Are we losing a race against time until the halving?

[maqifrnswa]

So I think my conclusion, thinking on the fly, is that the consumption of Bitcoin isn't an important requirement and that there will be higher multiples in Bitcoin than gold because the amount of BTC mined can't increase in response to higher prices. (However as I said earlier there is a relationship in the sense that in order to sustain any valuation, new $ demand for BTC has to at least offset the $ value of BTC being mined.)

You're right, consumption isn't necessarily important, and I choose the wrong word. I meant more as, "a store of something that is essentially to be purchased and used in industry" -- a commodity. At some point I will need gold electrodes and I must buy gold. My point is that gold is tied to a broader economy of goods that require it. There isn't the analogy for BTC.

While the total amount of BTC mined can't increase indefinitely, transaction fees can if miners only accept transactions in to blocks that pay for themselves. From a miner's point of view, there is no difference between transaction feeds and block rewards. That's why placed the fundamental limit the the minimum value of BTC to the marginal cost to "produce" a BTC, which from the miner's point of view is both fees and mining.
$ to produce a block / # of btc "produced" (mined or fees) = the value.
The scarcity keeps the denominator small, and the value stable.

[Empirical1.2]

There is no reason why a bitcoin should be priced anything except for the minimum, besides speculation.

Yet gold has been valued far more than the minimum cost of extraction for thousands of years.

It's almost as though there are different valuation metrics that must be applied to money.
As well as understanding what constitutes & can become a popular form of money.

Gold is a great example of my point. It does not, and has not, have a value in excess of production anywhere near what bitcoin has (bitcoin is WAY worse). Gold is only a few multiples (somwhere between 10%-300% premium) above the cost of production. The multiples are from speculation on supply as it is a required component in industry, and there is an industry selling it for the sake of it (jewlery). People model that the demand for gold will increase (because of real economic factors), and supply will decrease, so they pay a premium over production. However, gold is consumed - thus the demand. Nothing "consumes" bitcoin.

http://business.financialpost.com/news/mining/exactly-how-much-does-it-cost-to-produce-an-ounce-of-gold
http://www.visualcapitalist.com/what-is-the-cost-of-mining-gold/

The multiples are partly to do with the fact that in the case of gold, when demand increases, more gold will be mined/recycled at those higher prices whereas with Bitcoin, when there is a huge surge in demand, no more Bitcoin can be produced than is already written in the code.

Also gold is hardly consumed to my knowledge, I think I've read that a very large % of the gold ever mined is still in existence with a couple of hundred tons being recycled every year.

Only a small percentage of gold's demand is industrial I believe and a large part of the jewellery based demand is actually monetary, in the case of India, where gold jewellery is viewed as a form of money.

So I think my conclusion, thinking on the fly, is that the consumption of Bitcoin isn't an important requirement and that there will be higher multiples in Bitcoin than gold because the amount of BTC mined can't increase in response to higher prices. (However as I said earlier there is a relationship in the sense that in order to sustain any valuation, new $ demand for BTC has to at least offset the $ value of BTC being mined.)

[maqifrnswa]

There is no reason why a bitcoin should be priced anything except for the minimum, besides speculation.

Yet gold has been valued far more than the minimum cost of extraction for thousands of years.

It's almost as though there are different valuation metrics that must be applied to money.
As well as understanding what constitutes & can become a popular form of money.

Gold is a great example of my point. It does not, and has not, have a value in excess of production anywhere near what bitcoin has (bitcoin is WAY worse). Gold is only a few multiples (somwhere between 10%-300% premium) above the cost of production. The multiples are from speculation on supply as it is a required component in industry, and there is an industry selling it for the sake of it (jewlery). People model that the demand for gold will increase (because of real economic factors), and supply will decrease, so they pay a premium over production. However, gold is consumed - thus the demand. Nothing "consumes" bitcoin.

http://business.financialpost.com/news/mining/exactly-how-much-does-it-cost-to-produce-an-ounce-of-gold
http://www.visualcapitalist.com/what-is-the-cost-of-mining-gold/

[Empirical1.2]

There is no reason why a bitcoin should be priced anything except for the minimum, besides speculation.

Yet gold has been valued far more than the minimum cost of extraction for thousands of years.

I think there are different valuation metrics that must be applied to money. As well as understanding what constitutes & can become a popular form of money.

Some of the factors listed here, certainly come into play http://fee.org/freeman/detail/the-value-of-money

[maqifrnswa]

Everyone focuses a lot on the "technicals," of crypto,  which makes sense since it is entirely driven by speculators at the moment and fundamentals don't come in to play. But the fundamentals require analysis, because in the end - things really only last long-term because of fundamentals.

