Comment by wyager
4 years ago
> Money has to keep coming in to keep the price up due to paying miners
This is incoherent. It's hard to refute this because it's not even on the right page.
Demand for Bitcoin comes from demand for money (to transact, to store wealth, etc.).
It sounds like you're trying to model it using some idea of how equity pricing works - is that accurate?
All assets ( BTC, Stocks, Gold ) are priced on supply and demand. If demand goes down for BTC the price will go down.
It doesn't matter if the fed prints money or not BTC needs a constant infusion of new investment to keep the price up. Unlike a company with positive cash flow who could buyback shares and never get any new investors and still keep the price up.
> If demand goes down for BTC the price will go down.
Indeed. What may be missing from your model is that demand for BTC comes not just from people buying it, but from people holding it.
> BTC needs a constant infusion of new investment to keep the price up.
No it doesn't. Why do you say this? Where the market clears has essentially nothing to do with "new investment".
Stop and think about what you are saying. If everyone in the world stopped buying TVs and instead held onto their current TVs the demand for TVs would go to zero. What would the market price of TVs be when there is zero demand?
How do you think BTC miners pay for the graphics cards and electricity? NVIDIA doesn't take BTC as a form of payment. So money is constantly leaving the BTC network to pay for electricity and graphics cards. The only way that happens is if money is also coming into the BTC network
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Holding isn't demand. Holding just reduces supply.
Miners need to sell BTC to cover their operating costs, so there's constant sell pressure. To maintain the same price, you need equivalent buy pressure. Hence the need for "a constant infusion of new investment".