Bitcoin Forum

Based on latest difficulty and a 20% difficulty change projection, all the ASIC mining rigs will generate 500% of its current difficulty income during its lifespan

This means, if you have a 25Gh device, and start to hash at the beginning of this difficulty, you will make 4 coins total at current difficulty, and 20 coins during its lifespan, so any purchase price higher than 20 coins will never ROI in bitcoin. If the device arrived after one month, it will only generate 10 coins during its lifespan

Take knc's 200GH device for example, costs about 40 bitcoins. If it start to mine after one month, first period will be 16 coins, 80 coins during its life span. After another month (which is shceduled delivery time), first period will be 8 coins, 40 coins during its life span.

This is also true for those buying mining equipments with fiat money, if you spend fiat money to buy those 40 coins, you already had them without all those hassles about managing mining equipments


The positive thing is, soon the mining channel of investment in bitcoin almost fully closed, investment capital will flow back into exchanges

(But it is also possible that most of the investment capitals were trapped in mining devices thus no money can be used to purchase bitcoin now. In such a case we will see lackluster price development and skyrocketing difficulty)

Works for me.

Leggo.

Seems to make a lot of sense. Investing in bitcoins requires a business strategy if you are going to put a lot of wealth into it. I had no idea how few coins one would make with those mining rigs. If you are planning on holding bitcoins then the rigs wouldn't be a bad idea.

Difficulty follows price not verse visa, this has been debated to death already (tip to OP your side always loses)
So if people overdid it with their mining investment, they made a bad investment, and that's it.

It will get to the point where ASICs don't even pay for the electricity it costs to run them, it happend with GPUs and it will happen again.

Yes. But when difficulty has reached the right level for the current price, people will start to invest in coins instead of mining equipment.

The majority of the ASICs is payed for with Bitcoins so that will actually be the opposite effect you guys are hoping for. Added to that existing ASIC miners have an incentive to dump their coins because of increased competition.

The only hope for a new rally is a new media hype.

Why will they dump their coins because of increased competition? If I recieved less coins, I would hold on to them stronger than before.

And if you buy ASICs with bitcoins, don't you want bitcoins back (not FIAT)?

That's true for small miners, that only run them to get BTC. The guys that run big farms have significant operational costs that have to be covered by selling part of their mining income.

As mining provability decreases, the % of BTC that they have to sell immediately to cover their expenses increases. Therefore the overall % of fresh mined BTC that are sold immediately increases.

But honestly, at this point I don't think that mined BTC have a significant impact on the exchange rate anymore.

To the rally, I don't think we will see a real increase in Value in the next 6 Month or even longer. But that's OK.

All the "big names" we have in BTC now are people that joined it during the 2011 Bubble, staid after in and build the services that made BTC what it is today.

This time 100th the amount of people as during the 2011 Bubble came into Bitcoin, if the same % as 2011 stay and start building services they will harvest the fruits in ~2 Years. But for that I believe it's better if it gets a litte more silent around BTC for a while.

I understand the argument now. Thank you  :)

I think that we are already at the stage where no future mining investment will pay for itself. This means fewer miners and therefore fewer people with Bitcoin to spend. This either means that Bitcoins become more valuable because they are harder and more costly acquire or, more likely, the whole thing will pretty much die because business won't bother to make the investment to accept it because there are fewer people with it and so it will lose its current popularity and never gain any more traction.

The best thing going for Bitcoin was the democracy of mining in that anybody with a graphics card can generate a small amount, now you need serious investment in ASIC kit that is unlikely to make a return. All the GPU's are now useless and so the generation phase that was anticipated in the original design has ended. Without significant market share and large transactions fees, its pointless for anybody to make an investment in mining.

So my prediction is a slow downward spiral in value from now on. Meanwhile hash rates will continue to rocket until the ASIC manufacturers start to fold resulting in one or two large miners left operating i.e. a large likelihood of the dreaded 51% scenario. Then Bitcoin will be truly worthless.

It's a real shame, I really wanted it to succeed but I think ASIC's came too soon in its life cycle and killed it.

I know, in real life, 8 people with bitcoins and none of them has ever mined. I have mined for half an hour, only because I wanted to see how it works. People will continue to invest in bitcoins as a store of value, buying them at an exchange.

Not like we already had this a 100 times, but well:



After the 2011 Bubble mining was not privitable, too. For some time the difficult even decreased as people stopped mining. It didn't kill Bitcoin.
If you have some basic understanding of economics you will see that mining is designed to be a 0 sum game for the miner. The device used for it doesn't matter. As long as mining is profitable, people will start mining to make money until it reaches an equilibrium with running expenses. This is true no matter what is used to mine, be it CPUs, GPUs, ASICs or Windmills.

Also, that mining get's professional and more mining companies develop that have advantages over private miners and push them out is expected, no matter what device is used. That's just how any marked develops. Why should BTC (or cryptocurrency in general) be a difference here?

