February 6, 2023

Bitcoin Developer Estimated BTC Ownership Cost at 2.1% per annum

According to the calculations of the independent Bitcoin developer Tamas Blummer, the cost of operations in BTC is growing and Now it is about 2.1% per annum.

Tamas Bloommer presented his analysis of the cost of operations in bitcoins in a publication on Medium. According to his estimates, the cost of ownership of cryptocurrency is currently an average of 2.1% per year.

He notes that the most obvious costs arefees related to transferring BTC to and from wallets. The total amount in bitcoin paid in the form of commissions for transactions amounted to about 50,000 BTC at the end of 2016. However, by the end of 2019, the total volume of commissions had grown to more than 200,000 BTC.

Bloommer explains that newly mined coinsincrease supply in the market and will reduce the size of commissions, unless other factors dominating price movements appear. One such factor is capital inflows, when fiat currencies flow into the Bitcoin economy during the bull market and leave it during the bear market.

Production costs are also considered significant.factor, since mining companies constantly have to sell part of their coins to cover expenses. Changes in mining profits can be observed through changes in complexity, notes Bloommer.

If market prices are not high enough to support mining, miners partially shut down equipment, which reduces complexity due to falling competition.

"The most recent example, when the complexity of miningbegan to grow after a long recession, was in January 2019 with a BTC price of about $ 3400 dollars. I propose accepting this as the latest figure for estimating the cost of BTC production, ”says Bloommer.

Thus, at the current price just below $ 8400,the profit from one mined BTC is $ 5,000 dollars. At 12.5 BTC, the mining industry's profit margin is currently $ 9 million per day. Dividing this figure by BTC’s current market capitalization of $ 150 billion, we get Bitcoin ownership at 2.1% per year, plus operating costs, which are still negligible.

“The cost of storage will significantly decrease after halving the reward for the mined block in May 2020, as this will reduce the profit of miners,” says Bloommer.

Short-term speculation may make the cost of ownership negligible for users, but investors should be aware of these estimates, Blummer concludes.

Recall that in June of this year, the complexity of mining Bitcoin reached a record high, demonstrating the growing competition for new blocks among miners.