Bitcoin Forum

I'm pretty green to Bitcoins and mining but I think we had a window of opportunity that is now closed for mining for profit. Or better said, mining for profit much over the break even cost of the hardware.

For example, I don't believe there will ever be a day you will be able to buy from BFL (or any other vendor) a machine such as the Jalapeno for $249, that will generate $400 in BTC in a month. That's a 61% rate of return on your investment in 1 month! When banks at paying 1% on a CD, that makes zero sense. It would be same as Amazon selling $20 bills for $10 with free shipping. Basic supply and demand principle would kick in and drive up the price of the hardware to the point where you would have to pay an amount that would result in you only being able to make something close to a normal rate of return on your money. You are going to have a shortage, as in more people ordering than the company can ever supply, and a few lucky people reselling the products at a price so high that your rate of return will much lower and closer to what other traditional investments pay.

So none of this is making any sense at all to me. It makes zero sense that someone like BFL would sell any of their products at all. Anyone with capacity to build powerful miners should be mining with them, not selling them. Something fishy is going on.

I basically turned $100 into $3,000 over 10 months mining but it was pure luck. My used GPU that cost $100 mined 8 coins. Ordered a Jalapeno last year that cost me $249. It arrived and I sold it for over $2K. Now I can't find anything in stock that can be purchased that has even a remote chance to pay itself off, much less make a profit. I'd like to mine again but everything I explore seems like a loser to buy now.

What are your thoughts on KnC?

If a company made ASIC miners and mined a large number of coins continuously it would devalue Bitcoins and only produce a profit for a short time.

If a company, or 3 companies so far, make ASIC miners and sell them to miners then many individuals, whether truly individual people or groups pooling their investments, then the ASIC makers make money from continual sales, miners make BTC and the eco system continues.

You could have kept your Jalapeno and made more than $2K from it.  So it seems like your complaining about your own bad decision?  Not that you haven't done well with your initial investment.  Now your in a spot where your basically done, unless you want to invest allot more money.

Don't know what to recommend for you?  Maybe buy and sell Bitcoins?

Good Luck,
Sam

Please elaborate on how selling my Jalapeno was a bad decision and how I could make more than $2K in mining (assuming BTC price remains around $100 / BTC)? I hope I got this right but at the current difficulty and projected difficulty over the next 12 months my 7Gh/s Jalapeno would have mined  approximately 10 BTC. I stopped the calculation as of May 2014 because after that date my Jalapeno would be obsolete using more electricity cost that the value of coins mined.

If my math skills are right, 22 BTC I can buy now with the funds from the sale of my Jalapeno is greater than 10 BTC I could mine over the entire lifespan of the Jalapeno.

Even if I grossly miscalculated the payout and increase in difficulty, and if BFL is really going to be caught up with orders in 90 days, I could order 5 Jalapenos now for $1,000 (with 25% off coupon) and still have over $1K in the bank left over. Then I could go on my merry way mining with 5 Jalapenos 90 days from now. I really think it has to be a pipe dream that I can buy 5 Jalapenos now and 90 days from now be profitably mining with them.

Comments and suggestions welcomed. Like I said, I'm pretty green to all of this so I may have really screwed up the math. But when something sounds too good to be true, it usually is.


................   Jul-13   Augu   Sept   Octo    Nove    Dece   Janu   Febru   March    April    May   
Difficulty    3.12   4.34   6.76   10.37   16.15   24.80   38.62   61.00   90.99   139.68   214.41   
Coins/mo   3.38   2.43   1.56   1.020   0.650   0.430   0.270   0.170   0.120   0.0800   0.0500   

No, I think you're entirely right about mining not really being profitable anymore generally, the idea of doing something for money is that you should be able to make a decent living off it or at least earn some extra spending money, in this case because the cost of buying the ASIC's is so high that to me it doesn't seem worth it at all to even bother, not unless you want to donate hashing power to the Bitcoin network without frying your graphics card anyway.

Pretty soon I think the other miners are going to wake up and look at the mathematics and realise if they try and take it seriously they're still only barely going to break even.

I'm not saying selling your machine was a bad idea.  And obviously you've done well investment wise.

And your math may very well be correct.  I'm just saying that the math isn't the whole story about bitcoin and mining.  There are people involved so there are always variables that can't be foreseen.

When the ASIC race started the high point in BTC price had been 32 USD then it had dropped to 5 and then back up to the 15 range.  Then when ASIC's started showing up the price jumped up to what, 260 USD or so?

