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I'm not sure what your measure of first coin sales is supposed to represent. Let's say there's only two coins. You mine both, sell them to me for $1 and $100 r

I'm not sure what your measure of first coin sales is supposed to represent. Let's say there's only two coins. You mine both, sell them to me for $1 and $100 respectively. I then go on to sell them for $1,000 each. You seem to consider the $101 to be a better measure of capital inflow than the $2,000 (or $2,101). Not sure why?

graeme 6y ago
Hmm yeah this is precisely the point where I haven’t quite got things straight. I think the assumption I’m making is that the sale of coins you made to the third party is a trade between people in the market: you’re up $1899 but the new entrant is down $2000 until someone pays them. Whereas the $101 from the miner is actual capital extracted from the market. Of course, at some point the person who bought your two coins could find some kind of productive use for them and generate income from them (a new crypto finance or blockchain business management?). But that hasn’t happened yet so to date the value taken out of the system is miner’s earnings. However, I believe you’re correct. In terms of market liquidity the actual miner’s earnings doesn’t really matter. What matters is the state of market liquidity and how many people still want to invest. During a peak the actual inflows could be quite large. The bit I’m trying to reason through is how much of the total $1 trillion market cap can actually be sold at once. Current miner inflows are about $1.8 billion per month at present market prices, they’re selling 120% of what they mine based on stats I saw. But clearly other money could flow in. Do you know any good way to estimate it?
- auganov 6y ago
  > The bit I’m trying to reason through is how much of the total $1 trillion market cap can actually be sold at once. I'm not sure if there is such a measure. Let's say a stock has an indisputable dollar book value [0] value of $100 / share and nothing weird is going on. You'd expect liquidity to approach infinity as the price drops below $100. Past flows wouldn't matter at all here. If we operate under the assumption (which is a big assumption) that Bitcoin is fundamentally worthless and only traded by retail then perhaps some multiple of total cash balances at exchanges would be a good estimate of maximum liquidation value. While aggregate order books would be the minimum. I'm not sure how many Bitcoins are actively changing hands. Seeing widely different estimates (from 15% to 85%) for this. If this percentage is really low then it would seem perfectly plausible to me that there isn't enough cash to handle a big sell off. [0] Seems like you assume money made by miners is some equivalent of that for Bitcoin? But not sure why that would be the case. I have a hard time seeing how there is any price point for Bitcoin at which you can know for a fact you cannot lose money buying it. Also, if I bought all the Bitcoins, wouldn't the value be effectively zero?

graeme 6y ago

Hmm yeah this is precisely the point where I haven’t quite got things straight. I think the assumption I’m making is that the sale of coins you made to the third party is a trade between people in the market: you’re up $1899 but the new entrant is down $2000 until someone pays them. Whereas the $101 from the miner is actual capital extracted from the market. Of course, at some point the person who bought your two coins could find some kind of productive use for them and generate income from them (a new crypto finance or blockchain business management?). But that hasn’t happened yet so to date the value taken out of the system is miner’s earnings. However, I believe you’re correct. In terms of market liquidity the actual miner’s earnings doesn’t really matter. What matters is the state of market liquidity and how many people still want to invest. During a peak the actual inflows could be quite large. The bit I’m trying to reason through is how much of the total $1 trillion market cap can actually be sold at once. Current miner inflows are about $1.8 billion per month at present market prices, they’re selling 120% of what they mine based on stats I saw. But clearly other money could flow in. Do you know any good way to estimate it?

auganov 6y ago
> The bit I’m trying to reason through is how much of the total $1 trillion market cap can actually be sold at once. I'm not sure if there is such a measure. Let's say a stock has an indisputable dollar book value [0] value of $100 / share and nothing weird is going on. You'd expect liquidity to approach infinity as the price drops below $100. Past flows wouldn't matter at all here. If we operate under the assumption (which is a big assumption) that Bitcoin is fundamentally worthless and only traded by retail then perhaps some multiple of total cash balances at exchanges would be a good estimate of maximum liquidation value. While aggregate order books would be the minimum. I'm not sure how many Bitcoins are actively changing hands. Seeing widely different estimates (from 15% to 85%) for this. If this percentage is really low then it would seem perfectly plausible to me that there isn't enough cash to handle a big sell off. [0] Seems like you assume money made by miners is some equivalent of that for Bitcoin? But not sure why that would be the case. I have a hard time seeing how there is any price point for Bitcoin at which you can know for a fact you cannot lose money buying it. Also, if I bought all the Bitcoins, wouldn't the value be effectively zero?