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Bitcoin => Bitcoin Discussion => Topic started by: Fuzzy on May 12, 2012, 03:04:33 AM



Title: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Fuzzy on May 12, 2012, 03:04:33 AM
As the topic states, if you had $5000 that you wanted to invest, would you buy coins outright, or mining hardware? What and why? I'm sure a few people on these boards are facing a similar conundrum.


EDIT:
This calculation is assuming:

  • $5000 worth of "MiniRig Value (http://www.butterflylabs.com/products/)" hardware
  • No Delivery Wait Time
  • No Electricity cost
  • Difficulty increase of 5% every 13 days
  • Block split in 210 days
  • 1000 BTC bought today at $5 ea

"Growth factor" should read "Daily reward multiplier"
http://i.imgur.com/igIjz.png

EDIT: This is not an attack on people buying/making hardware or bitcoins. I'm looking for a logical discussion.
I am fully aware that a 5% difficulty increase cannot be/is impossible to guarantee/foresee, but it's the best estimate I can come up with.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: the joint on May 12, 2012, 03:05:32 AM
For me and my individual situation, the answer is hardware, without hesitation.

Edit:  Zero electric cost to me.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: check_status on May 12, 2012, 03:48:51 AM
Right now I would buy coin and look for somewhere around $0.25 per BTC to sell at, study the markets to see when to sell and which price. Buy hardware from your profit. :D


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Astro on May 12, 2012, 03:50:11 AM
I'd invest it all in Matthew.  What could go wrong?


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: check_status on May 12, 2012, 03:57:43 AM
I'd invest it all in Matthew.  What could go wrong?
Are more masks a good thing?


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: proudhon on May 12, 2012, 04:15:09 AM
With $5000 I'd go short on bitcoinica right now.  Oh, wait...


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: brunozisterer on May 12, 2012, 05:34:48 AM
Buy shares on GLBSE


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Garr255 on May 12, 2012, 05:36:49 AM
Buy shares on GLBSE
+1
Do that with 1k or more then buy hardware with the rest.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: kingkatari on May 12, 2012, 05:39:12 AM
I would Buy Hardware most likely BFL singles to mine up more then enough coin to make another $5k


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: bitlane on May 12, 2012, 05:55:25 AM
I was/am in a similar position....and the hardware keeps a flowin' in ;)


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Fizzgig on May 12, 2012, 06:02:27 AM
I would buy coins, what can equipment return in a year? after 1 year the inflation rate cuts in half, then less as demand inevitably increases. Speculation ftw.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: mufa23 on May 12, 2012, 06:12:18 AM
Hardware by far! It would pay itself off after 5-7 months (that's including the electric bill), then I'd really start bringing in the dough. Would have made $10k in a year (5k the first, 10k every other).

If I had a few thousand lying around, I'd be putting everything I've got into it right now. Only have a few hundred... Still have 2GH/s though. Better then nothing. 2k a year isn't too bad for now.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Fuzzy on May 12, 2012, 12:31:02 PM
Hardware by far! It would pay itself off after 5-7 months (that's including the electric bill)

By my Calculations, even at a measly 5% difficulty increase per re-target, the hardware wouldn't have paid off even after a year.
And that's assuming you could get $5000 worth of Mini-rig Value hashing power delivered today.

From my calcs, you'd only have 821 BTC after a year, whereas you could buy 1000 BTC now and save yourself the electricity/heat/hassle of dealing with the hardware.

This calculation is assuming:

  • $5000 worth of "MiniRig Value (http://www.butterflylabs.com/products/)" hardware
  • No Delivery Wait Time
  • No Electricity cost
  • Difficulty increase of 5% every 13 days
  • Block split in 210 days
  • 1000 BTC bought today at $5 ea

"Growth factor" should read "Daily reward multiplier"
http://i.imgur.com/igIjz.png

EDIT: This is not an attack on people buying/making hardware or bitcoins. I'm looking for a logical discussion.
I am fully aware that a 5% difficulty increase cannot be/is impossible to guarantee/foresee, but it's the best estimate I can come up with.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: proudhon on May 12, 2012, 12:39:45 PM
Hardware by far! It would pay itself off after 5-7 months (that's including the electric bill)

By my Calculations, even at a measly 5% difficulty increase per re-target, the hardware wouldn't have paid off even after a year.
And that's assuming you could get $5000 worth of Mini-rig Value hashing power delivered today.

From my calcs, you'd only have 821 BTC after a year, whereas you could buy 1000 BTC now and save yourself the electricity/heat/hassle of dealing with the hardware.