I suppose that those who bought large amount of mining equipments are long term investors, they have certain amount of risk fiat money that they would like to throw into bitcoin,  mining equipment is one of the investment option. They don't want to cash out quickly, since anyway those risk money will be converted into bitcoin and stay there for a couple of years. And if their financial situation improved (Which is likely after huge amount of QE3 money), they might invest more

But the risk is that they didn't know how large BFL's order queue is, and how many underground ASIC factories are opening up in china. That will eventually make each devices' daily coin return less than 0.1 coin

Once for a while, GPU mining rig also mined at a loss at the end of 2011, but that never lasted long, since people turned off mining rigs and purchased coin directly, which supported the exchange rate

The next natural step is that people will start to use mbtc as a unit of count, the day that you can acquire a single bitcoin without huge amount of capital will soon be gone

Just read the latest Avalon update, it also showed how a terrible mess the mining industry is now, someone might kidnap their relatives to get chips delivered  :D

This spring's rally is caused by reward halving and an anticipation of 20x increase in difficulty when ASIC devices are mass deployed, but now difficulty has almost reached 20x without any sign of stop, the projection of future exchange rate will change accordingly

The big difference between the 2011 bubble and now is that most people already had graphics cards so there was no barrier to enter mining so you didn't need to make a profit. Now you need serious money to buy ASIC hardware so you have to make a return which is unlikely. Already 5GH/s Jalepenos will struggle to break even and most buyers have yet to receive them. If there's no profit in mining who will do it ?

Suckers

People will buy the 6k USD mining rigs and run them anyway, because why not. 400W power drain is a drop in the home budget.

You can grow pretty decent pot with 400W of power. :)

I think the other thing that is looming is the glut in the ASIC market; there are a lot of people that have pre-ordered hardware, and they will still get it on put it online.  However the hardware manufacturers are still going to keep pumping out new ASICs even as the ROI on new purchases becomes achievable; this will lead to a glut on the market.  At that time, prices of the ASICs will begin to drop; we have already seen it with the Block Erupters price going down as people are realizing that there is no way to recover their investment.  That will slow growth in the mining sector until the prices become reasonable again.

Of course the other factor is the exchange rate, which if it goes up again will drive renewed interest in mining.


Bottom line - price of hardware will balance with value of BTC and difficulty, so that anyone can still invest in it.  

in the past we have seen, that a lot are still mining although it is clearly not profitable. they only speculated on higher prices a few months later, and my guess is they were right. if that pattern repeats, i don't know where the mining-top is. and even less, where the price top is (or should be).

I don't understand why so many people make the statement that GPU mining is dead. It may be dead for BTC but there are still plenty of alt currencies that can turn a respectable profit with little upfront investment. With the ability to trade alt coins for BTC on many exchanges it seems like GPU mining is still perfectly viable meaning that the entry fee into the BTC market is still within reach of many individuals. There may be a lower return than in the past but it's still sustainable for many alt coins at current difficulty levels and block rewards (particularly if you have a means of getting power for free). I'm no expert on crypto currency by any means but it seems to me that unless I'm missing something (which is very possible) that GPU mining is still very much alive and kicking and is a viable option for those looking to make some extra coin by putting their gaming computers to work while they're not gaming.

There are even services like middlecoin.com, which always mine the most providable altcoin, directly sell it and pay you out in BTC.

Year, put this is mining without purpose (from a BTC perspective), so enjoy it while it lasts.

*For all that don't know it (seem to be a lot recently) the purpose of mining is to secure the network and not to print money.

I disagree, ASICS are populating the world, thousands and thousands of them being built and sold.  Bitcoin mining is the only thing an ASIC does, once someone has an ASIC they are a guaranteed bitcoin supporter.  The ASIC population of the world is setting up the basic network, the core (dispersed) infrastructure that forms the foundation of bitcoin's future.  

It will just take a few years for the whole thing to be rolled out:  Mass-ASICS and an upgrade of the exchanges is what's currently happening.  ASICS aren't killing bitcoin at all, they are simply the foundation and they will get cheaper too, and having a network of tens of thousands of ASICS (will probably end up being hundreds of thousands) is plenty!  We don't all need to be mining.

More companies developing ASICS is good news!  More ASICS being built at all is good news, after all, they are BITCOIN ASICS!

Yes, in order to protect the income of my ASICs,　I will step into exchanges and purchase a lot of bitcoins :D

I do actually believe you.

https://i.imgur.com/hAUZNpR.png

How is that 20% estimate holding up?

(my bold emphasis)

Absolutely. ASICs are solid-rocket boosters for Bitcoin. With Bloomberg on the verge of legitimizing this revolutionary currency, Core Dev with a load of point-fo-sale improvements I agree with the OP. A rally is inevitable!

You have to actually poke holes in OPs logic, not re-state and mis-apply an old concept.

where are you on this picture?

http://www.pino44.com/wp-content/uploads/2010/10/You__re_So_Stubborn_by_coffinberry.png

Finally someone gets it.

Market usually price in what will happen in 6 months, the price rally in April basically priced in the difficulty change through October. That's most of the smart money's prediction ability, and that's basically what happened: Difficulty rose by 20 times, price rose from 10 to 200.

