Bitcoin Forum

I've been playing around with a few metrics to try to determine how to value LTC versus BTC; these are:
1. Return in USD per day per USD invested
2. Cost of electricity to produce 1 USD

Let's start with 1.

BTC: KnC 275 GH/s @ $3,000
$200.00 per coin
0.3485 coins/day at difficulty 391m
or 69.70 USD/day after electicity (300 watts), 1.5% fee, 0.15 cents/kWh
0.0232333 USD day ^-1 USD invested^-1

LTC: 40x 7950 (+PSU/mobo/memory/HDD valued at $4000) @ $12,000
$2.40 per coin
23.8434 coins/day at difficulty 1080
or $27.632 USD/day after electicity (9600 watts), 1.5% fee, 0.15 cents/kWh
0.002302666 USD day^-1 USD invested^-1

How does this look if we chart it out, with BTC difficulty inflating at a rate of 25% every two weeks and LTC difficulty inflating at a rate of 2% every two weeks, given constant prices for both currencies?

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

Well, that's pretty interesting.  In order to hit the same USD return per day per investment dollar, BTC difficulty needs to increase at the same rate (25% per two weeks) for 22 weeks, or almost half a year.

How about 2, cost of electricity to produce 1 USD for both currencies?

With BTC at $200 USD and LTC at $2.40 USD, the equivalent of 1 USD is 0.005 BTC and 0.41666 LTC respectively.
How much power is used to produce this 1 USD?  The calculations should be pretty straightforward, so I won't detail them here, but you should be able to plug this into allchains.info and see it for yourself.

BTC
KnC Saturn @ 275 GH/s, 300 W at the wall, 1.5% pool fee, difficulty 391M
0.0154949785 cents per USD

LTC
7970 @ 630 KH/s, 225 W at the wall (my own measurements from one of my rigs), 1.5% pool fee, difficulty 1080
0.5887987788 cents per USD

That's a 40 fold greater cost of electricity to produce 1 USD in LTC as compared to BTC!  Of course, over time and progressive difficulty increases this will continued to come down, but unless there are massive price swings in the near future or ultra efficient LTC FPGAs/ASICs come out, the cost of production of 1 USD with Litecoin will continue to be many fold that of Bitcoin.

Finally, it's worth mentioning that LTC block reward will undergo halving in less than 2 years time, while Bitcoin is looking at 3.5 years from the current date.

Feel free to point out any stupid oversights or assumptions, but these have been my thoughts over the past week or so, especially as BTC price continues to rise.

The price is the result of supply&demand equilibrium, and not result of electricity wasted.

The price is always the result of supply and demand equilibrium -- but you don't think the cost of production plays into the quantities of a commodity that people are willing to sell for a given price (supply)?

I'd say LTC is valued at exactly what its worth (i.e.: what people will pay for it). While it may take more electricity to make $1 worth of LTC, that's irrelevant if the market will only pay "xx" price for it.

It does seem to indicate that if you are going to invest electricity into cryptocoins the scrypt coins might not be the best ones to invest your electricity into...

-MarkM-

There is always a ROI risk for supplier. Besides speculations, investment and hopes main trend can depend from technology adoption by public. There is also a risk that the price of mining hardware is over valued, and it just waits for big technology players to step in (also depends from technology adoption by public).

I'd be interested to see how this compares to the cost vs profit of BTC in its early days, if anyone has the figures?

I think LTC, will increase a lot more very soon. It has increased so much already in the last few days. I am going to save some LTC, hoping it will go up to $150 soon.  ;D

Also you have to take into account the value of your equipment after you depose of it.

I've been mining Alt-coins over 1 year on a graphics card I bought for ~$80 sold for ~$45, I've made an ROI on that card many times over.

If i buy ASIC mining equipment I maybe get my 100% ROI back but the value of that equipment may get only 5-10% of what I paid for it.

I've already had the value of ASIC equipment drop 1600% of what I paid for it, and I didn't get an 100% ROI on it.

Well, this is going to end pretty soon.  SHA256 ASICs went from a 110 nm process to a 28 nm process within 10 months, whereas lately we tend to get stuck on process nodes for a year or two.  We'll probably wall for a while at 1-2 GH/s per watt, and from that point onward we would expect ASIC hardware to devalue at a rate similar to GPUs.

There have been a few set backs recently, mainly due to the closure of LTC-Global. Given that a replacement for it has been launched and another one is due to come online in the near future, I think the price might go back up due to demand for Litecoins to pay dividends with these exchanges, particularly from those listed who aren't mining operations.

On that note, perhaps people have been selling Litecoins too cheaply on exchanges, which has brought the price down lower than it should be valued at, and it wouldn't take too much effort for large-scale Litecoin miners to start selling their coins at higher prices to offset their costs of production and for others to follow suit as a result.

this is what i was thinking.

