[IkmoIkmo]

Why would that be? The maximum PoW can depress the price is the inflation rate. Nobody will pay $1 for electricity to generate <$1 of bitcoin. And the inflation rate of bitcoin is set to drop below that of any large currency like dollars, euros, yen.

In other words, the money supply that causes inflation (downward price pressure of currencies) is by design lower than fiat currencies. It's one of the key things supposedly we're not ought to be concerned about with bitcoin, so far I see no reason to think otherwise.

[ssharp]

> Nobody will pay $1 for electricity to generate <$1 of bitcoin.

Hobbyist miners are convincing themselves that <$1 of Bitcoin will be worth >$1 the future. Major miners seem to have question business models as well, where they are either losing money or have something shady going on with their cost of electricity. BTC still seems to be very prone to pump-and-dump schemes, so major miners may be able to pump the price enough to sell their coins profitably before the next crash.

[IkmoIkmo]

No not really. If you believe $1 of X will be more than $1 in the future, you buy it for $1, you don't pay more than $1 for the manufacturing or mining of $1 of X, it makes no sense from a financial perspective, especially considered the time, effort and substantial risks in purchasing and running mining hardware.

The argument that you mine to hold to invest, while mining and selling right away is unprofitable, doesn't really hold when you can just buy and hold instead for cheaper and less hassle & risk.

The exception is of course when buying coin isn't an option, but buying electricity & hardware is. Which is why you may see shady operators mine above cost in China, because purchasing bitcoin in bulk in China can't be done easily anymore, a substantial premium cost.

But generally speaking, mining expenses approach mining revenues and top out there, as with virtually every other market. There are some caveats sure but they're not the rule.

Beyond that though, electricity isn't very relevant. At the end of the day if you have 1 million bitcoins, and the annual mining rewards are 50k bitcoins, the most coins that can be sold is 5%. Regardless of electricity prices, the new supply is 5%. Whether it ends up in the hands of miners or others, that's the inflation and the amount of downward pressure. It's true if electricity is expensive and margins are tight, miners sell more quickly. But in the long-run, the supply on the market is still averaging 5%, there's no magic way to go above that number. You could see miners sell 0% the first half of the year and then the entire 5% the second half of the year when margins are tight and miners sell to get cashflow, but it's still 5% a year, regardless of electricity prices.

So 5% is just a hypothetical number, but the reality is that by design it's set to go to 0%, again regardless of whether electricity is cheap or expensive. Which is why I contest the earlier statement by the guy I replied to that electricity prices is something to worry about.

[sanswork]

>No not really. If you believe $1 of X will be more than $1 in the future, you buy it for $1, you don't pay more than $1 for the manufacturing or mining of $1 of X

I know you read /r/bitcoin so I know you know that there are a lot of people who stupidly don't think about it that way even just in that subreddit. There are also a lot who think their tiny collection of miners is contributing to the hash rate and helping the network even if they are losing out.

Also with all the delays in shipping miners there are a lot of people mining with obsolete hardware just because they don't have to feel completely scammed so if they mine something they can convince themselves it was worth it.

[michaeldunworth]

The reason it puts downward pressure is because large scale miners are forced to sell all their BTC almost immediately, if not pre sell future mined coins at a locked price (Hedgy.co solving this issue for them) So if people are forced to mine and sell every bitcoin instantly it applies heavy downward market pressure on the exchanges. Look at the volume in China, most of this comes from miners.

If electricity wasn't too bad, and/or the price was significantly hire per BTC the pressure to liquidate and pay bills wouldn't be there as much, leading to less (immediate) downward pressure on the markets/price.

[IkmoIkmo]

You missed my entire point, perhaps because the electricity bit wasn't really relevant and I should've left it out.

Say there's $100 today, and the max you can mine is $1 worth of coin per year. Even if it cost you a billion to mine that $1 coin, the worst that could happen is that you sell the $1 immediately to recoup your costs (as you said).

Alright fine so the max extra supply is just $1. That doesn't depress the price much, it's just 1% inflation.

And if you look at bitcoin, by design, those numbers are such that inflation goes to 0% over time, and drops below currencies like the dollar or euro or any other fiat one really, not far from now.

In other words, there's no real worry of price depression linked to electricity.

The reason I mentioned it is because if we assume you can gain $1, we must assume that people will spend up to $1 to make it. Even if you could make $1 of bitcoin with 1 penny of electricity today, over time competition would drive that to $1. It's totally expected and part of bitcoin's design. Saying 'if electricity wasn't too bad' like you do, implies that its price has anything to do with anything. It doesn't. Miners compete in a zero sum game, so they'll expend as much energy up to the price of a single bitcoin. (some foolish miners go a bit above, as in any market where poorly informed actors make bad buying decisions, but the market in general is expected to go up to the price of bitcoin in hardware+electricity expenses).

Beyond that, even if electricity prices are 0 or 1 billion, we expect miners to sell. At least in general, in a rational market. After all, if miners hold on to coin because they expect a price increase, they would do so regardless of whether they mined the coin, or simply bought it. Holding coin as an investment is a decision that is mostly (though not completely) separate from mining. It's true there is more pressure to sell if cashflow is tight due to tight margins, but this doesn't magically increase average long-term supply beyond the inflation rate of bitcoin, which is fixed, only whether there are spikes in supply in the short term from a buildup of unsold mined supply (of which you could say, would've been bought and held anyway if this particular miner was interested in holding as an investment).

Which adds to the argument that electricity costs don't play a huge role in whether the price gets depressed or not on average over the long term, it simply always does, up to the point of the money supply, which is fixed by design and designed to go to 0%.

The most electricity prices can do is direct the moment that new supply that's already been created is unleashed on the market. But unleashed it will, anyway, it's already in the market and in the hands of people who may choose to keep it as opposed to sell it. But as any market, especially relatively efficient ones like a global bitcoin trade, mining costs will approach mining revenues, leading most miners to sell immediately, which leads to relatively stable downward pressure at the rate of inflation of the money supply which again, is set to go to 0%. it's actually relatively high today (like 10%ish), but when talking about bitcoin in a longer term context, is set to disappear essentially.

At the end of the day miners do not control supply with electricity prices. They're simply the first 'buyer' of bitcoin's fixed supply (fixed, whatever electricity prices are) and buy this coin with electricity-dollars. When or how much of this they sell later, then, has very little to do with downward pressure. The downard pressure originates from the fixed supply of bitcoin whether electricity is cheap or expensive, it doesn't matter.

[teraflop]

> Nobody will pay $1 for electricity to generate <$1 of bitcoin.

Nobody would willingly, deliberately do so. There are plenty of cases of cryptocurrency mining software being installed on unsuspecting users' machines, causing them to spend a large amount of energy generating a tiny amount of Bitcoin/Litecoin/whatever that gets sent to the attackers.

Notably, this has happened to a number of EC2 customers. If you accidentally leak your AWS secret key (by unwisely checking it into version control, or through a buggy deployment process, for example) then more likely than not, you'll very quickly find your account being used to spin up a bunch of expensive GPU instances.

[IkmoIkmo]

True -- but completely irrelevant to my point that even if every single coin that was mined was immediately sold, the limit would be the supply of new bitcoins which is by design lower than that of other currencies like dollars/euros.