BTS is essentially a non-profit, it does not generate any value on its own. It pays for network security with dilution and transaction fees. The intrinsic value of a bitcoin is the marginal cost to produce the block divided by number of bitcoins paid to the miner per block. The number of bitcoins paid to miner via reward is decreasing over time, but will reach the floor of transaction fees, which is a variable. The marginal cost to produce a block is also a variable depending on the collective power of the miners (i.e., network difficulty), miner computing efficiency ( hashes/sec/(W*electricity rate) ), financing/depreciation of mining hardware, and development costs (since miners are the sole players with network financial incentive to maintain the code). In theory, if prices drop, then people turn off miners until the new network difficulty-price equilibrium is reached. There, therefore, is a minimum value to bitcoin (namely, where is the cheapest electricity in the world), but no maximum value besides speculation. There is no reason why a bitcoin should be priced anything except for the minimum, besides speculation.

BTS is different, as it is a "for-profit" coin. Real companies that produce goods and services and list on the network (with true regulatory compliance), which collects network fees. Fees pay expenses (technology development, marketing, business development, network security) and return a "profit" to the network via burned fees. The value of BTS is in the earning rate, as it is in a normal company (price per earnings ratio, for example, which is always "infinity" for bitcoin). If you can you estimate of the bitshares return and risk -- you can actually price BTS. The game is then trying to be the best at predicting return and risk.

That fundamental difference is why I've come to support bitshares.

But this was also my concern with BTA2.0: how do I price a short to create BitUSD when I know the floor is enforced by the network (the peg), but there is no explicit mechanism for enforcing a ceiling? I think the answer is in the expected profit from BTS. As long as BTS produces profit (my projections of earnings of BTS exceeds the current valuation), I'd be willing to leverage what I have to get more of them. So I price at a discount because I don't know what liquidity will be like when I sell and I want to account for it. There then becomes an auction on willingness to accept liquidity risk. Market makers profit from liquidity risk (over the long term), and also inject liquidity in the market - so I feel like the system has a good chance of working...

[CLains]

So in terms of how high LTC can go in the short term it's highly influenced by external events but long term it can sustain double the price with the same level of average new demand.

All else equal, if we view cryptocurrencies as cryptoequity we can look to the average fluctuation for stocks at around 15% annually. However, if we really believe in the potential for Bitcoin, Litecoin and BitShares to become 100 billion dollar industries,  then a volatility far in excess of 50% should be expected not just in the short term, but all the way there.

Let's say we care about 3% inflation annually so long as yearly fluctuation is less than 30% then we have the following scenario: Let's say BitShares is 30 million in 2015, then with 30% growth annually, we will reach 400 million in 2025. To get anywhere near 1 billion in the next five years we will have to sustain a growth rate of 100% a year.

I don't think I would be exaggerating if many of the core community members here value BitShares exactly on the proposition that we may reach 1 billion in the next five years, hence the quibbling over 3% is really a debate that will have evidence with a margin of error around 3333% in the coming years if we are successful. 

[Empirical1.2]

If we are talking about marketcap, given the average cryptocoin fluctuation of 300% per year it's hard to take debates about 3% seriously. The theoretical beauty and apparent intelligence of the explanation we give for this or that move in price has nothing to do with the actual causality of the thing we're trying to explain. Don't listen to what anyone says about anything after the fact - unless they've made tons of money trading crypto or stocks they don't know the reasons, they're indulging in rationalization and magical thinking.

Listen to the people who correctly predict what will happen to Litecoin in the next 30 days:

http://www.litecoinblockhalf.com/

Besides confusing concepts surrounding currencies and companies, BitShare-ites often dismiss and discount very real costs just because they are masked by volatility.

Regards LTC. It settled in the $50-60 million range for the majority of this year. With 30% annual inflation that implies an average of $1-1.5 Million in new demand every month to offset sales of newly generated coins. All else being equal after the halving LTC could sustain twice the price, $120 million with the same level of demand.

However all else is not equal, there has been the greek crisis, Chinese market problems, BTC problems and also an LTC ponzi which has increased demand and influenced the price positively.

Litecoin is still considered the next crypto-currency should Bitcoin run into problems and is also coming up to a block reward halving which could significantly reduce selling pressure. Combined I wouldn't be surprised to see the LiteCoin rally continue strongly. 

Capital controls this weekend possibly for Greece could be good for all crypto too if it actually happens this time.

So in terms of how high LTC can go in the short term it's highly influenced by external events but I think it can sustain at least $120 million with the same level of average new demand that it had in the first half of 2015.

[CLains]

If we are talking about marketcap, given the average cryptocoin fluctuation of 300% per year it's hard to take debates about 3% seriously. The theoretical beauty and apparent intelligence of the explanation we give for this or that move in price has nothing to do with the actual causality of the thing we're trying to explain. Don't listen to what anyone says about anything after the fact - unless they've made tons of money trading crypto or stocks they don't know the reasons, they're indulging in rationalization and magical thinking.

Listen to the people who correctly predict what will happen to Litecoin in the next 30 days:

http://www.litecoinblockhalf.com/

[santaclause102]

You mean BTC could instantly reduce its cost to 0 thereby instantly become DEAD.

BTC doesn't work without mining, and nobody is going to mine without the financial incentive. IMO BTC will have a hard time after the reward halving next year.