It's not that many months since Bitcoin was still being termed "experimental". Very few people were around to see its inception and with it many were mined by the few, many bitcoins have been lost simply by deleting of wallets throughout this experimental phase (whether you consider that good or bad). Litecoin is now that opurtunity to get on board at ground floor level. With good developers now on board and likely a good even distribution of coins in my view as well as holding a couple of bitcoins having litecoin is worth giving some thought. This of course will be poo-pooed by anyone in the Bitcoin only camp but shouldn't be ruled out on those counts without doing a little research.

Nope, the only use of Litecoin is speculation, and not many want to put money in.

I personally wont as I believe Litecoin is overvalued and I dont want to burn money

Cost of production is a major influence on supply and demand. Most miner's aren't going to sell at a loss, which creates a price floor.

Well, people mining BTC may see it differently, though, as they are only putting a little work and investment into obtaining BTC with current hardware and can easily trade this BTC for comparatively more difficult to generate LTC.

I think the cost to produce SHOULD help determine the price but there are a lot of miners who cant math.

LTC is useless shit - hope it dies sooner than later.
No trolling.

Taco , im going to be honest I didn't read anything.

But I assume you are saying its undervalued,  if so you are right.

But im going to say its not.

Probably in bubble mode - 0.5$/LTC would be a reasonable price.

Why do you think LTC is piece of shit? Why would be successful only BTC? In comparison to other crypto LTC has few features to offer.

I am too bored to explain (sorry mate) and I hope people do not take it personally - I am just honest on how I feel.

Let's say I hate the speculative trolls it has gathered (see btc-e trollbox).

And all I see by far is a pump & dump coin...

Perhaps a correction is underway. ;)

Yes, massively undervalued, it is on its way to $10...

Litecoin wow hope you guys are seeing this ~ to the moon!  ;D

No.  If it was then GPU miners would simply keep mining and sell their coins for $800 per BTC.   Miners have almost no pricing power.   If difficulty gets too high relative to price then some miners will quit and difficulty will go back down.

Uh...? You don't think the boom in the beginning of the year had anything to do at all with ASICminer and Avalon suddenly controlling almost all of the newly generated BTC supply?

No.  Correlation is not causation.  Why would Avalon miners not sell coins at a higher rate than GPU miners?  The number of miners is irrelevant the amount of production remains the same.  If anything the continually rising hashrate means that production is about 30% higher than the target.  Still the amount of coins relative to daily trading volume is a small fraction (and shrinking).   

LTC  is no piece of shit, but I still feel LTC  is overvalued. There is not much you can do with LTC, and did you read about LTC in mainstream news ?

Because if you don't sell the coins, you constrict the supply entering exchanges, thereby disrupting supply-demand equilibrium and pushing price up?  The volume of coins traded daily on an exchange is small compared to the total supply of coins.

I think the powers that be think they can control bitcoin by regulating exchanges. I've seen a few mainstream articles that portray bitcoin more as a "payment processing system" than an alternative currency.

That is probably why you see so much LTC hate that sounds identical to the bitcoin hate from 2 years ago - the idea of a whole market of cryptocurrencies will completely take over the dollar and it will be impossible to regulate AT ALL.

You haven't proven that ASIC Miners withold coins at a higher rate than GPU miners did.  I mined with GPU for 18 months and sold less than 10% of my coins to cover electrical costs.  Still while daily volume may be lower than total supply it is much larger than the rate of NEW production.  New ASIC miners don't "own" the complete supply they only "own" the newly created coins which is a tiny portion of the market now.  It was different in 2010 when the daily production was sometimes more than daily exchange volume but those days are gone.

Well, that's true, I didn't spend most of the coins I mined with GPUs either, but I meant more of that being a possible example of how the spending of coins mined might affect price.

Since we have actual data, I suppose an interesting thing to do would be to track how coins are spent after being mined in a block, and then see if we can use this to predict historical BTC prices.  I suspect this might be difficult because of the way pools are setup, but it's a neat idea.

In regards to electricity costs it depends where you are in the world. In Europe I hear utility costs are very high and mining is less economical there, but in Canada rates are much lower. The value of a coin is not tied to electricity costs as another user pointed out. When electricity costs become greater than earnings that is when hashing capacity drops, then of course difficulty is readjusted. It is going to be a constant fluctuation.

As far as LTC value goes I think it is priced correctly although I see it going up in the future for sure. As it has been pointed out many times before the only way to compete with Bitcoin is to offer some major differences or advantages, small tweaks to the protocol just make it a copy cat. However I believe the memory intensive Scrypt hashing qualifies as significant enough of a difference to lend it credit. I don't think it will replace Bitcoin but I think they will co-exist for a very long time to come. I also believe there will be a 3rd player that will eventually come out with another p2p currency with other distinct differences.