So the math is very fluid and will be until the ASIC vendors achieve some stability in their production rates.  Once that stability is achieved I believe the price increase at a somewhat linear rate.  But heck who knows?

Sorry for my rambling, but there allot of unknowns out there.
Later,
Sam

From an economic perspective, even if we achieve stability in the type and capacity of the mining hardware coming online, we still would not be able to see any profits significantly greater than other investment vehicles. With the increased media exposure, and more availability of hardware, the hardware will be priced to a level that one can only make a "reasonable" rate of return for the risk involved. That is more where I am coming from. The easier it is for people to buy hardware and mine BTC the closer the rate of return will be to other means of making money which means it will be low.

I don't think the jump to $260 per BTC had much to do with ASIC. At that time the Cyprus banking crisis (aka government confiscation of people's money from their bank accounts) lead to a panic and distrust of government controlled currencies. There was a corresponding increase interest and demand for BTC and thus the price of BTC went up. When that panic subsided the demand for BTC went back down to more "normal" levels so the price fell.

I have done some "day trading" in BTC as your prior post recommended. I may do more now that my mining play money fund is larger. I ordered one of those UBS miners for $100 just so I can still be in the game. But it will mine peanuts and I calculated I'll only recover $50 over a 1 year period. The $50 I am giving away is the cost for me to stay in the game and have something to keep me motivated to stay up to date with mining.

What I find it very odd how people are spending about twice what they can recover with the  hardware they are buying. I did it consciously knowing when I ordered the little USB miner for the fun of it. That was a small amount for entertainment and educational purposes. But I see people spending thousands of dollars on hardware on eBay and such where they will only recover 50-75% of their investment. Perhaps people are only looking at the current payout and not factoring in the exponential growth in difficulty when they bid up the price of hardware.

Only a sucker would buy an ASIC in today's market.

You're expected to pay an exorbitant price either based on suspect calculations of estimated RoI or demand from people who don't know better bidding it up.
All in spite of bearing the whole risk of being scammed or subject to incessant delays that kill your return.

D_Thomas Are you Greek?

I've researched until my eyes bled.

And, knowing the probability of breaking even At Best, have chosen to buy shares in a Jupiter that should deliver October/November.

Breaking even in a hobby/ Cause I Believe In is a great prospect. The off chance of profitability just sweetens the deal.

No, USA.

Think I jump in on this thread ... I am not looking to jump in to the hardware for mining.  I have been looking for a thread on the forum that discusses the ins and outs of perpetual/indefinite contracts.  I may have jumped a little to soon, but signed up for a 5GH/s contract for $500.  I figure this is play money and will see what happens.  The most I could lose is the 500 bucks, but who knows the company already has 4000GH/s mining hardware up and running.  Any help on finding an appropriate thread will be much appreciated.

Thanks Much,  :)
Lloyd

I think the OP is probably correct, but there are still a lot of people who want to get into mining. Maybe they are right...

OP is right. I am a prime example. I got into mining in May'13, having missed the big bubble up but got caught in the big blow down and the current stagnation. Spent $500 in GPU's and have made about 1 BTC thus far. Every 10 days or so, when the difficulty jumps, my mining "profit" takes a dump.

If I had just bought bitcoins with the $500, I'd have 3-4 BTC at least.

But your GPU is still worth about 3 BTC.

I'm still pretty new, but also pretty sure at this point GPUs are way more profitable mining scrypt like LTC and then converting it to BTC.

No, mining will never be guaranteed money anymore. Too many people are in the game now.

People still buy from BFL because it's a gold rush. They think if they can get in now they can still make money. It's far too late. BFL sells instead of mines because they can make far more money selling hardware to miners than they can actually mining. If BFL actually suddenly shipped all 60,000+ pre-orders tomorrow the difficulty would skyrocket so high than none of those machines would ever make thier cost.

I hate to say this but you didn't make as much as you thought you did (if any at all) from your Jalapeno.
I bought 2 Jalapenos at $150 last October. At the time, BTC was worth $10. That means those Jalapense cost me 15 BTC each. I don't expect those Jalapenos will ever mine 15 BTC in their lives. I would have been far better off just buying BTC with my $300. I would have 30 BTC now worth about $3k.

You were smart to sell your Jalapenos for 20+ BTC. You would never have mined that much. But you still might have been better off buying BTC instead of a Jalapeno (depends on what the exchange rate was at the time).

