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Using Bitcoin to make payments online is way cheaper as compared to traditional banks. The costs linked are manageable, but recently, we have witnessed an expected skyrocketing of cost of storing this digital asset. The storage cost now stands at 2.1% per annum, according to a recently issued report.
Storage Cost Escalation
Centralized exchanges that offer better spreads or transaction fees than banks are super popular today. Bitcoin stands out as one of such cryptocurrency that lets you enjoy terrific savings on transaction costs and spreads. One thing most of the people who invest in this digital asset don’t realize is that it costs money to store and the storagerate keeps increasing.
Just recently, a well-known independent Bitcoin developer known as Tamas Blummer gave out a detailed summary of the Bitcoin storage costs, which are often overlooked. He termed these costs as ‘the carry for other assets’cost and so far, they stand at 2.1% per annum.
In his summary, Tamas Blummer pinpointed moving Bitcoin in and out of wallets as the most common force triggering the high storage costs. The fees are paid daily by those moving their coins and depends more on the byte size of your transaction rather than the amount you transfer.
Charts and statistics showing the cost of moving Bitcoins in and out of wallets were estimated at 50,000 in 2016. As of 2019, the costs have increased to way over 200,000 Bitcoins.
Blummer explained further that freshly mined coins have a significant impact on the market supply and could potentially increase the value if the costs of moving the coins weren’t so high. Another of the many factors mentioned as the core reason behind the upsurge of Bitcoin storage costs is capital inflow. When Bitcoins are doing pretty well, fiat penetrates its economy and leaves immediately when the market turns sour and unbearable.
In most instances, miners are forced to sell a portion of their supply to cater to the mining costs, which affects the costs of ownership. Blummer claims that miners can quickly tell the changes in their mining profit margins by checking the mining difficulties.
In the event market prices are too low to sustain the production of coins, miners will be forced to stop mining, which ends up lower the mining difficulty, hence reducing the competition. And when that happens, those miners using the smartest hardest and lower energy software are likely to stand still despite the challenges.
The most updated example of a Bitcoin news mining cost per unit was in January of 2019 when the price was estimated at 3400. Bitcoin currently costs around $8400 and $5000 per BTC mined. It is estimated at 12.5 per block mining, which translates to profits of about 9 million a day. When you divide the figure with the recent BTC market gap of 150 billion, you will get the 2.19% per annum storage cost.
Blummer highlighted that these figures might not remain the same forever. They may increase or even reduce in the future, depending on the above-outlined factors.