They could instantly reduce their costs to 0 by copying DPOS.

Ah, then I misunderstood you. I thought you meant they could reduce their cost to zero by scrapping the block reward.

Bitcoin copying DPOS is unrealistic. They can't even agree on a minor issue like increasing their blocksize.

Im curious why you think the reward halving will give them a hard time. I think it will bump Bitcoin back to $1000.

When the block reward halves, mining will instantly stop being economically viable for most of today's miners. Meaning the hashrate will drop seriously. Experience with certain altcoins (MMC2, PTS) shows that this can lead to a wildly oscillating difficulty, which makes the coin unusable.

Even if the difficulty adjustment happens smoothly, the reduced hashrate means that BTC becomes more vulnerable to a 51% attack, especially in view of the existing but unused mining hardware.

Also, I see no reason why the halving should lead to higher BTC prices. The reduced dilution does not alter the know hard cap of 21MBTC. Anyone who is betting on BTC will buy before the halving.

Less new coins released to miners -> less coins need to be sold by miners to pay electricity bills?

The scenario with the oscillating difficulty sounds a bit worrying. Has that been observed with bigger ones like LTC OR Doge?

[speedy]

When the block reward halves, mining will instantly stop being economically viable for most of today's miners. Meaning the hashrate will drop seriously. Experience with certain altcoins (MMC2, PTS) shows that this can lead to a wildly oscillating difficulty, which makes the coin unusable.

Even if the difficulty adjustment happens smoothly, the reduced hashrate means that BTC becomes more vulnerable to a 51% attack, especially in view of the existing but unused mining hardware.

Also, I see no reason why the halving should lead to higher BTC prices. The reduced dilution does not alter the know hard cap of 21MBTC. Anyone who is betting on BTC will buy before the halving.

The eventual hard cap of 21M is not relevant, its the rate of new coins currently being sold that determines the price.

Even if there is a reduced hash rate, someone will still find a block even if it takes half a day. And Im pretty sure there will be a runup in price before the halving meaning it will be just as profitable to mine as before. Even if the difficulty does oscillate temporarily, the supply of new coins will dry up and thats what matters.

I just hope BitShares can earn some real revenue before June next year or we will get left behind.

[pc]

You mean BTC could instantly reduce its cost to 0 thereby instantly become DEAD.

BTC doesn't work without mining, and nobody is going to mine without the financial incentive. IMO BTC will have a hard time after the reward halving next year.

They could instantly reduce their costs to 0 by copying DPOS.

Ah, then I misunderstood you. I thought you meant they could reduce their cost to zero by scrapping the block reward.

Bitcoin copying DPOS is unrealistic. They can't even agree on a minor issue like increasing their blocksize.

Im curious why you think the reward halving will give them a hard time. I think it will bump Bitcoin back to $1000.

When the block reward halves, mining will instantly stop being economically viable for most of today's miners. Meaning the hashrate will drop seriously. Experience with certain altcoins (MMC2, PTS) shows that this can lead to a wildly oscillating difficulty, which makes the coin unusable.

Even if the difficulty adjustment happens smoothly, the reduced hashrate means that BTC becomes more vulnerable to a 51% attack, especially in view of the existing but unused mining hardware.

Also, I see no reason why the halving should lead to higher BTC prices. The reduced dilution does not alter the know hard cap of 21MBTC. Anyone who is betting on BTC will buy before the halving.

[triox]

Look at the block size debacle. Bitcoin is being held hostage by it's own security industry. Many of the developers are shareholders in huge mining operations and in firms that capitalize on Bitcoin being expensive and slow.
I see no chance of Bitcoin having it's consensus fixed, at least not until 51% attacks start routinely crippling the network.

[xeroc]

Assuming Miners produced one block every 10 minutes and we have 25 newly
created Bitcoin, with a price of $300/BTC a mere $7.5k need to be bought to
hold the price.

That's what most people already know ... Now let's do this:

Assuming Miners produced one block every 10 minutes and we have 25 newly
created Bitcoin, with a price of $300/BTC and an average of 800 [1]
transactions per block, each transaction requires someone to buy Bitcoin for
roughly $10 ($9.38).

Not sure if this would be "economically correct" .. but for me, this means,
that every transactions should have a fee of $11 to achieve a stable price that
is NOT based on speculation.

It's ridiculous, isn't it? Where the flaw in my math?

[1] https://blockchain.info/charts/n-transactions-per-block

[Akado]

We still have 1 year to go till the halving if I'm not mistaken and a lot can happen during that time, specially when we're talking about cryptos so I wouldn't worry just now. However it would be ideal to have everything running smoothly at least by January/February just to keep 6 months ahead.

And I agree with btswildpig, markets are irrational, at least, these are. You will see all kinds of useless coins getting pumped to huge prices if bitcoin ever reaches $1000

[btswildpig]

don't worry , once bitcoin reaches 1000USD , BTS will be at least X5 for no reason .


That's how a bull market works . Everything rises for no reason .