Will post excel img in a sec

Bingo.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Garr255 on May 12, 2012, 01:15:58 PM
I agree with the posts above. Just buy all the coins being sold for <$5 :D


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: matthewh3 on May 12, 2012, 04:04:02 PM
Buy shares on GLBSE
+1
Do that with 1k or more then buy hardware with the rest.

+1

Do that and give the Hashking a large deposit as well.

Rational:  Spread it around


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: mufa23 on May 12, 2012, 04:09:07 PM
I am roughly paying $2.5MH/s. I spent $800 for 2GH/s. Which brings in about 1.2BTC/day (Mining at EMC). At $5/Bitcoin, I will have paid itself off in around 160 days (5.3 months). With the remaining 205 days left in the year, I would make 246BTC at current difficulty. Multiple those coins by 5 (dollars), and you come up with $1,230 of pure profit.

So now knowing this, I would spend $5k for roughly 12.5GH/s (7.5BTC/day). Which would pay itself off after 160 days, bringing in a total profit of 1,537.5BTC ($7,687.5 USD). Now if at the end of the year I could sell off the hardware for half of what I bought it for, I would have turned 5k into 10k within the year.

Sounds worth it to me.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Fuzzy on May 12, 2012, 04:14:32 PM
I am roughly paying $2.5MH/s. I spent $800 for 2GH/s. Which brings in about 1.2BTC/day (Mining at EMC). At $5/Bitcoin, I will have paid itself off in around 160 days (5.3 months). With the remaining 205 days left in the year, I would make 246BTC at current difficulty. Multiple those coins by 5 (dollars), and you come up with $1,230 of pure profit.

So now knowing this, I would spend $5k for roughly 12.5GH/s (7.5BTC/day). Which would pay itself off after 160 days, bringing in a total profit of 1,537.5BTC ($7,687.5 USD). Now if at the end of the year I could sell off the hardware for half of what I bought it for, I would have turned 5k into 10k within the year.

Sounds worth it to me.

How do you do that? $0.4 per MHs sounds unrealistic.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Littleshop on May 12, 2012, 04:56:06 PM
I am roughly paying $2.5MH/s. I spent $800 for 2GH/s. Which brings in about 1.2BTC/day (Mining at EMC). At $5/Bitcoin, I will have paid itself off in around 160 days (5.3 months). With the remaining 205 days left in the year, I would make 246BTC at current difficulty. Multiple those coins by 5 (dollars), and you come up with $1,230 of pure profit.

So now knowing this, I would spend $5k for roughly 12.5GH/s (7.5BTC/day). Which would pay itself off after 160 days, bringing in a total profit of 1,537.5BTC ($7,687.5 USD). Now if at the end of the year I could sell off the hardware for half of what I bought it for, I would have turned 5k into 10k within the year.

Sounds worth it to me.

Works great when you ignore electricity cost and difficulty increases.   You might get free power but you don't get to ignore difficulty.

Also hardware never fails?

Right now, if you own GPU's and your power is below 12c a KWh leave gear on, or if you own FPGA's leave them on. 

If you do not own, buy coins or invest in the BTC economy in other ways.

 


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: check_status on May 12, 2012, 05:23:28 PM
Quote from: Fuzzy
By my Calculations, even at a measly 5% difficulty increase per re-target, the hardware wouldn't have paid off even after a year.
And that's assuming you could get $5000 worth of Mini-rig Value hashing power delivered today.

From my calcs, you'd only have 821 BTC after a year, whereas you could buy 1000 BTC now and save yourself the electricity/heat/hassle of dealing with the hardware.

This calculation is assuming:

$5000 worth of "MiniRig Value" hardware
No Delivery Wait Time
No Electricity cost
Difficulty increase of 5% every 13 days
Block split in 210 days
1000 BTC bought today at $5 ea
Your calculations are flawed because they utilize a fixed value of Bitcoin based on today while all of your other numbers vary into the future. If you want a more realistic profit profile then you need to project the growth in Bitcoin value to coinside with your other projected growth variables. Drawing a line from the beginning of Bitcoin value to todays Bitcoion value and then extend into your desired future cashout date, say 12 months, will give your spread sheet a more realistic perspective of Bitcoin mining profitability. Of course, this assumes the projected growth of Bitcoin value is constant.

