Bearing this in mind and just thinking logically; from a purely finance point of view, what a prudent mining company (btc or other) would do when planning production, is to hedge future production plans either partially or in full via futures markets or swap contracts. I have experience doing just this when working in finance for a coke and coal production company. If a company has committed to the investment of the capital required to produce the bitcoins (i.e. the miners) then they will short the futures market aggressively, particularly when the futures prices are greatly above the cost of production in order to lock in guaranteed gains. This has particular consequences when there is also other supply side issues like the mt Gox coins and demand side issues like the public losing interest due to dwindling prices.
It is reasonable to assume that there is a floor price which will be met in a market which is largely dictated by supply. Miners will contract their supply somewhat if the marginal cost then begins to exceed production.. simple economics therefore would suggest that there will be a self corrective mechanism which would keep the floor price around the cost of production which by all accounts appears to be $3-4.5k.
For this reason alone, this is a great place to have speculative bids in my opinion.
Unbelievable dude. You called the exact bottom with such a straight forward analysis. Very nice job!
HamadaMark
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looks he is not the only person who did that @tommyf1001,
ruraldisturbance
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What a call. Really amazing man. And as the cost of production creeps up and we approach halving 3, the price should continually go up. Satoshi also said "At the moment, generation effort is rapidly increasing, suggesting people are estimating the present value to be higher than the current cost of production." People still estimate present value to be higher than the current cost of production, from my personal experience, especially the miners.
mattcook
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Interesting perspective...... great analysis
deactivatedaccount123
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What I would really like to know, is what is the actual cost to produce a single Bitcoin?
Hint: It's not 3.1k.
bsgold
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Legend!
BuddhaTrader7
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Theory ("theory" as for BTC is unproven yet) is interesting to consider, but what would make BTC price increase long-term if the price keeps gravitating to cost of production? What are the factors affecting the increase in cost of the production increases besides electricity and how should they move in order for BTC to move upwards? I feel like the post is interesting but only half way done, and more complete analysis is required.
filbfilb
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@BuddhaTrader7, recommend thinking about supply and demand.