What do you guys think the BFL's/Asics will do to BTC?

[Meatball]

So, I jumped on the bandwagon and ordered one of the new ASIC units from BFL.  They've gotta be close to order 8000 by now, since my order number was pretty close to that.  Reading through some other posts, it looks like a lot of the new orders started around order number 2000, so that's about 6000 orders of ASIC units waiting to be fulfilled.  Let's just for argument sake say that every order is a single Jalepeno and is fulfilled by year end.  That's at least 3.5 GH/s * 6000 = 21000 GH/s or 21 TH/s added to the network in the next 3 months.  That just about doubles the hashing power that's out right now, so difficulty will double relatively quickly.

So, my question to everyone is, what do you think will happen when all these new rigs hit the scene to BTC price/difficulty?

[ice_chill]

This has been discussed and many are fine with 350TH by summer 2013 and reward block halfing aswell. However those discussions were when BFL was the only ASIC option, now we have others

Also to keep it real, don't expect to make more per year than the units price (unless you are very early in the order queue)

[tacotime]

I think it will drop the price as people who purchased Asics, which only have a practical use as a bitcoin miner, will try to dump as much btc for cash as they can to repay their bitcoin mining investment.  Subsequently btc mining profit will drop from where it is now and competition will be fierce.

A lot of people are thinking the opposite, but I see no reason that ASICs would decrease supply while increasing demand., thereby raising the price.

Putting my money where my mouth is, I'm investing heavily in litecoin whose algorithm is designed to be difficult for FPGAs/ASICs and which uses much more power than bitcoin to mine with a GPU.

[Inspector 2211]

I think you are underestimating the difficulty increase.
If I am correct and difficulty increases by, say, a factor of 10, most of the GPU miners will drop out (because for them, the electricity cost will be higher than the revenue) and even some FPGA miners will drop out.

As for the Bitcoin/US$ exchange rate, that's impossible to predict and unrelated to the advent of ASIC miners, as the block generation rate always stays constant.
However:
Very soon, a block will equal only 25 BTC and IMHO, due to principle of supply and demand, US$ per BTC has nowhere to go but up.
That said, the exchange rate is very volatile due to speculation/hoarding and should a large sell-off occur, the sell-off could feed on itself and the exchange rate could collapse.

Just my 2 cents.

[Domrada]

I think you are underestimating the difficulty increase.
If I am correct and difficulty increases by, say, a factor of 10, most of the GPU miners will drop out (because for them, the electricity cost will be higher than the revenue) and even some FPGA miners will drop out.

As for the Bitcoin/US$ exchange rate, that's impossible to predict and unrelated to the advent of ASIC miners, as the block generation rate always stays constant.
However:
Very soon, a block will equal only 25 BTC and IMHO, due to principle of supply and demand, US$ per BTC has nowhere to go but up.
That said, the exchange rate is very volatile due to speculation/hoarding and should a large sell-off occur, the sell-off could feed on itself and the exchange rate could collapse.

Just my 2 cents.

I have to agree. I would say a factor of 10 is a conservative estimate. Setting up GPU miners and keeping them running is not a hassle-free endeavor, so that in itself has been a barrier to entry and mining has remained profitable. But with plug-n-play mining hardware from BFL, the only people I see making any money in the foreseeable future are the people at BFL.  I will be dropping out of the mining game altogether when my GPU's stop earning.

ON THE OTHER HAND, if the price goes up to $1000/btc, people who bought from BFL are going to be making plenty, but so are the folks who simply bought btc and held.

[tacotime]

Very soon, a block will equal only 25 BTC and IMHO, due to principle of supply and demand, US$ per BTC has nowhere to go but up.
That said, the exchange rate is very volatile due to speculation/hoarding and should a large sell-off occur, the sell-off could feed on itself and the exchange rate could collapse.

Just my 2 cents.

BTC is still inflationary by definition as the supply is constantly increasing.  If the demand is low enough or the supply high enough, block reward will have no impact on the price of the coin.  If the block reward is 50 BTC and people on average only spend 5 BTC, the net amount not entering the market per day is 45 BTC (people can afford to hoard, as their GPUs have high resale values or other values, such as use in gaming).  If you have ASIC miners who mine a 25 BTC block and spend an average of 20 BTC a day, the net amount not entering the market is 5 BTC.  That is to say, the intended contraction of supply is not a rule from the halving of the block size but is dictated by the behaviour of the miners.  I'm hedging my bets on speculators thinking that the price is going to skyrocket so they pour money into it, only to have the market collapse in on them when trust among miners with massive amounts of ASIC mining power collapses and they try to sell the BTC they have as quickly as possible.  Hoarding only works to increase the price if everyone is doing it, and ASIC investors tens of thousands of dollars into this will have no choice but to dump heavily when the price starts to fall, for fear of not being able to make a return on their investment and not being able to resell their BTC mining hardware.

We may see a spike in value before and for a couple of weeks with the massively increased hash rate (the same thing happened in 2011 during the summer when GPUs began to massively mine), but likely a collapse will follow of an even greater magnitude than that following the 2011 tanking to $2.  In the long term the price will rise again, but profit will be lower.  This exact same pattern occurred with litecoin when GPU mining became widespread, as the chain was originally thought to only be CPU minable.

[foggyb]

........... but likely a collapse will follow of an even greater magnitude than that following the 2011 tanking to $2.

Are you saying you believe the price will collapse to $2? That would be incredible. Very few people would be investing in FPGA or ASIC technology if they believed the price will see $2 again. Instead of buying expensive paperweights, they'd wait for $2 bitcoins and buy them!