Quote from: Fuzzy
How do you do that? $0.4 per MHs sounds unrealistic.
mufa23 is only quoting the cost of the GPU's because he may have utilized existing MB/PSU/CPU/RAM. So for mufa23 he only had to spend $800 to become a miner. His next 2 GH/s will cost $.60 per MH/s. ;)


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: giszmo on May 12, 2012, 06:54:28 PM
Quote from: Fuzzy
By my Calculations, even at a measly 5% difficulty increase per re-target, the hardware wouldn't have paid off even after a year.
And that's assuming you could get $5000 worth of Mini-rig Value hashing power delivered today.

From my calcs, you'd only have 821 BTC after a year, whereas you could buy 1000 BTC now and save yourself the electricity/heat/hassle of dealing with the hardware.

This calculation is assuming:

$5000 worth of "MiniRig Value" hardware
No Delivery Wait Time
No Electricity cost
Difficulty increase of 5% every 13 days
Block split in 210 days
1000 BTC bought today at $5 ea
Your calculations are flawed because they utilize a fixed value of Bitcoin based on today while all of your other numbers vary into the future. If you want a more realistic profit profile then you need to project the growth in Bitcoin value to coinside with your other projected growth variables. Drawing a line from the beginning of Bitcoin value to todays Bitcoion value and then extend into your desired future cashout date, say 12 months, will give your spread sheet a more realistic perspective of Bitcoin mining profitability. Of course, this assumes the projected growth of Bitcoin value is constant.

Quote from: Fuzzy
How do you do that? $0.4 per MHs sounds unrealistic.
mufa23 is only quoting the cost of the GPU's because he may have utilized existing MB/PSU/CPU/RAM. So for mufa23 he only had to spend $800 to become a miner. His next 2 GH/s will cost $.60 per MH/s. ;)

For generating bitcoin, the exchange rate does not matter (a rise in difficulty is what reflects the rise in popularity and the technological progress in his model). For buying now it does not matter neither.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: mufa23 on May 12, 2012, 07:16:44 PM
Quote from: Fuzzy
How do you do that? $0.4 per MHs sounds unrealistic.
mufa23 is only quoting the cost of the GPU's because he may have utilized existing MB/PSU/CPU/RAM. So for mufa23 he only had to spend $800 to become a miner. His next 2 GH/s will cost $.60 per MH/s. ;)
Yes, one rig I already had some spare parts, so I only spent $270 for the first rig.

Did this with the second, and will do with my next rigs.
$270 - Three 5830s
$20 - CPU
$5 - RAM
$45 - MoBo
$50 - PSU

$390 for a 1GH/s rig.


http://i.qkme.me/3688w6.jpg


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Fuzzy on May 12, 2012, 07:21:43 PM
Quote from: Fuzzy
By my Calculations, [...]

Your calculations are flawed because they utilize a fixed value of Bitcoin based on today while all of your other numbers vary into the future. If you want a more realistic profit profile then you need to project the growth in Bitcoin value to coinside with your other projected growth variables. Drawing a line from the beginning of Bitcoin value to todays Bitcoion value and then extend into your desired future cashout date, say 12 months, will give your spread sheet a more realistic perspective of Bitcoin mining profitability. Of course, this assumes the projected growth of Bitcoin value is constant.

That's because my question is based on a decision made today.
As stated previously, generating bitcoins does not depend directly on the value of bitcions.

ie, if you bought 1000 coins today ($5k worth), and a year later your hardware ($5k worth) would have generated 821 btc, you're still ahead if you had bought bitcoins outright, whether BTCs are worth $1 or $100
The value of the hardware however needs to be accounted for, as is the delivery time of said hardware.

Quote from: Fuzzy
How do you do that? $0.4 per MHs sounds unrealistic.
mufa23 is only quoting the cost of the GPU's because he may have utilized existing MB/PSU/CPU/RAM. So for mufa23 he only had to spend $800 to become a miner. His next 2 GH/s will cost $.60 per MH/s. ;)

That's what I'm assuming. Unfortunately you can't plug a GPU into the wall and just mine away.


$270 - Three 5830s
$20 - CPU
$5 - RAM
$45 - MoBo
$50 - PSU

$390 for a 1GH/s rig.

Looking at those they seem like cherry picked numbers and cannot be found in bulk.

Also the avg hash rate for a 5830 is 300. Not bad for a $100 card tho.

And if you've ever run a rig for over a month, you know a $50 PSU just isn't gonna hold up.



Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: check_status on May 12, 2012, 10:10:49 PM
Quote from: giszmo
For generating bitcoin, the exchange rate does not matter (a rise in difficulty is what reflects the rise in popularity and the technological progress in his model). For buying now it does not matter neither.

