The impact of Mining relativne to supply and therefore the price of Bitcoin


What impact does Bitcoin Mining have to on the supply of the coin?

To state it plainly…it is the act of mining that creates the supply. For every block found by a miner, BTC coins are created; currently a little more than 6 every ten minutes. Miners are therefore the first to be in possession of the coins and will either hold it or sell it to pay some bills.

Since there are only 21 million coins that will ever be mined the product is of course a scarce commodity. If the miners who held on the coins for years decided to sell all they have for some reason (going out of business or lost faith in the product or their country regulations prevented them (I.e China)) they might flood the market with a product many are after. Which way the price goes in this case, could not be determined by the excess supply.

Given todays climate as we anticipate near events (ETFs and halving) the price may go up, but it would have nothing to do with an excess supply as in the case above. In fact, in rational markets it would go down.

In rational markets the supply meets the demand at various price points (factoring in the cost to make more or less of an item) as the price increases to a point, the demand usually falls simply because it would be more than they want to pay. For the Bitcoin market this has not held true because of one small caveat… the supply is limited, fixed and the demanders have deep pockets.

How does it reflect on the price per coin on the exchange?

The miners do not set the price. They can only hold out until an agreed upon market price between seller and buyer is reached. The price of course is what people are willing to pay, usually anticipating an upside or need.

The price for this scarce commodity has been based on its values as: deflationary; store of value; and of course its limited supply/uniqueness.

The only way I can image the supply would effect the price is if somehow a change was made to the protocols allowing more than 21 million coins to be mined, which of course can’t happen with Bitcoin.

From a miners perspective their major revenue is based on mining coins and collecting transaction fees where neither directly effects the price.


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