[tacotime]

........... but likely a collapse will follow of an even greater magnitude than that following the 2011 tanking to $2.

Are you saying you believe the price will collapse to $2? That would be incredible. Very few people would be investing in FPGA or ASIC technology if they believed the price will see $2 again. Instead of buying expensive paperweights, they'd wait for $2 bitcoins and buy them!

It will be relative. 2011 saw BTC go from $30 to $2.50.  2013 may see bitcoin rise to $125 and drop to $5.  I hold 50:50 btc:ltc, so as long as one of them goes up in valuation by an order of magnitude I win.

[Sitarow]

I think it will drop the price as people who purchased Asics, which only have a practical use as a bitcoin miner, will try to dump as much btc for cash as they can to repay their bitcoin mining investment.  Subsequently btc mining profit will drop from where it is now and competition will be fierce.

A lot of people are thinking the opposite, but I see no reason that ASICs would decrease supply while increasing demand., thereby raising the price.

Putting my money where my mouth is, I'm investing heavily in litecoin whose algorithm is designed to be difficult for FPGAs/ASICs and which uses much more power than bitcoin to mine with a GPU.

For now....

[foggyb]

Are you saying you believe the price will collapse to $2? That would be incredible. Very few people would be investing in FPGA or ASIC technology if they believed the price will see $2 again. Instead of buying expensive paperweights, they'd wait for $2 bitcoins and buy them!

It will be relative. 2011 saw BTC go from $30 to $2.50.  2013 may see bitcoin rise to $125 and drop to $5.  I hold 50:50 btc:ltc, so as long as one of them goes up in valuation by an order of magnitude I win.

Its an observation, but the bitcoin market doesn't behave as predictably as people want it to.  The unique factors and market conditions that happened in 2011 to bring it to $2.50 will not necessarily repeat. Especially not with the USD inflation we will be seeing due to unlimited QE3.

[Meatball]

........... but likely a collapse will follow of an even greater magnitude than that following the 2011 tanking to $2.

Are you saying you believe the price will collapse to $2? That would be incredible. Very few people would be investing in FPGA or ASIC technology if they believed the price will see $2 again. Instead of buying expensive paperweights, they'd wait for $2 bitcoins and buy them!

Ah, that's relative though.  If BTC drops to $2, people so far seem to have been willing to mine at a loss for a month or two in the hope things turn around.  If they don't, but people will drop out, the difficulty will drop and people still mining will make more BTC for their hashing power.

The next six months are going to be a flat out mess IMO.  You not only have the ASIC/BFL's about to drop into the mix, but likely a drop to 25 BTC/reward.  There will be a ton of flow as the network Hashing rate goes all over the place.  GPU miner's will likely be pretty much done in 6 months as those two things will make it extremely unprofitable to keep going the GPU route.  It's not going to be slow and gradual, it'll be all at once like the shift from CPU to GPU was.

[jamesg]

Ah, that's relative though.  If BTC drops to $2, people so far seem to have been willing to mine at a loss for a month or two in the hope things turn around.  If they don't, but people will drop out, the difficulty will drop and people still mining will make more BTC for their hashing power.

The next six months are going to be a flat out mess IMO.  You not only have the ASIC/BFL's about to drop into the mix, but likely a drop to 25 BTC/reward.  There will be a ton of flow as the network Hashing rate goes all over the place.  GPU miner's will likely be pretty much done in 6 months as those two things will make it extremely unprofitable to keep going the GPU route.  It's not going to be slow and gradual, it'll be all at once like the shift from CPU to GPU was.

Glad to see you back around Meatball!

As for what will happen in the future for mining and the bitcoin price, we have seen that while there may be times of unprofitably if the price falls and the diff lags behind, they due tend to work themselves out to keep mining profitable in the end.

I think the block reward halving and ASIC arriving will exasperate the swings but the general direction for both the price and diff are still up.

[bitcool]

As a gpu miner, I am planning to pull the plug in December, if not earlier.

[crazyates]

As for what will happen in the future for mining and the bitcoin price, we have seen that while there may be times of unprofitably if the price falls and the diff lags behind, they due tend to work themselves out to keep mining profitable in the end.

+1

You can still mine when the price is $2, and save up those BTC for when the price goes back to $10.

[Meatball]

As for what will happen in the future for mining and the bitcoin price, we have seen that while there may be times of unprofitably if the price falls and the diff lags behind, they due tend to work themselves out to keep mining profitable in the end.

+1

You can still mine when the price is $2, and save up those BTC for when the price goes back to $10.

That completely depends on your power costs.  For example, right now I'm just putzing around with a few GPU's, but I'm making enough BTC to cover my power costs and then some.  I'm making about $4 for every $1 in power I'm spending for power.  Now, if the price drops down to $2.50, I'd be breaking even.  Once Difficulty shoots up and things go to 25 BTC/reward I could easily see me having to spend $1 in power for $0.25 worth of BTC and while I love the whole BTC project, I don't want to throw money out the window either.

There is definitely a point where some people will pull the plug.

[bitcool]

As for what will happen in the future for mining and the bitcoin price, we have seen that while there may be times of unprofitably if the price falls and the diff lags behind, they due tend to work themselves out to keep mining profitable in the end.

+1

You can still mine when the price is $2, and save up those BTC for when the price goes back to $10.

It doesn't make sense to lose money mining if you can buy it cheaper