Quote from: Fuzzy
That's because my question is based on a decision made today.
As stated previously, generating bitcoins does not depend directly on the value of bitcions.

You are projecting into the future 12 months from Today the difficulty increases which shows a reduction in coin generation, highlighting a loss in production without determining what Bitcoins value is going to be 12 months from now. Your statistics are painting an inacurate picture of potential profit.

Quote from: Fuzzy
And if you've ever run a rig for over a month, you know a $50 PSU just isn't gonna hold up.
He's probably using 2 Dynex 500W PSU's. :D


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Fuzzy on May 12, 2012, 10:25:25 PM
Quote from: giszmo
For generating bitcoin, the exchange rate does not matter (a rise in difficulty is what reflects the rise in popularity and the technological progress in his model). For buying now it does not matter neither.

Quote from: Fuzzy
That's because my question is based on a decision made today.
As stated previously, generating bitcoins does not depend directly on the value of bitcions.

You are projecting into the future 12 months from Today the difficulty increases which shows a reduction in coin generation, highlighting a loss in production without determining what Bitcoins value is going to be 12 months from now. Your statistics are painting an inacurate picture of potential profit.

That's because it doesn't matter what they're worth in $ if what you're interested in is how many bitcoins either option nets you in 12 months.

And if it weren't for the 12 week delivery (during which you miss out on ~300 BTC), I'd gladly forego the 200 BTC difference and electricity costs if it meant I got to have a piece of kickass Bitcoin Mining hardware which may one day become a Bitcoin Artifact of sorts.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: sunnankar on May 12, 2012, 10:51:40 PM

That's because it doesn't matter what they're worth in $ if what you're interested in is how many bitcoins either option nets you in 12 months.

And if it weren't for the 12 week delivery (during which you miss out on ~300 BTC), I'd gladly forego the 200 BTC difference and electricity costs if it meant I got to have a piece of kickass Bitcoin Mining hardware which may one day become a Bitcoin Artifact of sorts.

Yes, using BTC as the numeraire does complicate things because expenses are in $$ or Euros for electricity. But no one has even discussed the discount rate for determining the NPV. That should then be applied to alternatives like BITBOND or GIGAMINING and then corrected for downtime of hardware and labor value.

For example, there are currently 3,924 GIGAMINING available at 1.51 BTC each. $5,000 would buy 662 of them or 3,310 MHs of production in perpetuity with no downtime or labor. That is the opportunity cost which you could then project for a discount rate and difficulty changes to model for 1,000 BTC NPV.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: check_status on May 13, 2012, 12:00:24 AM
Quote from: Fuzzy
By my Calculations, even at a measly 5% difficulty increase per re-target, the hardware wouldn't have paid off even after a year.
In your argument, Bitcoin will continually lose value over time because of difficulty increases. This conclusion is invalid because you don't take projected Bitcoin value into consideration. You assume a static, unchanging Bitcoin value over time while difficulty does change over time. You are intentionally weighting your chosen outcome.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Fuzzy on May 13, 2012, 12:14:10 AM
Quote from: Fuzzy
By my Calculations, even at a measly 5% difficulty increase per re-target, the hardware wouldn't have paid off even after a year.
In your argument, Bitcoin will continually lose value over time because of difficulty increases. This conclusion is invalid because you don't take projected Bitcoin value into consideration. You assume a static, unchanging Bitcoin value over time while difficulty does change over time. You are intentionally weighting your chosen outcome.

Actually, if you look carefully I NEVER take the value of bitcoin into consideration, beside what I can get Today in terms of Coins or Hardware. It's as if you won a contest and got to choose between 1000 BTC or a 8.2 GH/s FPGA machine.




[...]


[...]

For example, there are currently 3,924 GIGAMINING available at 1.51 BTC each. $5,000 would buy 662 of them or 3,310 MHs of production in perpetuity with no downtime or labor. That is the opportunity cost which you could then project for a discount rate and difficulty changes to model for 1,000 BTC NPV.

Looking at my previous model, given a steady difficulty increase, the total number of bitcoins mined looks asymptotic, which is really weird, to see the reward of 10 GHs reach 0.01 BTC per 14 days  ???

But that's what the calcs show, and plugging in 3,300 MHs, at 5% diff re-targeted at 14 day periods, yields 348 BTC in a year, and only 417 four years later.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: sunnankar on May 13, 2012, 04:41:42 AM
Looking at my previous model, given a steady difficulty increase, the total number of bitcoins mined looks asymptotic, which is really weird, to see the reward of 10 GHs reach 0.01 BTC per 14 days  ???