I always look at mining costs in terms of BTC, because spending dollars on a miner is an opportunity cost of me not spending that money on buying BTC directly. You need to use the exchange rate at the time you pay for the miner and then think purely in BTC from then on.

If you look at it that way, pretty much every customer of BFL is LOSING money. 

Mining is going pro, and anyone wanting to get into it needs to understand that.

This is a marginal business, and if you want to actually make a profit doing it you have to treat it like a real business and not as a get-rich-quick gold rush. That was over the second the first Avalons came online, and those folks who owned them are the only ones who really struck gold. Those that followed will be mightily disappointed. 

Jumping in now requires a boatload of capital to build a mining network that is capable of a decent return. You must simply do the math to properly figure your ROI now and into the future as possible projections or face possibly screwing yourself. By my calculations a full Bitfury rack at 400 GH/s is plenty profitable even at a 62% rise in difficulty per month and accounting for a 0% rise in Bitcoin's value, though that means dropping a cool $8000 to get started. Only those brave and bold will be miners going forward as the industry grows up and the buy in cost is substantially more than a cute little BFL Single or ASICMiner USB (winning the award for worst investment ever at 333 Mh/s for around 1.2 BTC as you would need 15 of them to equal a BFL single...though I can't say I dont still want one anyway because the are neat  :D )

So, those hoping that their single 5 Gh/s Jalapeno was going to let them retire young and rich, probably not going to happen because the mining industry is exploding, just accept it. Remember that BFL still sells them because they are selling you the pickaxe. Just a product like any other for cash money. Mining itself is an entirely different ballgame than simply selling something there is a demand for in terms of making a profit. Though I don't doubt for a second they probably are mining with their own gear, or are at least more than happy to "test" them on the live network.

Keep in mind that part of the ROI problem is more that Bitcoin's market value has flattened compared to the network's dramatic rise in power. What really needs to happen is either some tapering of network speed as the ASICs finally reach saturation, Bitcoin rallies upward again like it did in April to offset the difficulty rise, or ideally some of both. I imagine it will be both, but we will need to be patient and see.

That was an awesome post.

And btw - USB erupters have dipped to $70ish on eBay, and will most likely continue to drop as sellers sitting on craptons try to unload them before the price bottoms out.

Wrong.

Investing in mining is just another form of speculation. Some choose to invest in coins to make their money, others choose to invest in hardware to try and make theirs.

Either way, you're speculating because you're calculating an ROI off a moving target. You could buy mining gear tomorrow with an ROI in 9 months, but the next day the ROI could be 2 years or 2 weeks. You're speculating off price either way when you get into the mining business.

People buying ASIC hardware today (even with negative, or LOONG term ROI) are speculating that the price of Bitcoin will go up and that in turn will net a profit from their investment. Additionally, if a Miner is sitting on the BTC they earned and not selling it as it comes in the door, it only goes to drive home the point that they're just speculating vs. attempting to recover income.

In a healthy Bitcoin ecosystem, the ROI on mining should be very, very low in that mining shouldn't be about printing money to make an easy buck. Difficulty should follow price and demand. We're missing an element right now with demand (as Bitcoin still hasn't a solid foothold in retail) but it's getting there.

So what exactly was Wrong?

I disagree. My investment is based on the price going down slightly or staying the same. Bonus if it goes up.

As to your second point, someone has to make a profit on mining. If larger profits are gained from being first to market with more powerful mining equipment (and further securing the BTC network), so be it. It must be that way to spur innovation and development.

That's correct.  First to market has to reap the benefits, that's the only incentive for even attempting to be first at something unproven.  Granted, everything about bitcoin is speculative.  It's a new currency, only a few years old.  It still has limited adoption rate and usability given comparison to the rest of the world.  And it is exceptionally volatile, easily trading in -+ 10% a day.  

With all that being said, speculative can also be extremely lucrative.  Bitcoin has established a pretty solid history, it averages somewhere between 30k and 50k transactions a day.  The current price has actually hit a floor around 70/coin and rebounded from there.  It has peaked around 260/coin and is currently facing a ceiling at approximately 111/coin.  

