The day ASICs all the BTC economy

[tacotime]

I'm pretty surprised that it's been going about as I predicted.  I made a bunch of money this year on LTC and BTC, which is good.

Around the end of last year I predicted that the price of BTC would hit some new high above $100.  I sold the majority of my BTC when the bubble hit and have no regrets.  I also predicted that as ASICs hit, mining profit would tumble and we'd see a new low around that of the previous bubble's high ($30).  As before, the tumble to $30 or so will be slow and agonizing.

I would caution against the buying of large quantities of ASICs right now as the price may go so low that you'll be able to pick them up for next to nothing at the end of this year.  I bought 5 USB Block Erupters for shits and giggles, but I wouldn't go farther than that from any company -- unless you really want to worry about mining with your shiny new $120 GH/s ASIC that pulls 600 W from the wall and nets you barely nothing in the event the price collapses but the difficulty remains high.  Further, the effect on resale value of the devices will be catastrophic, so you may encounter horrible losses even if you try to resell it after.  If this happens, then it's probably a good idea to buy ASICs and sit on them until the network and price sorts itself out.

That's just my two fiat buck cents on where the market is going.

[keatonatron]

Why do you think the price would go down if mining wasn't profitable?

If Asics are expensive and use a lot of electricity, miners would want to hold on to their coins until they could at least break even when selling them. If all the miners suddenly stopped selling, the price should go up considerably.

And if people start realizing it isn't profitable and stop mining... then the difficulty will come back down and mining would be cheaper again for the people who stick with it.

[tacotime]

Why do you think the price would go down if mining wasn't profitable?

A large company requires a lot of revenue to continue operation.  Operating using tens or thousands of watts a day will require constant dumping to meet the overhead.  A company also has to weight the amount they know they'll get in fiat today versus losing even more money tomorrow.  I think the end result with ASICs will be lots of downward pressure, because everyone will want to recoup their investment as quickly as possible and because if the price of Bitcoin collapses the resale value of their hardware also collapses.  Hence, best to sell BTC while it's worth something then dump the devices as quickly as possible if the price of BTC appears to be falling.  We're already seeing this pretty widespread and ASICs have barely been introduced.

Before there were tens of thousands of smaller scale GPU miners who could easily resell their cards for 80% of their value in 4 months and make more than that 20%.  Even more, there was less pressure to sell the BTC in general above your operating cost and the cost of the card because they were random internet dollars that didn't cost a lot to procure (one of my friends just discovered 3.5 BTC the other day he forgot he even mined a year ago).  Now with profit and resale value of your device up in the air and the amounts being invested by companies in the millions, I think it's likely we'll see a collapse in BTC value.

Also notice that newer ASICs are already offering a 5-10 fold efficiency improvement over the first gen BFL/Avalon chips (eg Bitfury, which is 0.4 W per GH/s).

If Asics are expensive and use a lot of electricity, miners would want to hold on to their coins until they could at least break even when selling them. If all the miners suddenly stopped selling, the price should go up considerably.

There is no guarantee that the price will go back up, and most of the time you need to try to recoup losses now instead of a year from now if you have a ravenous bunch of investors to cater to.

And if people start realizing it isn't profitable and stop mining... then the difficulty will come back down and mining would be cheaper again for the people who stick with it.

Yes, exactly.  This is when I look forward to mining, moreso than right now.  I mined throughout 2012 and sold only 25% of it then, 2013 was great.

I'm sleepy, hope this is coherent.

[auto2nr1]

Thanks for sharing your thoughts. Hopefully the prices don't fall too much. Many new miners would be losing money and not getting a ROI for a while.

[AmunRa]

I'm pretty surprised that it's been going about as I predicted.  I made a bunch of money this year on LTC and BTC, which is good.

Around the end of last year I predicted that the price of BTC would hit some new high above $100.  I sold the majority of my BTC when the bubble hit and have no regrets.  I also predicted that as ASICs hit, mining profit would tumble and we'd see a new low around that of the previous bubble's high ($30).  As before, the tumble to $30 or so will be slow and agonizing.

I would caution against the buying of large quantities of ASICs right now as the price may go so low that you'll be able to pick them up for next to nothing at the end of this year.  I bought 5 USB Block Erupters for shits and giggles, but I wouldn't go farther than that from any company -- unless you really want to worry about mining with your shiny new $120 GH/s ASIC that pulls 600 W from the wall and nets you barely nothing in the event the price collapses but the difficulty remains high.  Further, the effect on resale value of the devices will be catastrophic, so you may encounter horrible losses even if you try to resell it after.  If this happens, then it's probably a good idea to buy ASICs and sit on them until the network and price sorts itself out.

That's just my two fiat buck cents on where the market is going.

Well said !!

[amencon]

Any ASICs I'd buy would be with BTC and I would judge its ROI based on BTC.  Not that your point that the ASICs might be cheaper come years end isn't still valid.  Just that if BTC to USD plummets near term it won't hurt making your BTC ROI and in fact would likely help.  This is good as long as you anticipate BTC price to come back or BTC to become its own viable closed loop economy at some point.

[smoothie]

For the person that looks at 2-5 months as slow and agonizing then yeah sure they will go nuts..

Long-term (say 365 days from now) we will be far north of $100. I have my eyes set on the longer term for both Bitcoin and Litecoin.

Hence my physical litecoins, which in and of itself are marketing tools or branding. Putting your digital coins into physical form does create stronger hands. Just look at those who bought Casascius coins in 2011. They are doing just fine right now. Some 1 BTC coins are going for more than 3 BTC each.

I'm not a miner (anymore) but I do believe that Bitcoin as well as other Cryptocurrencies will gain traction as more users adopt them via media news coverage that has been happening on a daily basis.

These dips are just buying opportunities....remember the dip from $15 -> $7.5 ...10.5 months ago? Now we sitting ~$100.

[HappyBitCoinUser]

Long-term (say 365 days from now) we will be far north of $100. I have my eyes set on the longer term for both Bitcoin and Litecoin.

No indication that the value is going to be higher in a year. If anything more people will lose interest or confidence, and some more people will dump coins on the market, and the value will just get lower and lower. Maybe in 1 year will be down to $5-$10 per BTC.