But that's what the calcs show, and plugging in 3,300 MHs, at 5% diff re-targeted at 14 day periods, yields 348 BTC in a year, and only 417 four years later.

Not sure that is the best premise to use. Perhaps you should review your calculus and differential equations for your next financial modeling.

http://bitcoin.sipa.be/speed-lin-ever.png

http://bitcoin.sipa.be/speed-small-lin.png


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: sunnankar on May 13, 2012, 04:57:28 AM
Actually, if you look carefully I NEVER take the value of bitcoin into consideration, beside what I can get Today in terms of Coins or Hardware. It's as if you won a contest and got to choose between 1000 BTC or a 8.2 GH/s FPGA machine.

Another potential flaw in your logic.

Like a gold mine which produces a commodity but has input costs, like fuel and trucks, denominated in a different currency; the FPGA machine has operational costs that are fiat currency denominated and must be born by someone and therefore has opportunity cost even if you can have those costs born by someone besides you. The FPGA machine also likely has an expected salvage value just like the used dumptrucks and gold mine would after the asset has been depleted. You fail to take into account these calculations with the discounted future cash flows.

But unlike a gold mine the FPGA machine has alternate uses that could possibly generate more revenue than the value of generated bitcoins and use that revenue to purchase bitcoins (this ties in with my earlier post about difficulty; miners who can generate more value from their processing power from an alternate activity will reallocate processing power from bitcoin mining to activity X).

You have also failed to take into consideration any tax implications; For example, 179 deductions for hardware, deductions for electricity, capital gains, etc.

Therefore, the decision between bitcoins or hardware is more akin to bar of gold or gold mining company whose miners/equipment/mine can also perform excavations and foundations for skyscrapers than between lump sum or annuity.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Fuzzy on May 13, 2012, 12:49:30 PM
Looking at my previous model, given a steady difficulty increase, the total number of bitcoins mined looks asymptotic, which is really weird, to see the reward of 10 GHs reach 0.01 BTC per 14 days  ???

But that's what the calcs show, and plugging in 3,300 MHs, at 5% diff re-targeted at 14 day periods, yields 348 BTC in a year, and only 417 four years later.

Not sure that is the best premise to use. Perhaps you should review your calculus and differential equations for your next financial modeling.

I'd be interested in which premise you could come up with for this situation. As you can see, I'm doing a manual step calculation here, not an integral function.

And looking at those charts, since the crash, the difficulty has been climbing at reasonably steady rate of about 4.895% per retarget, so my assumption is pretty close.



Actually, if you look carefully I NEVER take the value of bitcoin into consideration, beside what I can get Today in terms of Coins or Hardware. It's as if you won a contest and got to choose between 1000 BTC or a 8.2 GH/s FPGA machine.

Another potential flaw in your logic.

Like a gold mine which produces a commodity but has input costs, like fuel and trucks, denominated in a different currency; the FPGA machine has operational costs that are fiat currency denominated and must be born by someone and therefore has opportunity cost even if you can have those costs born by someone besides you.

The cost of electricity in a year for that scenario (using $0.10 / KWhr), is $356.
But that assumption is covered here:

This calculation is assuming:

  • [...]
  • No Electricity cost
  • [...]



The FPGA machine also likely has an expected salvage value just like the used dumptrucks and gold mine would after the asset has been depleted. You fail to take into account these calculations with the discounted future cash flows.

That is true, but since the value of bitcion mining hardware is tied to how many bitcoins it can mine, that value is very low at the end of a year, and it's simply impossible to predict it's value retention. If you have a suggestion, I would love to hear it and take it into account here.


But unlike a gold mine the FPGA machine has alternate uses that could possibly generate more revenue than the value of generated bitcoins and use that revenue to purchase bitcoins (this ties in with my earlier post about difficulty; miners who can generate more value from their processing power from an alternate activity will reallocate processing power from bitcoin mining to activity X).

Please name one use of the FPGA that would yield more bitcoins than mining. If you are just predictiong that there may be a use some time in the future, then that is an even harder guess to make than the original question I posed.


You have also failed to take into consideration any tax implications; For example, 179 deductions for hardware, deductions for electricity, capital gains, etc.

I would like to point out that there are no set Tax rules for Bitcoin yet, but if we use them as investment options, as most people will probably do, then you bring up a VERY good point relating to hardware/electricity deductions.

Providing that Bitcoin succeeds (if it doesn't, then you're no better off if you'd bought bitcoins outright), then you make back the value of the hardware when you realize your investment by converting to fiat and subtracting the cost of hardware from the taxes you owe on your capital gains.