Of course, a better prediction should be based on number of participants and how much each of them are willing to invest in bitcoin, but difficulty is a good indicator of supply and demand change (more hash power competing for same amount of coins). The fast increase in difficulty just showed how many people are willing to invest in bitcoin, it is difficult to imagine if someone are totally not interested in bitcoin would like to buy a ASIC mining device

Based on latest data, we are seeing more and more ASIC manufacturers establishing, especially that mysterious phoenixasic.com, if they indeed decided to throw 200 million USD for the project, I'm sure there must be some other insider movement we don't know

Bitcoin's market value is still very small, considering those 30 trillion dollars in tax heaven off-shore accounts, even a tiny bit of those stash will push the exchange rate up several magnitude. If you are a super rich guy and your life are so boring since you already had everything you want, what will be the new fun for your life besides gambling? Bitcoin of course  :D

Just like internet, bitcoin never existed in human history, and almost everything in bitcoin is against traditional wisdom, people will always be surprised but highly attracted, the more they study it, the more interesting aspect they will discover, and it will almost certainly make people to reconsider the idea of money, which they have been ignoring most of their life

Latest difficulty jump: 35.88%  :o :o

yes, a miner is more likely to buy coins and spend them.  And more likely to encourage others to do so.

Also, consider that there is very little "efficiencies of scale" involved in taking a black box plugging it into power and ethernet and turning it on.  So large miners do not have significant advantages over others.

ASICs are pretty cheap per unit once NRE is paid, so bitcoin miner device prices will crash.  Once that happens electricity costs become important.  At that point, people with cheap or free electricity or a use for the incidental byproduct (heat) will have a definite advantage over large miners. 

So I expect that as the ROI -> 0, mining will decentralize back into a "hobbiest" domain and be used to consume excess power (summertime personal solar cells for example) and provide supplemental heat for homes.  But of course this won't happen at the current mining rig premium.  The will happen once Moore's law stops being applicable.  As long as access to the latest ASICS lets you mine most of the coins centralization makes sense.

Sunk costs.

Most of the recent difficulty jump are 30%, generated from BFL mass shipping, bitfury deployment and together with kncminer's 28nm ASICs launch, these all make the coin much more difficult to get for anyone

The silk road shutdown just showed that currently no any kind of negative news could affect the bullish trend of bitcoin. People usually say, if the price don't fall when it should fall, then it will rise later, we are going to see a rally very soon, target area at least $500

I believe!

I can give you a corrolary: We've had all the bullish news in the world yet can't pass the same resistance level after 2 months.

This tells me were maxed out for now at the highest possible sentiment. Now what if the bullish news stops, or what if there's some bearish news? The sr crash shows the stagnant market is a ticking bomb waiting to go down at the slightest change of sentiment.

I don't agree with that. We are not maxed out because every new bitcoin business slowly brings more people to the table who by using bitcoins take them from the market. We are just building up and everything is ahead of us. There are still many many people who don't know how to benefit from bitcoin .

Well bitcoin itself isn't maxed out but the sentiment given the current state of bitcoin IS maxed out. This means that in order for bitcoin to move forward, some significant and corporeal development needs to occur, and this is certainly possible. However, the level of effort needed for bitcoin to drop is relatively minor. Some simple event can occur, such as... mtgox enables withdrawals. Actually, merely the sentiment needs to reverse, which can occur via something psychological.

Some keywords we haven't seen in a while: mtgox, withdrawal, bankruptcy, hacker, worm, legislation, fork, capitulation, winklevoss, scalability.

+1

His right the price should rise and reach the value we all put on it , i think around £1000 per coin end of next year

Sentiment only affect the price for a while, the fundamental support for the price comes from the long term demand. Official recognition of bitcoin as a reliable long term store of value (digital gold) could be a breakthrough. If pension fund are allowed to invest in bitcoin, then we are going to see a huge amount of capital inflow

Currently I only watch bitstamp exchange rate, it is very clear that any kind of large sale (like thousands of coins) will push the price down for a couple of percent, but then immediately be bought back and push the price even higher, this is exactly what happened during this spring in mtgox, some large player are testing the market weakness before they go ahead and drive a rally

This is the most insightful post on this thread.

I am gutted my ROI is going to be abysmal, but ever bitcent it makes when it finally gets here is a bitcent more than i have right now.

I expect to go through the same painful realisation for the monarch too. Yes I got fished in on that as well ;)

This spring, it was the diminishing return of GPU mining sparked a large wave of rally, simply because there was no way to get enough coin in the foreseeable future at that time (unless you already had a pre-order of ASIC devices since last year)

It is a similar situation now: With 30% jump at each difficulty change, in a couple of months, many ASIC devices will only earn back the basic hosting cost, and this time there is no other more efficient miners in sight, means investing in mining rigs will only be profitable for those with free electricity

Currently exchange rate is still waiting for the difficulty to catch up, after the difficulty rise another 10 times (about 4 months), the only way to invest in bitcoin is to buy. But I think wise money won't wait until that time when everyone else also realized this