Subnostr

No, due to fungibility and universal availability of the assets the price will always be around the cost to produce coins. Think about if you have something brand new that is highly desirable and doesn't have a high production volume, like a new in box PS5 during its launch year, you could easily sell it at the inflated price it costs to buy a new one because the one you offer is the same as the new ones produced.

The miners will always need to make a profit, the difficulty adjustment ensures it's not too easy or too difficult to do so for the average miners. Humanity will keep adding to the mining network, and the halving will keep occurring, which will continuously increase the cost to create coins and the value of all coins on the open market will follow.

Chris 1y ago

Or even far earlier, say 2105 when all but the last whole Bitcoin has been rewarded. You’re saying that the cost to mine that last Bitcoin over a 35yr period will be the sole determinant of price as opposed to the supply/demand characteristics of the other 20,999,999 Bitcoin already in existence?

Seems more likely to me that in the next 3-5 cycles, volatility will dampen (slowly) as over 99.5 percent of coins will have been rewarded by then and instead of thinking in fiat we will be living in a global circular Bitcoin economy.

Another wrinkle is that (IMO) hash is likely to almost infinitely decentralised across the planet in these next 3-5 cycles as the only viable miners will be those with access to marginally free electricity. Large scale mining will be an artefact of the “early days”. Can already see this happening now as the large public miners are shifting towards being Bitcoin Treasury businesses.

Just a thought…..still working it out in my own coco 🥥 🧠

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Discussion

TheBitcoinBattery 1y ago

Appreciate the discourse. 🖖🍻

It is my understanding that Bitcoin's are, and always will be, a free market good. As with all free market goods cost of production cannot be higher than the expected return on the investment necessary to make the good or production wouldn't happen. On the other side cost of production cannot be much lower than open market prices they would expect to receive for them or people will focus on making more Bitcoin through mining, raising the hashrate which raises the difficulty and thus the cost of mining until they reach equilibrium again. This is ensured to occur thanks to the difficulty adjustment, as the difficulty increases with the hashrate then only the most efficient miners will remain profitable and stay mining. Less efficient ones either die off or are forced to increase their efficiency to stay profitable.

Remember that there is no other buyer of excess energy, we will create abundant excess energy and as the value of the coins rises our drive to mine will rise with it. The halving regularly reduces the payment for that effort and increases the value of all coins compared to electricity.

Think about it like this, 1 Bitcoin costs roughly 3 minutes worth of all the energy of the entire network to create today. The amount of energy input is going up and so does the total value held by that energy. In 8 years of 15% annual growth the total amount of energy will likely be 3x what it is today, and the amount of Bitcoin given in exchange will reduce to only 0.78125 (7.8125 BTC at that point if the 10 to 1 split I am suggesting occurs across the entire network). That means that 1 Bitcoin would represent about 12.5 minutes of the total energy input of the network. If you held 1 Bitcoin from today, you would see it grow from being worth 3 minutes of the energy given to today's network, to 12.5 minutes of the energy input by a network 3 times the size it is today. That's 12+ times the value.

These effects are self reinforcing. I don't see anyway for them to be stopped, and it brings abundance to everyone faster than anyone expects.

Chris 1y ago

Is the 15 percent annual growth a hard ceiling in your opinion? Why couldn’t it be 25 percent? Or higher?

TheBitcoinBattery 1y ago

That's just my extrapolating the same rate of growth the network saw over the last 6 years. It very well could grow faster than that, or it could slow down, but only time will tell.