Also remember, rising tides raise all boats. As public opinion improves for Bitcoin it will have positive impact on all crypto currencies. I wouldn't be surprised if LTC hits $20 in the next 12 months.

^^ Slight aside, but I'm in Canada and I pay $0.15 / kWh.  The rates are technically pretty low, but after taxes and nebulous fees I end up paying that much.

I think you have precisely explained why it is worth as much as it is. Network effect. 

I pay about $0.25 / kWh, so Litecoin is really massively undervalued from this point as I cant GPU mine with a profit.

http://spectrum.ieee.org/computing/networks/bitcoins-computing-crisis


interesting mentions LTC as BTC alternative!  8)

I agree part of the depressed LTC price has to do with the bubble of GPU's comming onto the network earlier in the year and teh fact that they all needed to get ROI or a large part of it

You steal electricity then. Someone is always paying in the end.

Undervalued to who?

I guess it all depends on the perspective.

Wouldn't surprise me to see a price rise to $10-$40 in the next 12 months.

I could be wrong on that but it wont be a surprise.

undervalued. it's the second most "used"/"mined" coin.
it wouldn't take that much for exchanges and processors (bitpay, coinbase etc) to flip a small switch and start processing litecoins as well.
in due time.
technologically beacuse it IS so close to bitcoin in many ways doing that would require minimial effort.
after this happens i think price will be much higher

There's little reason to accept litecoin for now. Hoping it to get accepted tho cause I mined some 200 of em when it was easy  ;D

Your electricity bills is way too high although I agree that Litecoin is massively undervalued....

I would say yes..... it is undervalued...

generating LTC is not that easy... considering high ELECTRICITY it consumes...

When I started LTC the price was around $5+ per LTC.. which I think is a very good price for $0.25/kwh (high peak hours)

when ltc dropped to under $2 I stopped mining and my $5k rig is sitting doing nothing until fall/winter where electricity is cheaper $0.12/kwh

so yeah... since BITCOIN IS THE GOLD... there should be a SILVER... which is LITECOIN...

if BTC is worth $1000 then LTC should be worth $500

:)

Free market price will rise if both supplier and consumer agree with its new value. The demand for units of exchange derives from number of natural transactions.

Way overvalued, it is.

oracle success, part 2

Litecoin is hardly useless, and is probably under selling itself by saying it is silver to bitcoin gold. At the end of the day, litecoin functions and has many of the advantages of Bitcoin. You can still transfer money across the planet in an instant, avoiding clearing houses. The only factor that should be the difference is supply, Bitcoin/4!

Bitcoin has the advantage of sentiment being the first crypto around, but there is definitely value in Litecoin..

It's more like gold to Bitcoin's platinum. Silver would be Peercoin at the moment and I guess a smaller, more plentiful alt like Feathercoin would fit the description of bronze better.

Overvalued.

It's the same thing that happened last bubble all over again. Newbies read some article about bitcoin, considers buying some but thinks "Naaaah...I missed the train, but what's this litecoin? If I buy that I'll be rich quick, Because it's still cheap and it's the silver to bitcoins gold!"

Then the oldtimers pump, dump and profit, and ltc sinks down to obscurity again.

actually it should be BTC 1000 USD and Litecoin 250 USD  (because there is 4 times more silver than gold :) )

You're out of your fucking mind.

For this to happen, there needs to be parity between the support and services associated with both coins. BTC is miles ahead of LTC in that regard.

First mover advantage is not easy to overcome.

Visa/Mastercard
Bitcoin/Litecoin

 :o

on the other hand, Pioneers were often recognized in the wild west because their bodies had the arrows sticking out of their backs. 

First mover advantage is great, but I strongly feel that Litecoin has attached itself to Bitcoin's coattails and is going along for the ride.

It is so little extra effort for any enterprise to accept LTC as well as BTC.

With the large market capitalization of Litecoin, why wouldn't businesses want to open themselves to a $593,246,312 market?

undervalued in my opinion, but we will see

This thread reminds me of the Bitcoin talk from a year ago wondering if BTC was overvalued
at $50.... so $850 later.

Litecoin is poised for a great year... riding on Bitcoin's success, without the taint
of Silk Road, with better technical specs, ready to be added to the bigger exchanges,
at a much more affordable investment price than btc.

Litecoin has consistently doubled in value, repeatedly since 2012.
See no reason why it will not continue to rise in value accordingly.

I think $100 ltc by mid to late 2014 is conservative estimate.

There are certainly some interesting alt coins coming on the scene like
Nxt, Msc, and Xrp and the establishef Ppc, Xpm and Nmc coins. But highly doubt
they will contend as seriously as Litecoin. LTC has been anointed by the media, the exchanges,
the miners, daytraders and investors as the The Crypto Currency after Bitcoin.

I just see someone way too invested in NXT... good luck with that?