice on August 13, 2011, 03:24:18 PM This was the equilibrium posited by Satoshi in his paper, and you have it wrong. In fact, price drives mining, not the other way around. Whether there are 5 miners or 5000 the supply will be the same. The large moves in the market make plain that speculators, not miners, are the ones setting prices.



You are right "sometimes". The problem is this, when the mining sector of the Bitcoin economy gets to big, the direct buyer starts feeding the beast (the miners), they want and need to have their money back from their investment, and the only way to do this is to attack the direct buyer at the exchanges. You could say that it is a constant fight between the direct buyer and the miners. My belief right now is that the miners are in desperate need to get their money back and that is the reason we see the price hit new lows. If the direct buyer were smart, we would already have hit equilibrium, but the direct buyer is greedy and don't understand economics.



The heavy investments was all made in May and June of this year. Before the money of those investments are not taken home from the direct buyer we will see a continued downturn and pressure on price. That was the reason I said it will hit 5-6 dollars when it cost 12 dollars a couple of weeks ago. You are right "sometimes". The problem is this, when the mining sector of the Bitcoin economy gets to big, the direct buyer starts feeding the beast (the miners), they want and need to have their money back from their investment, and the only way to do this is to attack the direct buyer at the exchanges. You could say that it is a constant fight between the direct buyer and the miners. My belief right now is that the miners are in desperate need to get their money back and that is the reason we see the price hit new lows. If the direct buyer were smart, we would already have hit equilibrium, but the direct buyer is greedy and don't understand economics.The heavy investments was all made in May and June of this year. Before the money of those investments are not taken home from the direct buyer we will see a continued downturn and pressure on price. That was the reason I said it will hit 5-6 dollars when it cost 12 dollars a couple of weeks ago.

grod



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Full MemberActivity: 154Merit: 100 Re: Bitcoin simply are not worth ($10 or $9 or $8) August 13, 2011, 06:14:21 PM #11 I'm not sure you can take volumes at MtGox as a reliable proxy for number of coins having traded hands at the end of the day. There's a lot of froth being caused by bots playing with each other as a result of reduced commissions. And day traders are all on mtgox, since no other exchange has enough volume or volatility for anything over $1000 in play money. I strongly doubt $73000 new dollars are finding their way to mtgox a day let alone 5-20x that.



Only the operator of mtgox has a clear picture of how many bitcoins vs how many dollars are being deposited as opposed to being taken out, and as a result what % of newly minted coins are being hoarded in comparison to the historic 80%+ levels. I'm one of those jonny-come-lately miners, and I can tell you all I'm doing is depositing bitcoins and receiving dollars. I have no reason to believe my behavior is atypical of the other 3/4 of the mining power.



What I think happened as a result of 3/4 mining power being added since June is a shift from a mining demographic content to hoard most and sell a small % to those of us wanting to sell most and hoard very little. This IMO is not a bad thing.