Brilliant  ;D


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: check_status on May 13, 2012, 04:39:47 PM
Actually, if you look carefully I NEVER take the value of bitcoin into consideration, beside what I can get Today in terms of Coins or Hardware. It's as if you won a contest and got to choose between 1000 BTC or a 8.2 GH/s FPGA machine.

That is why I used the terms 'invalid conclusion' and 'flawed', as your goal is to extract value. Today value is measured in Dollars, it is the world standard in which all other valuations are made. You have, in theory, $5000; You want to buy hardware that costs $5000 or Bitcoins that cost $5000. You are seeking either break even or profit, measured in what? Dollars. For that, you will need to know what the value of a Bitcoin will be in the future. And then, you can determine what is the most profitable direction, hardware or outright purchasing of Bitcoins.




The trend graph starts in July 2010, the next data point, $1.70/BTC 4/24/11, then $2.20/BTC 11/19/11, then $4.40/BTC 2/19/2012, and finally $5.00/BTC 5/12/12.
This shows the value of 1BTC may be $6.50 just prior to the split, if the trend continues. This translates to approximately a $.25 increase per month per BTC.
The halving is artificial scarcity and like all scarcity, value increases. While there may be some wild speculation when the halving happens, the value will continue it's upward trend.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: MarketNeutral on May 13, 2012, 04:45:20 PM
What is the approximate dollar threshold at which it would obviously be more profitable to invest in mining instead of purchasing bitcoins outright?

I know people disagree wildly, but I'm curious.


EDIT: Also, how does this figure differ depending on the expected time frame, such as if I want to break even at 3 months versus 3 years?
The mining calculators have been of some help, but I still must read between the lines.

Also, I'm surprised that $5000 is so disputed. Is 5k that close to the mark?

[Edited for grammar.]


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Fuzzy on May 13, 2012, 05:08:52 PM
Actually, if you look carefully I NEVER take the value of bitcoin into consideration, beside what I can get Today in terms of Coins or Hardware. It's as if you won a contest and got to choose between 1000 BTC or a 8.2 GH/s FPGA machine.

That is why I used the terms 'invalid conclusion' and 'flawed', as your goal is to extract value. Today value is measured in Dollars, it is the world standard in which all other valuations are made. You have, in theory, $5000; You want to buy hardware that costs $5000 or Bitcoins that cost $5000. You are seeking either break even or profit, measured in what? Dollars. For that, you will need to know what the value of a Bitcoin will be in the future. And then, you can determine what is the most profitable direction, hardware or outright purchasing of Bitcoins.

Exactly, and at the end of the day year you will either have X bitcoins or Y bitcoins. My question is, will X be larger than Y. the vallue per bitcoin will be the same, whether its $1 or $100, what matters is how many you have.



Also, I'm surprised that $5000 is so disputed. Is 5k that close to the mark?

The $5000 is an arbitrary number. It's just an investment, $1 or $1million, that's up to the investor to decide. The variable here is what you are buying with the funds available.

From my perspective, no FPGA bought today will be able to beat a direct bitcoin buyout.
Unless you can write the cost of hardware off of your "taxes paid on capital gains", that's where things get murky, as I've presented a rather ideal scenario for hardware.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: check_status on May 13, 2012, 08:25:07 PM
This Trend Graph is based on the market prices for each month, projected out until march 2013.



Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Fuzzy on May 13, 2012, 08:38:37 PM
This Trend Graph is based on the market prices for each month, projected out until march 2013.


I find it odd that most of the values on that chart are below the projection line.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: check_status on May 13, 2012, 08:54:23 PM
I chose to base the trend graph on the actual market prices instead of correcting for the Tsunami spike of June 2011. The second spike is nowhere near the magnitude of the first. Whether the values are above or below the line aren't important if what your interested in is will the value increase based on previous history. To graph future profitability you would utilize the pattern you noticed, say 10% below the trend line, to create a more conservative valuation.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: arklan on May 24, 2012, 11:59:03 PM
very interesting thread.

of course, i think 1 year is short sighted. afterall, the hardware isn't ALL going to melt down into piles of goo in exactly 12 months. it'll keep earning. also, as we've just seen, the difficulty is far more fungible then a steady 5% increase.

i say hardware - and the lower the electricity it uses, the better!


