Quote from: vulgata on August 08, 2011, 01:59:18 AM

Quote from: bitcoinBull on August 08, 2011, 12:41:02 AM

Quote from: skyhigh on August 06, 2011, 03:40:34 PM

I won't start buying before $6.00. I would rather miss the whole thing and forget about bitcoins all together then buy above that price or EVER chase it higher. But that's just me. When/if I will start buying, I know already the whole plan, which I might fine tune as we go along, but I won't ever go outside my comfort zone. I know exactly how much I will buy, when, how much it will cost me and when I will/might sell. There isn't anyone who could influence me in a way that I would change my plan drastically. I would/will still read what people are saying but not react on it unless the price/volume tells me so. That's how I made money in the past and will do so in the future.

When bitcoin was $1 the daily trade volume (on MtGox) was around $10k USD on low days and $50k USD on strong days. By the time daily volume was above $100k+ on average, price was above $5 and on its way to $10 (volume was growing to a million).

Unless we see a massive decrease in daily trade volume from the current $500k-$1m, down to under $100k, I'd be very suprised to see prices below $5.

Someone made a great post earlier and independently came to the same point as you and showed his work to boot:

Quote from: tacotime on August 06, 2011, 10:43:02 PM

Bitcoin will currently continue to lower in value as long as the following is satisfied:
- Miners can sell the BTC they make for more than they can easily invest it for (>5% annual, maybe >2.5% in the current economic atmosphere)
- The global economy is a downfall and people are looking to liquidate assets while they are still worth something.
- The BTC surplus as a result of high speed mining and immediate resale of mined BTC continues, that is, there is a low demand for BTC while the number of sellers remains high.

Eventually a point must be reached at which the miners are no longer willing to sell any BTC and an equilibrium must be established. Where is this?

Average price of power in the US: 0.1109$ / KWh (2.66$ USD/day)
Typical hash rate/KWh: 1,750 MH/s (AMD 58xx/69xx cards), or 0.84 BTC/day
Average amount of time to mine 1BTC at this hash rate: 1.19 days
Total cost/BTC: 3.16$ USD

Let's looks at the current price of BTC, 7.5$ USD or so. This represents an insane 99% profit after addressing for power. Of course, hardware must be factored in here too, and it is assumed that at the end of the year most miners will have spent more on hardware than on power. How much more? A rig that can mine 1750 MH/s probably costs in the vicinity of 1000-1300$ USD. The value of the hardware probably declines by about 30% each year.

Looking at each miner per year, let's say the rig costs 1200$ USD and by the end of the year just 840$ USD from devaluation. The bitcoin miner must make 360$ to recoup this loss. This makes our math easy, because it's clear than that he or she must make at the very least about 1.00$ per day. We also know that we owe 2.66$/day of electricity, or about 971$ per year. We mine 6.30$ USD a day (0.84 BTC), so our ROI (return on investment) is still 72% percent. This is an enormous and unsustainable value.

Altogether, the cost of mining with this 1,750MH/s rig is 1330.90$ USD per year.

We need to make all this back plus at least 5% for ourselves. That's about 1400$ that we'd need to make that year, to make this worthwhile. That would mean we'd have to be mining 3.84$ USD of BTC a day, or that the value of BTC would have to be 4.57$ USD.

What matters is not the amount of BTC being mined each day or the difficulty or whatever. What matters is the USD equivalents of whatever is being mined per day. If the USD equivalent is less than the end of the year hardware costs and power costs plus a small 5% or so share, no one will mine, period, and the price must rise. If the USD equivalent is more than the end of the year hardware costs and power costs plus a small 5% or so share, everyone will mine and the price must fall.

The current price seems to be unsustainable, as there is no reason to invest anywhere else if BTC mining returns such insane amounts. For people investing in mining rigs there is another loss fear in case the market collapses and you lose the amount you spent on electricity and the devaluation of your hardware, but there is no way that price is an additional 65%. There are no 70% junk bonds; at best it represents an additional maximum of 5%.

ASIC mining/other highly targeted hardware may not change this much because the resale value of something that can only mine BTC will be worth dickall in the event of the BTC market collapsing and must be purchased cautiously at the present time.

Aren't those two different, somewhat contradictory points. The first guy is implying the price should go up, the second is implying it should go down...