Doesn’t matter what someone paid for it in the past, only what someone will pay for it now. Recently I was curious how much actual money has been exchanged for BTC and also how much money has been spent to mine the current supply. I searched hard for maybe 30 minutes and didn’t find anything, nothing even close to the info I was seeking. Is it possible to estimate the actual cost of BTC so far? I guess you could put an estimate on the actual cost of mining but what about the guy who mined some of the stuff on his laptop a decade ago in high school with a free laptop and free electricity? Do you value that particular coin at zero? And what if that same guy has held it till now, can you say that he lost ~35k from 2021 until now? I think you can. I know that if all bitcoins were suddenly offered for sale that the price would definitely not hold where it’s at and market cap would instantly drop. But to value an asset at cost of production and ignore current market value would be delusional. It doesn’t matter what it cost to produce to produce it, only what people will pay for it. As someone that buys and sells things to make money I do use cost of production for “potential” changes in future supplies. But with BTC it’s super easy. We know with certainty the maximum supply. We know that 93% of that total is already in existence and the remaining 7% will be added over the next 140 years. I’ve read that at least 1M coins have lost pass keys and can’t be recovered. The supply is basically already fixed and demand is set to increase exponentially. That’s a recipe for a moonshot and that’s why I’m totally excited about it and also only allocating 5% to it. Tell your friends to do the same!
Then why talk about it? One of the things I've found with crypto bulls is that they are extremely sloppy with their use of commonly understood financial terms. I find the market cap more interesting on a going forward basis than the paid in cost but that's because it's useful to think about what it would take to make Bitcoin go up 100x again. It would be a massive shift in the world economy. People would have to sell off stock (a productive asset) for Bitcoin (a non productive asset). I find that highly implausible, but assume it actually happens.... At some point Bitcoin would reach market saturation. The only thing that drives the price of Bitcoin up is new money going into Bitcoin. This is because it's non-productive. Once you're saturated Bitcoin would only be able to grow at the same rate as global gdp. Once that happens Bitcoin is doomed to crash because you can get the same return from a portfolio of stocks with some actual assets and productive capacity to back up the value of the stocks. Once no more parabolic upward moves in price are possible, Bitcoin then would drop like a rock. Long term, it's unavoidable that Bitcoin roi drops as the price increases. Prices of other assets can only drop so far. Landlords are going to demand a reasonable return on their property regardless of Bitcoin's price and Exxon is not going to pump gas for free.
The value of onchain (Bitcoin blockchain) transactions settlement for last year 2022 was over $14 Trillion, This is higher than Visa transaction settlement for 2022 Centralized Exchange trading volumes are not included, since they do not occur onchain Mining infrastructure costs will be difficult to get from mining farms in China, Kazakhstan and Russia https://buybitcoinworldwide.com/mining/by-country/ You should be able to get a lot of data from the US publicly traded companies that are bitcoin miners in their published reports and you could possibly extrapolate but you'll also have to account for mysterious (secretive) mining farms, possibly state-sponsored
You're familiar with the concept of low circulating supply or small float in stocks? Same thing in bitcoin. The number of available bitcoins for sale are very low compared to the total amount of bitcoins that have been mined (19.5M) and it is estimated that 4-5M bitcoins are lost forever (Satoshi's coins included) An easy to understand example is in the past month, bitcoin's market cap went up by $150+ Billion but the amount of new money is around $1-2 Billion BofA has a published paper estimating a multiplier of 118-1 for every $ of new money buying bitcoin Unless you believe that $150 Billion of new money bought bitcoins in the last month, you must have some hard data of where this money came from?
Your hypothetical scenario though is likely thousands of percent away from the current price. Currently bitcoin is just 10% of golds market cap for god sake, and I think it’s certainly has much more utility than gold. My point is even if you are right, and to be clear, I disagree with your analysis, you literally wouldn’t have to worry about this until many multiples of the current price.
Agreed. But you need to keep in mind that this is what Bitcoin maniacs are claiming will happen. If Bitcoin continues it's historical price increase we're not talking that far in the future. Only assuming no one else can make the same analysis.
so what bitcoin price do you think we have to worry about this? It certainly isn’t 35,000. It’s probably not even 100,000. At 100,000 that is still only a market cap of like 2 trillion which again is just 20% of the current gold market cap.
I totally agree with everything you said. I'm just betting that that saturation point isn't as close as you think it is. There's an opportunity here.
I thought about that but what if the number represents several round trips per bitcoin? I guess you could use the average hold time data to come up with something. I guess what I meant to find was the dollar amount of other assets that have been converted to BTC. Maybe I'm getting mixed up?