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: giszmo on May 25, 2012, 12:19:28 AM
very interesting thread.

of course, i think 1 year is short sighted. afterall, the hardware isn't ALL going to melt down into piles of goo in exactly 12 months. it'll keep earning. also, as we've just seen, the difficulty is far more fungible then a steady 5% increase.

i say hardware - and the lower the electricity it uses, the better!

oh, i guess in one year you will not burn all your hardware but with my 8 cards the trend was going in that direction.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: arklan on May 25, 2012, 12:20:45 AM
very interesting thread.

of course, i think 1 year is short sighted. afterall, the hardware isn't ALL going to melt down into piles of goo in exactly 12 months. it'll keep earning. also, as we've just seen, the difficulty is far more fungible then a steady 5% increase.

i say hardware - and the lower the electricity it uses, the better!

oh, i guess in one year you will not burn all your hardware but with my 8 cards the trend was going in that direction.

...ouch. sympathies. maybe i've been lucky, i don't know. been running full tilt for 8 months or so now without a mining related death.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Fuzzy on May 25, 2012, 12:35:42 AM
of course, i think 1 year is short sighted. afterall, the hardware isn't ALL going to melt down into piles of goo in exactly 12 months.

I've talked to a CA and am working on a even more flawed 2 year projection that accounts for capital gains, net losses, and hardware depreciation write offs.

This WILL require an estimate of BTC value in 2 years, but will be used as a user input, so you can guess at whatever value you think is best.

So many negative trolls, so few tangible solutions  :P


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Seal on May 25, 2012, 12:45:47 AM
Spend $2k on Mining Hardware (sounds like you wanna play anyway)
Spend $2k on coins
Spend $1k on Bitcoin investments (setting up a site... buying bitcoin related shares etc...)

Diversification. The lowest risk, and the highest potential upside. Mining will return you consistent income on your spending, but will by no means make you rich.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Fuzzy on May 25, 2012, 02:01:14 AM
Spend $2k on Mining Hardware (sounds like you wanna play anyway)
Spend $2k on coins
Spend $1k on Bitcoin investments (setting up a site... buying bitcoin related shares etc...)

Diversification. The lowest risk, and the highest potential upside. Mining will return you consistent income on your spending, but will by no means make you rich.

http://i.qkme.me/3pfram.jpg


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Aseras on May 25, 2012, 04:01:34 PM
If anyone can figure this out they should be playing the stock market.

$5000 can buy a lot of hardware depending on the goods and a deal.

I just saw 6 5830, 2 5850 and 4 5870 sell for ~$1000. ( http://hardforum.com/showthread.php?t=1695049 ) That's 5.8gh

Figure a couple good deals like that plus some other hardware costs and you have 15-20 gh for your 5 grand.

If you have cheap or free power you are golden and break even in 3-4 months.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: SgtSpike on May 25, 2012, 04:17:05 PM
If anyone can figure this out they should be playing the stock market.

$5000 can buy a lot of hardware depending on the goods and a deal.

I just saw 6 5830, 2 5850 and 4 5870 sell for ~$1000. ( http://hardforum.com/showthread.php?t=1695049 ) That's 5.8gh

Figure a couple good deals like that plus some other hardware costs and you have 15-20 gh for your 5 grand.

If you have cheap or free power you are golden and break even in 3-4 months.
That's a big if though.  15-20 GH/s of GPU hashing power is gonna be 5,000 to 10,000 watts of power.  You have to be able to have wiring to support that much of a power draw, as well as cheap enough electricity to make it work.

Assuming worst case scenario, and it draws 10,000 watts while only getting 15 GH/s, and also assuming that you don't need HVAC, you'd have to have an electric rate less than $0.14/kwh in order to make ANY money whatsoever.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Aseras on May 29, 2012, 11:42:56 PM
Well if I had to pay, power here is 5 cents. $.05/kwhr here. It's cheap. Luckily I can run my farm where I have "free" power and climate control. Aside from maintenance and reinvestment, my mining is pure profit.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Bitcoin Oz on May 30, 2012, 12:00:58 AM
Mining will only be profitable if you dont have to pay eletricity or rent.

Find someone who has free/cheap electricity and rent on glbse and buy their shares is my tip.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Aseras on May 30, 2012, 12:34:52 AM
Or for someone who mined a ton of coins early and can afford to "waste" them on FPGA or asics or whatever without real cost to them. The buy in cost is killer. Long term is useless if you don't have a powerful setup and be able to stay on the bleeding edge long enough to break even.  even now that gap is widening between the hobbyists and the professionals to the point where unless you are perpetually investing returns you won't make it long. I've paid for my 5830s and 5850s many times over. I doubt many will see 3-4 times the cost of the next big thing. FPGA or mini rig or asic unless they are willing to invest at a loss long enough and hard enough to drive the little guys out and essentially carve a niche out.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Phinnaeus Gage on May 30, 2012, 12:40:26 AM
I have not read past post #2, therefore this may be already addressed. I would say either if you have faith in Bitcoin. As for buying hardware, I say the hell with the electricity cost, for that would be overcome down the road provided you hold unto your bitcoins, paying the electric company with fiat.

