BTCMeansFreedom4All on Nostr: The only thing that really matters in determining the long term value growth of ...
The only thing that really matters in determining the long term value growth of Bitcoin is the mining network and the halving.
Supply and demand has the strongest effect on the margins, and the price is set on the margin. If it costs $312,500 worth of energy to mine 1 block where the reward is 3.125 Bitcoin (plus minor amounts of fees), than the value of each Bitcoin reflects it's cost of production of about $100k each.
If the amount of input cost remains the same but the halving reduces the coins, then the value must adjust to reflect the new balance of the trade and the value of each coin grows while the hashrate reduces until equilibrium is reached.
Miners will not mine at a loss for very long, so the coins cannot be worth less than their production cost. If they are worth less then inefficient miners will stop mining, the difficulty adjustment then occurs and makes it easier to mine and reduces the energy input required to better match the market price = miners are profitable again.
On the other hand miners will mine harder if it's more profitable because the price is above it's production cost. But then the difficulty adjustment will occur and make it harder to mine and reduce the distance between the price and mining cost so it's less profitable. Growth has to be gradual, until the halving shakeout of the most inefficient miners occurs and forces faster change.
The entire system keeps itself in equilibrium. Bitcoin's price and production cost are tightly linked.
Understand that the actual fair and sustainable value of your coins is more accurately reflected by the average mining cost of production than is the FIAT market's price.
The crashes of 80% only occur after the market price grows to multiples of the average cost of production through mining. Avoid the FUD crash and take advantage of it by understanding this and paying attention to the real game of continually growing amount of mining waste/excess energy in exchange for a continuously reducing amount of coins.
Supply and demand has the strongest effect on the margins, and the price is set on the margin. If it costs $312,500 worth of energy to mine 1 block where the reward is 3.125 Bitcoin (plus minor amounts of fees), than the value of each Bitcoin reflects it's cost of production of about $100k each.
If the amount of input cost remains the same but the halving reduces the coins, then the value must adjust to reflect the new balance of the trade and the value of each coin grows while the hashrate reduces until equilibrium is reached.
Miners will not mine at a loss for very long, so the coins cannot be worth less than their production cost. If they are worth less then inefficient miners will stop mining, the difficulty adjustment then occurs and makes it easier to mine and reduces the energy input required to better match the market price = miners are profitable again.
On the other hand miners will mine harder if it's more profitable because the price is above it's production cost. But then the difficulty adjustment will occur and make it harder to mine and reduce the distance between the price and mining cost so it's less profitable. Growth has to be gradual, until the halving shakeout of the most inefficient miners occurs and forces faster change.
The entire system keeps itself in equilibrium. Bitcoin's price and production cost are tightly linked.
Understand that the actual fair and sustainable value of your coins is more accurately reflected by the average mining cost of production than is the FIAT market's price.
The crashes of 80% only occur after the market price grows to multiples of the average cost of production through mining. Avoid the FUD crash and take advantage of it by understanding this and paying attention to the real game of continually growing amount of mining waste/excess energy in exchange for a continuously reducing amount of coins.