Lol, first going to infinity, now going to zero. This is the typical overshoot/undershoot behavior. When everybody starts believing something is going to zero, it bounces back and vice versa.
Bitcoin is close to becoming worthless?
71–80 of 83 posts
Re: Bitcoin is close to becoming worthless?
#72Earlier quoted context omitted.
Why would the cost of mining not fall correspondingly? It will adjust until it becomes profitable again, nobody is going to run mining farms if they are clearly losing money every single day.
You're implicitly assuming that bitcoin will retain value. If the value of bitcoin halves every 6 months and the cost of mining halves every 7 months, bitcoin will never* be worth mining again. * Of course it wouldn't be a smooth decline so there may be short periods where it occasionally becomes viable.
Where is the author pulling their mining costs from? I'd love to see their source. Mining costs are mostly concentrated in purchasing the equipment and setting up a factory. Once that's done, your day to day expenses are electricity and labor.
Many of the biggest Bitcoin mining operations are in places like China, near hydro-electric dams, where the electricity cost is extremely low. Labor is also cheap. Since they've already paid the setup costs, they are not going to be shutting down even at $1000 BTC.
There have already been hash rate wars. BCH has tried sending BTC into a death spiral before, by luring over miners to their blockchain. It worked, for a bit. Eventually, transaction fees went up on BTC, and miners were incentivized to return to BTC.
The average block time is 10 minutes for Bitcoin. Hash rate adjusts every 2016 blocks. That's 14 days on average. If the hash rate dropped 50%, it's 28 days.
Re: Bitcoin is close to becoming worthless?
#73Earlier quoted context omitted.
It's actually not that simple, and strangely one of those areas where economics has had a blind spot for a long time. Lots of businesses use cost-plus pricing, which contradicts the econ 101 assumption that you're repeating. Now, one might naively argue that even with cost-plus pricing, the outcome is still the same because businesses who set their price too high will be either outcompeted or just find no demand eith…
You're talking about products, not commodities. What's the consumer utility function look like for gold ore or bitcoin?
That's specifically why I mentioned price expectations.
Re: Bitcoin is close to becoming worthless?
#74Earlier quoted context omitted.
log charts are misleading because by changing the base and the vertical axis you can make a huge decline look like a blip. but seeing 80% of your money gone is anything but a blip. also there is no guarantee bitcoin will continue to have exponential returns.
> also there is no guarantee bitcoin will continue to have exponential returns which is true of any investment vehicle. You can only look at past performance and future market factors to make predictions, but even with the safest investment methods there is no guarantee.
stocks have century of exponential returns. bitcoin just a decade
Re: Bitcoin is close to becoming worthless?
#75Counterargument: actors aren't rational and will continue mining at a loss because of the sunken cost fallacy.
Mining will always continue because it's what keeps the current canonical ledger safe so if nothing else the exchanges and market makers are still economically incentivised to mine.
Re: Bitcoin is close to becoming worthless?
#76The article is misinformed: I am the first one to jump on Bitcoin's flaws, but this here just reeks of somebody not understanding the protocol: > As I argued, once Bitcoin’s price falls below its cost of mining, the incentive to mine will deteriorate, thrusting bitcoin into a death spiral. The cost of mining adjusts depending on the hash rate , so if nobody is mining the cost of mining goes down until people start mi…
The article addresses that further down. frankly I don’t quite know if their argument is valid. I am skeptical, as bitcoin existed before it got any significant value. “. Similarly, when the price of bitcoin falls and miners exit, the cost of mining decreases. However, the number of miners cannot fall below a certain level, because without the miners providing the computing power to maintain the ledger, the bitcoin b…
I suppose one source of risk is that if enough miners exit then it becomes viable for a bad actor to purchase enough computing power to mount an attack.
IIRC 51% attack happened on one of the bitcoin forks.
Re: Bitcoin is close to becoming worthless?
#77This is so fucking hilarious.
Re: Bitcoin is close to becoming worthless?
#78Bitcoins' value is in its utility at the moment. Until it stabilizes it is poor as a money (a store of value) while still quite handy as a currency (exchange of value). If it becomes a more stable store of value than competing fiat currencies it will have even more value added.
How would it ever stabilise? There is a hard limit to the number of coins issued, and unless the market is static, the value of bitcoin has to go up.
I haven't seen a good explanation to that problem.
Re: Bitcoin is close to becoming worthless?
#79Earlier quoted context omitted.
You might be interested to learn this is a point of some contention. There have been real markets with utterly wild and out of control futures markets where the spot seems to have happily trundled along with the fundamentals.
Like? If true it means that either the futures market are tiny or that there is a barrier to efficient arbitrage.
Chinese commodity markets have been known to be hugely volatile with huge volumes. The actual producers react by pulling out of the futures market. Which I guess might qualify as a trading strategy.
Re: Bitcoin is close to becoming worthless?
#80Counterargument: actors aren't rational and will continue mining at a loss because of the sunken cost fallacy. Mining will always continue because it's what keeps the current canonical ledger safe so if nothing else the exchanges and market makers are still economically incentivised to mine.
Can't that sunken cost be repurposed to mine Monero / ETH / ZCash / whatever else is in vogue nowadays?