The cost of Bitcoin storage has risen in the past couple of years and currently stands at 2.1% per annum for BTC.
A recent report by an independent Bitcoin developer Tamas Blummer reveals the often-overlooked expenses that lead to the rise.
I just published Bitcoin’s storage cost https://link.medium.com/3vNsuOYTK0
Bitcoin’s storage cost
Storing wealth in bitcoin is not for free. That cost is traditionally called carry for other assets and is easily quantifiable for bitcoin…
The developer added that the most obvious cost for storing Bitcoin comes from the charges for deposits and withdrawals, which is basically moving in and out of digital wallets. According to the developer, the fees are charged according to the byte size of the transaction and not the amount moved. The report reveals that in late 2016, the total BTC paid in transaction fees was almost 50,000. In 2019, the figure surged to more than 200,000 BTC.
Other Factors at Play
Blummer explains that capital inflow is one of the factors that affect price movements, even in the face of newly mined coins that increase market supply and eventually lover their value. In a bull market, fiat enters the market. The opposite happens during a bear market.
Besides, mining costs are also a major factor that influences price movements. Miners would want to sell more of their supply to balance their expenses. Consequently, the profit margin depends on the level of difficulty in mining. If market prices cannot sustain production, the mining process will reduce, which eventually reduces competition. In such situations, only industry leaders with advanced hardware or lower energy costs can survive.
The report further illustrates the cost per unit to mine one BTC:
“The most recent example where mining difficulty recovered from a longer downturn was in January 2019 at a bitcoin price of 3400 USD. I suggest to assume this as the most recent estimate of bitcoin mining costs for a unit.”
Using the current price of Bitcoin at $8,400 and $5000 required to mine one BTC currently, the developer also considered 12.5 BTC per block rewards, which amounts to $9 million per day in profits based on current figures. Divided by the current Bitcoin market cap of $150 billion, he arrived at the figure 2.19%.
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