Cost of Storing Bitcoin Increasing, Currently Estimated at 2.1% pa

There are a number of costs associated with using bitcoin and while it is still far cheaper than using traditional banks, they still need to be accounted for. Storage of the digital asset also has a cost and it has been rising.

Bitcoin Storage Costs Escalating

At the moment most people use centralized exchanges which profit from transaction fees and spreads as banks do. However, there is also a cost for storing BTC which has jumped over the past couple of years.

Independent bitcoin developer Tamas Blummer has summarized these often overlooked expenses in a recent Medium. The cost is known as a ‘carry for other assets’ and according to the post is currently at 2.1% per annum for BTC.

He added that the most obvious cost for Bitcoin storage was fees associated with moving it in and out of wallets. These fees were paid by people moving coins and were proportional to the byte size of the transaction, not to the moved amount.

According to the chart, the total BTC paid in transaction fees was around 50,000 in late 2016. But by late 2019 those fees have surged to over 200,000 BTC.

Blummer continued to explain that newly mined coins increase the supply to the market and would drive their value lower if there were not other factors that dominate price movements. One if those factors is capital inflow as fiat enters the bitcoin economy during a bull run and leaves it during a bear market.

Mining costs are also a significant factor as miners constantly need to sell some of their supply to cover their expenses. Changes to mining profit margin can be observed through changes in difficulty, he added.

If market prices are not high enough to sustain production, miners will shut down equipment which decreases the difficulty due to reduced competition. Industry leaders with more advanced hardware or lower energy costs are likely to survive any such shakeouts. He…

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