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Bitcoin's Present Low Price? It's The Mining Thing

Currencies / Bitcoin Sep 27, 2014 - 03:43 PM GMT

By: Mark_Blair

Currencies Forgive any repitition, readers. The situation has become much clearer.

Brief background:

The China Thing ended on April 10 ($380). Bitcoin lifted by about 65% over the following weeks. Then it dropped a little. Then more. Then, a fortnight ago, it slipped back to $380, and has been puddling about at just over $400.

This has caused dismay; and the main reason it HAS caused dismay is that cryptographic technologies AND adoption are BOOMING. So, how can a technology be developing so well, day by day, have almost boundless potential . . . and be tanking in price?

It's 'The Mining Thing':

now, we're wading in murky waters here, readers; and I pledge to do my best to be objective. I am not a Bitcoiner; I am an 'altcoiner' -- I analyse and trade the hundreds of other cryptos in existence. However, I am absolutely NOT anti-Bitcoin. Bitcoin is great. It's the meat and potatoes of the crypto phenomenon. However, the reason that 65% of my crypto funds are in my 'home-coin' is that it lacks The Thing that is presently causing Bitcoin its troubles: 'inflation.'

A year ago and a half ago, Bitcoin was mainly being mined by enthusiasts; but the steady rise in price sparked fabulous advances in mining technology and methods. The era of The Guy and His Home Computer ended -- in crypto time -- about a million years ago. Moreover, we have a far better idea of the production cost of one Bitcoin.

And this has put us between a rock and a hard place. The supply of newly-mined coins has demand under its thumb.

Note the difference between commercial adoption of Bitcoin and high transactional-volume. Companies like Dell and Toshiba are set up to accept cryptos, but that's just not the same as having people with Bitcoin queued at the door.

We must clarify the term 'inflation.' If you cruise the Bitcointalk Bitcoin-speculation threads, you will hear people shouting at each other about Bitcoin's 'inflation.' Bitcoin is not inflationary in the sense that M.O. readers understand fiat currencies are. When the last Bitcoin is mined -- and as there is no centralised body that can fiddle the diddle -- that's it: no more coins can be added to the currency.

Meanwhile though, Bitcoin (and most 'POW' coins) still have millions of coins to be mined; and those coins are being mined hard (because success is a done deal . . . ). This 'arrival on the scene of newly-mined coins' is what crypto geeks call 'inflation.'

We had The China Thing; we're having The Mining Thing; the future couldn't look brighter.

And before we finish today, two brief Sections:

Section One: non-inflationary POW coins:

okay, now I get to push my barrow! 'Unobtanium' is a small-cap crypto. It's my (final choice as a) home-coin. It eschews the foxtail-on-the-aerial approach, focussing solely on being a 'crypto-commodity' -- a store of wealth. It is succeeding. Only one Top Sixty coin more than weeks old is doing better than Uno, but that coin is both unstable and slipping in price.

What is Unobtanium's secret? It's flat-out rare! The 'bottle-necking' of its mining is decades ahead of Bitcoin. Come and visit:

Section Two: 'price-independence':

the next year will see more and more cryptos ceasing to significantly price-track Bitcoin. Crypto-fiat 'portals' are pivotal to this, but equally important is the fact that there now exist dozens of 'assets' etc. that simply can not be characterised as knock-offs of 'the real' crypto.

How about a future in which a company can raise its capital by launching a crypto whose coins are the 'shares' of the company? No bank loan required!

Well, it's not the future. They exist.

Have a peek here:

Mark Blair has a three-decade background in libertarian theory and activism. He is a crypto geek, and holds Unobtanium, Nxt, Nxttycoin, and JL777hdl.

Copyright © 2014 Mark Blair - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

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