Take a step back and look at the market as a whole and you see that a large amount of USD is constantly being pumped into BTC right now.  MTGOX CEO made a statement in April in an interview that between 300-500k was being withdrawn for every 1-3m coming in.  ASICS purchases are direct investments into the Bitcoin economy.  There has been millions spent on ASICS in the last year, probably in the realm of 50-100m at a minimum.  This has a positive impact on the price of bitcoins.  When bitcoin spiked to the 260 level in April, it was shortly after the introduction of ASIC miners into the community.

We can "Speculate" that growth will continue based on the current trend line.  That would indicate the price of BTC has to rise.  As adoption rates continue in businesses across the globe and BTC finds more uses, you will see an increase in demand as well as an increase in transaction volume.  When demand rises on a limited supply, you will also see a price increase.

The point here is that this is a speculative investment.  It's not a foolish one if you understand the risks, BTC could suddenly see massive regulation, drop to less than 25/coin, and all these ASIC's would be far from profitable.  Such is the risk you take, tread carefully.

the problem is that we are buying money to make money

No, you have to treat it as a get-rich-quick gold rush. The difficulty keeps increasing. Collectively, the total revenues of all miners have a hard limit.  That total revenue per month declines each month. Any edge you have in hardware only produces profits for a short period. There is no long-term business in Bitcoin mining. Bitcoin is designed that way.

Well, yes I agree that bitcoin mining is a business and now it is essentially for deep pocketed professionals.  Those who have the funding to put up the $50 - $100 thousand for a minimum of 1 TH/s of hardware plus operating costs.  If KNCminer keeps its word about shipping no product in Dec, Jan, and Feb we may be able to recoup the ROI during that time span.  That is if the other major hardware vendors agree to stop shipping during the same time frame also.

I see that diff jumped ~18% this morning to 37392766 and as I remember it was July 22 or 23 or about 11 days ago when it went from 26 million to 31 million or ~18% then also.  So in the last 22 day difficulty has jumped ~36%. I extrapolated this to an increase of 18% every two weeks and came up with a difficulty of 200+ million by the end of 2013.  I know that this does not consider the new ASIC hardware coming online. So we most likely will be looking at about 500+ million by the end of this year.  Like I said above only those with DEEP pockets will still be mining by the end of the year, or we will be looking at using contracts or shares to participate in the bitcoin mining side of this adventure.

Lloyd

I don't understand all this halabalu over being so worried about making your profit. Unless the entire BTC market crashes you'll still make money over a period of time, it just gets longer and longer.

This is how I look at things. I almost buy nothing in my life that generates money. Let me clarify, I don't own anything that just sits there and generates some form of income(except now of course). With that said I could care less if I'm going to make a huge profit, because after the initial investment I have passive income as long as the market doesn't crash.

I'm not worried about ROI or trying to make my money back the first month. It seems that is what every one tries to do here is hope they are going to make every penny they dump into mining back instantly the first month. If you think that your just stupid. Unless you spend a ton of money doing so then good for you.

To me this is more so a hobby and something I can be productive with and I like that. Almost more than I like making money. This preoccupies my time and is a great conversation starter. The fact that I have asics and that I generate money off them each month is fine by me.

Did I make profit the first month, hell no... the second.... nope..... But I'm still making passive income now that I never had before from spending a few hundred dollars. and the best part! I can decide to spend it, or roll it over for more income a month.

Something to consider about BTC earned via dividends or mined versus earning an income that's immediately taxed.

- Let's say you spent $100 on the latest e-doodad at the Nile e-superstore. To have spent that $100, unless you're Mitt Romney or in his type of position, you're getting taxed at anywhere from 25-40% if you're like most people. So to have purchased that $100 worth of electronics you had to have labored to earn $125-140 depending on your tax situation.

- Now say you mined a Bitcoin or got paid in BTC dividends. Who knows how long it took but you have a Bitcoin. If you were to purchase something with that coin, currently valued at about a $100, you've essentially purchased something that would have really cost you $125-140 pre-tax.

Of course, purchasing something with that coin has an intrinsic opportunity cost that offsets the tax advantages: you've decided that whatever you've decided to purchase with that BTC at that moment is worth more than that particular BTC's future value - regardless of one's position on the viability of the longevity of cryptocurrencies like Bitcoin.

As for myself, in the BTC world I have a # of bets.

1 that went badly & is most likely gone to ASX project: 50GH/s
1 to BFL (2 Jallys): 10GH/s
1 to Bitfury or KnC: 50 or 100GH/s
Total planned: 110-160GH/s, on hand: none

Got enough funds I can afford the 50GH/s BF or a 100GH/s KnC. Bitfury will most likely make early Oct. & it's upgradeable to 400GH/s which helps for planning against obsolescence but KnC gets you 50GH/s more for only $200 more *if* they can meet their schedule. Dilemma, dilemma.

