Is it even possible to spend a supply of 1 sat UTXOs?
As the value of Bitcoin continues to fluctuate wildly, many investors are wondering what happens when they own large amounts of Bitcoin. More specifically, how does one spend a supply of just 100 million or 10 million individual units (UTXOs) given average transaction costs, fees, and market volatility?
To illustrate this concept, let’s consider an extreme example: Imagine you own 1 BTC with 100 million UTXOs each worth 1 sat. In other words, you have a huge supply of Bitcoin with roughly 1 trillion (10^15) individual units.
The Cost of Issuance
If we assume that the average cost of issuing a single unit of Bitcoin is around $30 (as of March 2023) and take into account the fees associated with the transactions, the total transaction costs would be staggering:
- Spending 1 BTC: Assuming an average price of $31.50 per BTC, it would take about
32 million individual units to issue one unit of Bitcoin.
- Buying and Selling: When buying or selling UTXOs, you will need to pay fees for the transaction. These can range from a few cents to several dollars per transaction, depending on the exchange or platform you use.
Let’s consider an example scenario where we buy 1 million units of 100 each at $2 per unit:
Purchase Cost
: $20,000 (1,000,000 units $2 per unit)
- Transaction Fees: Assuming a transaction fee of $5, you would need to pay an additional $25,000.
- Total Expenses: Including the purchase cost and transaction fees, your total expenses would be approximately
$45,000.
This represents a significant portion of the estimated value of your 1 BTC supply. To put this in perspective, if you were to spend all 100 million units at an average price of $30 per unit, it would require approximately
3.33 billion transactions, each of which costs about $10 in fees.
The Verdict
Spending a large amount of Bitcoin can be extremely costly and time-consuming due to the high transaction fees associated with buying and selling individual UTXOs. This scenario highlights the importance of managing your stash effectively even when there is an abundance of cryptocurrency to minimize costs and stay within budget.