Via buying coins, I would hold onto them until the price you paid for your coins doubles, then spend half your coins, keeping the other half. Then if by chance Bitcoin goes to zero, you are even, but cashing out at any point prior to even is your profit. If the price doubles again, do the same thing, at which point you have made another 100% profit and still have 1/4 of your coins in your wallet(s).

Hope that helps.

~Bruno~


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: notme on August 03, 2012, 12:15:17 AM
This Trend Graph is based on the market prices for each month, projected out until march 2013.


Horrible X-axis labeling.  What month does it start at?


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Garr255 on August 03, 2012, 12:30:51 AM
This Trend Graph is based on the market prices for each month, projected out until march 2013.


Horrible X-axis labeling.  What month does it start at?

You can't subtract from
march 2013
?


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Astro on August 03, 2012, 01:04:38 AM
$5000 of Facebook stock, all in.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Shadow383 on August 03, 2012, 02:08:31 AM
$5000 of Facebook stock, all in.
You sure you don't want to pick up some Greek government bonds whilst you're at it?  ;)


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: smoothie on August 03, 2012, 02:58:22 AM
Coins.

Simply because with mining it is a race to who gets their order first and also who pays the least for electricity.

I say coins will be a better bet than trying to mine. Just like in early 2011 if you bought a ton and didnt mine you would still have had 2.5x more coins than if you tried mining 24/7 for the next 6 months.

Bitcoins are waaaaaaaay undervalued. Once mining hardware hits the scene difficulty and price will skyrocket.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: notme on August 03, 2012, 04:36:34 AM
$5000 of Facebook stock, all in.

Lol.

When they IPO'd at $38, I told several friends and family it would hit $20 before the year is up.  Now, at around $23, I'm thinking the low will be around $16 for this year.  I doubt it will reverse direction much next year either.  Maybe sideways if you're lucky.  Look at the P/E ratio and ask yourself can you wait that many years to get your money back.  Sure, revenues could rise, but why would they?  Every step they take seems to drive away users since they are slowly realizing they are the product, not the customer.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Shadow383 on August 03, 2012, 04:37:48 AM
$5000 of Facebook stock, all in.

Lol.

When they IPO'd at $38, I told several friends and family it would hit $20 before the year is up.  Now, at around $23, I'm thinking the low will be around $16 for this year.  I doubt it will reverse direction much next year either.  Maybe sideways if you're lucky.  Look at the P/E ratio and ask yourself can you wait that many years to get your money back.  Sure, revenues could rise, but why would they?  Every step they take seems to drive away users since they are slowly realizing they are the product, not the customer.
Did you short it? I did, made a month's pay in one trade  ;D


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: notme on August 03, 2012, 04:41:39 AM
$5000 of Facebook stock, all in.

Lol.

When they IPO'd at $38, I told several friends and family it would hit $20 before the year is up.  Now, at around $23, I'm thinking the low will be around $16 for this year.  I doubt it will reverse direction much next year either.  Maybe sideways if you're lucky.  Look at the P/E ratio and ask yourself can you wait that many years to get your money back.  Sure, revenues could rise, but why would they?  Every step they take seems to drive away users since they are slowly realizing they are the product, not the customer.
Did you short it? I did, made a month's pay in one trade  ;D

Nope... all my trading money was already allocated.  Mostly in bitcoin ;).  Stocks are iffy for me anyway since there is too easy for them to get away from reality with today's financial system.


Title: Re: If you had $5000 to invest right now: Coins or Hardware? Whats your rationale?
Post by: Fizzgig on August 04, 2012, 05:50:55 AM
I would buy coins, what can equipment return in a year? after 1 year the inflation rate cuts in half, then less as demand inevitably increases. Speculation ftw.

Price of bitcoin during time of quote (May 12): $5.10
Price of bitcoin now (Aug 4): $11.10
Invest $5000 into bitcoin during time of original post: 980 bitcoins
Value of investment after 11 weeks: $10,878, increase of 118% IN 80 DAYS!

How long can this insane increase continue? Who still doubts bitcoins are going to be worth hundreds some day?

Anyway...Sell half and invest $5400 into equipment. Problem solved.