BTW, flipped a Jally I got for cheap & I nearly made ROI on the pre-orders I've made even including the ASX Project noobtastic brain fart!  ;D

I'm long on BTC. Also own 1.01 AM shares because I like the dividends aspect and that they re-invest 25% to new TH.

I bought a 6.5 (4.5Gh + 2Upgrade) Jalapeño when 1BTC = 126 USD

I've paid 278 USD total (included shipping) and I have to pay 50 USD at customs when it arrives (if it does ever)

If the coffee warmer is able to mine 2 BTC at free electricity, I'll be happy :)

I have a 2.5 Ghash/s GPU setup. Will continue to mine until difficulty hits 60M (in 2 months?). Just happy to support the network.

ROI achieved on Jalapenos received in early July, including electricity, interest, and tax (yes, income tax on income earned).  Paid with USD$ and have now received more USD$ than previous input.  Mission accomplished.

 Anyone buying an ASIC today needs to have fast delivery.  BFL will in the very best scenario ship new 5Gh orders made today by the end of September.

just out of curiosity, that means you sold the bitcoins for USD then, correct?

i was under the assumption that bitcoins themselves weren't counted as income

wrong

if bitcoins were still worth $35 usd, it would have been "not worth mining any longer" a long time ago

but they aren't worth $35 anymore



the point here is to just keep a balance of bitcoins for the liquidity and developments in the exchange rates

Never heard of ASX Project before but there site indicates they have 150Gh/s units in stock.  Is your 50Gh/s unit being shipped now?

This is the death of bitcoin imho. Miners have been the mainstay of the legal bitcoin economy as they have amounts to spend and therefore it's worth people accepting it. Now that it's impossible for new miners to get onboard, they'll be fewer transactions and therefore less fees, fewer people to accept it, etc.

There's a bubble for hardware, because now you need ASIC to generate the same return as a GPU but even this will be obsolete pretty soon because of colossal jumps in difficult - it's the death spiral, the more you so spend, the sooner the end and therefore the more you lose.

It won't be a death spiral if the coin goes up or the cost of ASICs come down.

I'm told my 50GH/s unit is "Complete": http://www.reddit.com/r/BitcoinMining/comments/1j71eq/so_im_told_my_upgradable_50gh_1k_asic_clone_order/

No updates since. :(


Stay away! Until you hear of someone receiving an ASX unit, don't send them a Satoshi!

This logic would work, if bitcoin wasn't taxable. Theoretically it IS taxable income the moment you convert it to USD.   For now, you most certainly can pay for goods and avoid income taxes with the coins you earned but it would be foolish to assume this is "tax free income".

Today there was a court ruling that Bitcoin denominated investments were in fact securities and would be treated as such.  https://bitcointalk.org/index.php?topic=269612.new#new (https://bitcointalk.org/index.php?topic=269612.new#new)

This means that those bitcoin dividends you are talking about spending, those are coming from a security in bitcoins.  That security in bitcoins now needs to obey SEC rules and regulations. The exchange offering those BTC securities also needs to obey rules and regulations.

The implication here is that dividends, are 1099-DIV income.  If you are being paid dividends that's taxable income.  It may not be today, but it could definitely be backdated and reported to the IRS if companies like ASICMiner are now required to comply with regulations....

Buyer Beware.

The picture of the chip on their website is a fake.

Yes, I sold the bitcoins and converted them to my local currency.  Once the money arrives in my bank account it's a little hard to hide the income from the government  ;)  I don't declare bitcoins still in my wallet as to me, they're like shares or a brick of silver with constantly fluctuating value. 

Sorry for the late reply to this quote but, what's wrong with filing 1099s? Done it before & I don't mind paying taxes. I don't look at mining & mining speculation as a way to *hide* money from the Feds (but I do see it as a way to maintain & build wealth, like other securities). I, for one, do like having lights that work, streets that are paved, etc., etc.. due to taxes paid by citizens. Not saying we should grab everyone's wealth & re-distribute it, but we all have to and should pay our fair share of our local, state, and fed. taxes. It's one of the things we miners & investors have to do to make BTC really take off & be legit.

I've seen documentaries of places where true anarchy rules, like Somalia. It's not pretty.