Bitcoin, Peak Mining & the Halving Myth
Updated
This is my honest opinion of the Bitcoin market. The points I tried to make here require a lot longer than 20 minutes to really discuss, but they boil down to two major arguments:
This is important because both of these fundamentals are believed to underpin Bitcoin's speculative price by many analysts. Effectively, in the case of mining, there is no production based price floor, as the industry as we know is not a fundamental factor: a single CPU can keep the entire Bitcoin network running, and there are many people mining for free! (Malware miners, electricity thieves etc.)
The second point is harder to contend. Let's take gold as an established example. Gold's "intrinsic value" (as espoused by goldbugs) lies predominantly in its utility and relative scarcity. But the truth is the industrial usecase makes up around 15% of the gold market, the rest is financial speculation and non-essential items. This is a recent change which took place within the last 50 years since the advent of gold futures and ETFs and this is why we see these massive inter-year price movements in the gold market now. Before this the price was fixed and before that (when utility was greatest) the price was flat for hundreds of years and changed very little over the millennia. (Yes, there are academics that work this stuff out.) Whatever happens within the speculative gold markets, the price returns to the demand level supported by utility. This is what I call true demand. In gold this cycle seems to take decades.
Speculation is the heart of TA, it is effectively what most people chart. This type of supply/demand will eventually be overcome by fundamentals when you move to larger enough time frames. This analysis here, such that it is, takes a multi-decade approach.
Disclaimer: This is 100 % opinion, but it is genuinely what I believe.
- Bitcoin does not need a mining industry
- Bitcoin does not have any significant consumption-based demand (true demand)
This is important because both of these fundamentals are believed to underpin Bitcoin's speculative price by many analysts. Effectively, in the case of mining, there is no production based price floor, as the industry as we know is not a fundamental factor: a single CPU can keep the entire Bitcoin network running, and there are many people mining for free! (Malware miners, electricity thieves etc.)
The second point is harder to contend. Let's take gold as an established example. Gold's "intrinsic value" (as espoused by goldbugs) lies predominantly in its utility and relative scarcity. But the truth is the industrial usecase makes up around 15% of the gold market, the rest is financial speculation and non-essential items. This is a recent change which took place within the last 50 years since the advent of gold futures and ETFs and this is why we see these massive inter-year price movements in the gold market now. Before this the price was fixed and before that (when utility was greatest) the price was flat for hundreds of years and changed very little over the millennia. (Yes, there are academics that work this stuff out.) Whatever happens within the speculative gold markets, the price returns to the demand level supported by utility. This is what I call true demand. In gold this cycle seems to take decades.
Speculation is the heart of TA, it is effectively what most people chart. This type of supply/demand will eventually be overcome by fundamentals when you move to larger enough time frames. This analysis here, such that it is, takes a multi-decade approach.
Disclaimer: This is 100 % opinion, but it is genuinely what I believe.
Note
Another possible oversupply crisis for Bitcoin and fork coins, is the Wright vs. Kleiman case which is still ongoing. Craig Wright's motion to dismiss the suit against him was thrown out by the US court. The Kleiman estate is seeking the return on a 'good portion' of 1.1 million Bitcoins.coindesk.com/bloq-ceo-jeff-garzik-subpoenaed-over-craig-wrights-satoshi-claim
Note
Wrote an accompanying Medium post medium.com/@sunnyday.james/bitcoin-peak-mining-the-halving-myth-7263f132450b
Disclaimer
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