The reason why bitcoin is valuable and will continue to rise until mass adoption is its utility as money which means store of value and medium of exchange at the same time. Having the capped supply only helps the price rise by eliminating an inherent inflation that fiat (no capped supply) has, but it is not the reason.
there is alot more to it than 'utility'
...
in short.. the reason gold is not sold for $2 is not due to "utility" its due to the mining cost of gold being not $2/ounce but instead over $1k/ounce which causes the market to speculate over $1k and wont be $2 unless something terrific happens like millions of tonnes of gold rich asteroid rained down on earth where everyone on planet can mine in their backyard with a spoon and a filter for $1 a ounce and everyone starts selling down to a $2 market
Your explanation is naive and insufficient. It relies solely on the Law of Supply -- there is a direct relationship between price and supply, but it totally ignores other significant factors -- the Law of Demand, the fact that gold mining lowers the price of gold instead of supporting it, and the fact that most gold is not consumed.
The Law of Demand basically states that there is a direct relationship between price and demand. Regardless, of how much it costs to mine gold, if there is less demand for it, then the price will drop. At the extreme, if there is no demand, then the price is $0, even if it costs $1k to mine it.
Finally, gold mining does not
support the price of gold. Instead, mining tends to cause the price to
drop to cost of mining. As long as the price is higher than the cost to mine, more gold will be mined leading to more supply and lower prices. Mining does not prevent the price from going below the cost of mining.
Even if the price of gold is less than the cost of mining and mining stops, there is still supply because most gold is not consumed and there are plenty of non-miners with gold to sell.
Anyway, back to Bitcoin and "utility"...
I agree that utility is not the only factor in the price because utility determines demand and the Law of Demand is not the only factor. The price is determined by the convergence of the Law
s of Supply and Demand.
However, it is correct to say that
utility does support the price because more utility increases demand, while the
cost of mining does not support the price because a higher cost does not lower supply.
mining(as a generalised term your suggesting) does not support the price.....
mining in the
most efficient way
is under the market pricethe market price then speculates above the most efficient mining cost(a)
as you infact admit. if mining is not profitable less people mine. this then gives more sats to those remaining and so the mining cost(a) would decline and remain under the market rate
and as i said the market rate would be under the (z) of inefficient mining costs, where by those with such high costs already gave up mining and instead taking advantage of buying from the market at discount..
so imagine (a)-(z) range of mining costs ($65k-$375k)
now imagine the bitcoin market price was at (d).. where by all the other countries around the world with mining costs of (e)-(z) dont see the advantage of mining and instead just buy at (d) right now.. because(e)-(z) are not mining this gives (a)-(c) more sats meaning their costs are lower due to lack of mining competition from (e)-(z)
if the market was higher to be more profitable for say (e)-(k) then (a)-(c) would get less sats due to higher competition, thus (a) would be higher than $65k where no one wants to sell below (a) still.. for obvious reasons
as for your "supply" theory
in 2012 there was only 11.5m coins in circulation but price was less than now, with more coins in circulation(19.9m).. so "supply" is not as you think
because in the lame highschool 'supply demand' the price would have been higher in the earlier years due to less supply
(based on your version of supply/demand)
however actual economics shows that markets do not process all 19.9m circulation. heck they dont even process whole btc per orderline.. the market supply is less than you think and not judged on by the 'scarcity' supply cap. heck statistics sites show only 13k btc was the volume amount of most exchanges combined yesterday..
but when you look at how the mining reward halved months ago and the markets went from $25k-$50k to prepare for the change.. you start to see the effects of which "supply" and costing affects the market
