In today's era of digital currency, Bitcoin, as one of the best, is highly sought after by investors. However, the storage costs that come with it are not well known. The latest analysis shows that storing Bitcoin is not free, and the annual cost is as high as 2.1%. Let's take a deeper look at the cost mystery hidden behind digital currency.

 Hidden costs: digital currency storage fees

The rise of digital currency has brought new opportunities to investors, but the hidden costs behind it are often overlooked. Storing Bitcoin is not as simple as traditional currency, but requires considering factors such as network fees, security, and storage device wear and tear. These seemingly insignificant expenses gradually accumulate in long-term holding and become factors that investors cannot ignore.

 Network fees: insignificant accumulation costs

When trading digital currencies, network fees are an inevitable expense. Although the fees for each transaction may be insignificant, these fees will gradually accumulate as the number of transactions increases. Especially during the peak period of Bitcoin, network congestion slows down transaction speeds, which in turn increases fee expenses. This seemingly small expense has become one of the expenses that cannot be ignored in long-term holding.

 Security: Protecting assets cannot be ignored

The security of digital currency has always been the focus of investors. In order to protect assets from hacker attacks or tampering, investors need to consider purchasing security equipment, regularly updating software, and possible insurance costs. Although these security maintenance costs seem insignificant in daily life, they are necessary expenses to ensure the safety of assets.

 Wear and tear of storage devices: traces of time

As time goes by, the wear and tear of storage devices is another cost that digital currency holders need to face. The aging of hardware equipment, the increase in power consumption, and even the recovery costs caused by data loss are quietly consuming investors' funds. These seemingly small storage costs have gradually shown their influence in long-term holding.

 Continuous 2.1%: The pain of digital currency storage costs

Taking the above factors into consideration, the cost of digital currency storage is far from as simple as imagined. The annual cost of 2.1%, although not as much as the cost of the traditional financial system, is enough to attract investors' attention. In the world of digital currency, in addition to paying attention to price fluctuations, it is also necessary to focus on the storage costs brought by long-term holding. Only by deeply understanding these hidden expenses can we better plan our investment strategy.

 Conclusion

The storage cost of digital currency is not illusory, but a real and non-negligible part. By analyzing the costs of network fees, security maintenance, storage device wear and tear, we can more clearly understand the overall picture of digital currency investment. While pursuing profits, we must always pay attention to the hidden costs behind them, so that we can truly control risks and make considerable profits. I hope that every digital currency investor can be at ease in this world full of opportunities and challenges and reap a lot.

The four most famous international exchanges:

Binance INTL	OKX INTL	Gate.io INTL	Huobi INTL
China Line　APP DL	China Line　APP DL	China Line　APP DL	China Line　APP DL

Note: The above exchange logo is the official website registration link, and the text is the APP download link.

The analysis results show: Storing Bitcoin also has costs? Currently 2.1% per year, storing wealth with Bitcoin is not free. The quantified results show that the current cost of storing Bitcoin is about 2.1% per year. Let me tell you why.

Fees

The most obvious cost of using Bitcoin to store wealth is that you need to pay a certain fee when you deposit Bitcoin into your wallet or transfer it out of your wallet. You can see the total transfer fee on the Bitcoin blockchain in the figure below, which is the additional profit of miners digging out new blocks.

Fees paid

The above fees are paid by the person transferring Bitcoin, and the amount of the payment is proportional to the size of the block space (bytes) occupied by the transaction, not the number of Bitcoins transferred. This is the explicit fee (cost) of storing Bitcoin.

Dilution

According to the fact that Bitcoin generates a new block every ten minutes, miners will dig out new Bitcoins.

Total number of newly mined bitcoins (in millions of bitcoins)

Newly mined coins increase the supply of bitcoins on the market, and if there are no other factors that drive price changes, the value of bitcoins will decrease. The price of bitcoin involves the following factors:

Capital Flow

Buying bitcoins with other currencies will cause a large amount of capital to flow into the bitcoin market, while selling bitcoins will reduce the capital stock of bitcoins. These inflows and outflows of capital dominate the price trend of bitcoin and mask the dilution (more and more bitcoins) that causes the decline in the price of the currency.

Mining Cost

Bitcoin mining requires huge costs. Miners make up their production costs by selling some of the mined bitcoins. Assuming the price of bitcoin remains unchanged, the contribution of miners to the capital inflow of the bitcoin market depends only on the cost they pay when they sell bitcoins.

Therefore, miners make a profit from mining and sell the mined bitcoins, and there are more bitcoins on the market, and the wealth of coin holders is diluted. Because if there is no new capital inflow, the price of the currency cannot be maintained at the same price.

It is worth noting that if competition causes miners’ profit margins to drop to zero, in order to cover the mining costs, they will use all newly mined Bitcoins to pay for the costs, and then their activities will no longer dilute the wealth of Bitcoin holders. This situation has only appeared briefly in Bitcoin’s history and will not last forever.

We can also observe the changes in miners’ profit margins through changes in mining difficulty. If the current market price of Bitcoin is not enough to maintain production, miners will shut down some equipment to save electricity expenses, causing the mining difficulty to drop. Miners who hold outdated mining equipment and do not have access to cheap energy will give up mining. Industry leaders may still be profitable. As prices recover, the elimination of other competitors will allow them to gain higher market share.

Mining cost estimation

The most recent recovery in the mining industry began in January 2019, when the price of Bitcoin was $3,400. I assume this is the mining cost required to mine one Bitcoin.

Storage Cost Estimation

Using this mining cost estimate, the current price of Bitcoin is $8,400, so we can assume that miners can currently make at least $5,000 for each Bitcoin they mine.

This means that based on the current 12.5 Bitcoins mined per block, miners' profits are about $9 million per day. This profit dilutes the wealth of holders at a rate of $9 million per day/
$150.3 billion (total market value of Bitcoin), which is about 2.1% per year.

Therefore, the wealth storage cost of Bitcoin is currently 2.1% per year, plus the currently negligible transaction costs. When the Bitcoin block reward is halved next year, the decline in miners' profitability will significantly reduce the storage costs of coin holders.

This holding cost will be masked by greater price fluctuations caused by the inflow and outflow of short-term capital (speculative behavior), and investors should be aware of it.