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Author Topic: Are miners or investors more important?  (Read 1934 times)
muasktak10
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September 16, 2012, 04:03:32 AM
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I don't understand why people spend 1700 dollars on a mining rig, when they could spend that same 1700 dollars on investing into bitcoins, because you are not guaranteed a return if you mine solo, only if you pool, and at that point investing would be the better option as your return to time to risk ratio would be much profitable than any other method of acquiring bitcoins.

I am actually looking to invest in bitcoins very soon. is it even possible to buy large amounts of btc at once?

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evoorhees
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September 16, 2012, 04:05:39 AM
 #2

Buying coins will typically be smarter than buying mining equipment. There are exceptions/caveats to this, but I don't recommend anyone "mine" for profit in Bitcoin unless you have a serious competitive advantage (cheap/free electricity and capital to spend on the latest BFL equipment Smiley

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September 16, 2012, 04:59:29 AM
 #3

I am actually looking to invest in bitcoins very soon. is it even possible to buy large amounts of btc at once?
Depends on what you mean by "large". Anything under $100,000 worth shouldn't be too difficult. Much larger amounts than that are possible, but not as easy and certainly not advisable, as bitcoin's market cap is only around $100,000,000 at the moment, so it only takes few million dollars or so to seriously disrupt the market.

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Stephen Gornick
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September 16, 2012, 06:59:16 AM
 #4

I don't understand why people spend 1700 dollars on a mining rig

Bitcoin is not out of the woods.  There are severe risks yet ... there could be a determination in the U.S. that Bitcoins are stored value used internationally and thus any business that accepts them as payment or for exchange must do full AML / KYC compliance, even for a 1 satoshi payment.    (Of course, this is not at all likely to happen but is in the realm of possibilities).  That would crush the bitcoin exchange rate for a while.

So if you had a GPU rig, you could always sell the hardware and get back maybe 75% or more (or more than 100% including the mined BTCs that had already been cashed out).  Whereas is you bought BTCs, you take the entire loss.  

That has changed though.  Used GPUs are not selling near their "as new" price anymore.  In a BTC/USD collapse, they'ld get even less.   Used FPGAs may have value, depending on the model, but probably nowhere near the level used GPUs sell at, compared to "as new".  Used ASICs end up essentially being paperweights at best.

So, historically, GPU rigs were nearly guaranteed to be profitable (in terms of USDs invested) no matter which way the exchange rate went.

Anyone buying one today either has free electricity or doesn't understand math hasn't performed the proper profitability computations.

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September 16, 2012, 08:24:19 AM
 #5

the way i see my mining hardware investment (when i'm actually able to make it...) is long term. if i buy 100 coins today, then the price goes up over the next five years, awesome. but if i'm mining for those same five years, i'll probably not only generate significantly more then 100 BTC, but i'll be less afraid to spend it (on more mining hardware, maybe!) if i have a steady supply of BTC coming in.

now, right now buying any hardware is incredibly risky, with the whole ASIC thing pending. i'm in sit and wait mode, as far as new hardware goes. not enough info out there from any of the products for my taste.
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September 17, 2012, 08:45:31 AM
 #6

not only generate significantly more then 100 BTC

$100 worth of Bitcoin mining hardware has often returned BTC worth more than the $100 invested, even after subtracting the cost of electricity.

$100 worth of Bitcoin mining hardware rarely will return more than the number of BTCs that those $100 would have purchased.  Nearly all the gain has been the increase in the BTC/USD.  So let's go back to November 2011 when spending 1,000 BTC (worth $3,000 at the time) was a great idea, or so lots of miner's thought.  So today they've gotten back just 500 BTC from mining (now worth $6,000) and they still see it as having been an excellent investment.  This is because $6K is better than $3K, and they still have all the GPU hardware.

But those GPUs can mine for years and only bring in a few dozen more BTCs -- production will never reach the 1,000 BTC amount that they cost.


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September 17, 2012, 09:01:12 AM
 #7

not only generate significantly more then 100 BTC

$100 worth of Bitcoin mining hardware has often returned BTC worth more than the $100 invested, even after subtracting the cost of electricity.

$100 worth of Bitcoin mining hardware rarely will return more than the number of BTCs that those $100 would have purchased.  Nearly all the gain has been the increase in the BTC/USD.  So let's go back to November 2011 when spending 1,000 BTC (worth $3,000 at the time) was a great idea, or so lots of miner's thought.  So today they've gotten back just 500 BTC from mining (now worth $6,000) and they still see it as having been an excellent investment.  This is because $6K is better than $3K, and they still have all the GPU hardware.

But those GPUs can mine for years and only bring in a few dozen more BTCs -- production will never reach the 1,000 BTC amount that they cost.



Then count in, also, all the three bitcoin an hour or so time you put in back then...

Or go back farther, imagine all the 10,000 bitcoin pizzas the early CPU miners ate instead of doing without and buying bitcoins instead...

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September 18, 2012, 05:42:35 AM
 #8

I've struggled with the question (in the OP body...not the subject) and have always come down on the side of speculative investing.  Part of it was that I could choose a position which I wanted and just get it done vs. months/years of hoping that the mining investment would pay off and watching mining technology evolve.  Of course hoarding was much more tenable when the BTC price was lower (and I obtained a lot of my position in the lower ranges after the last big peak...grasping repeatedly at the falling knife as it were...)

I could see making a boat-load of profit (temporarily...which may be good enough) if one was set up to mine with highly competitive gear as the price spiked, but OTOH sitting on a pile of BTC such a condition would also be a good strategy.  If BTC values climb at a constant rate which allows existing miners to expand and new ones to get in, I cannot see mining really providing a big pay-day.  A patient speculator would do fine in that scenario though.

For me to take on mining it would require several things:

 - confidence that mining technology was approaching a theoretical optimal state (that is, optimized ASIC gear.)

 - an operating base in a country which I felt was least likely to harass miners (Ecuador seems to be a freedom loving country who does not immediately bow their heads to power.)


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September 18, 2012, 07:33:21 AM
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...
For me to take on mining it would require several things:

 - confidence that mining technology was approaching a theoretical optimal state (that is, optimized ASIC gear.)

 - an operating base in a country which I felt was least likely to harass miners (Ecuador seems to be a freedom loving country who does not immediately bow their heads to power.)



How would a country 'harrass miners'? 
Presumably it would be easy enough to operate your miners via Tor... so I don't really see how they could know you were mining even if they were packet-inspecting for mining traffic.


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September 18, 2012, 07:52:07 AM
 #10

I don't understand why people spend 1700 dollars on a mining rig, when they could spend that same 1700 dollars on investing into bitcoins, because you are not guaranteed a return if you mine solo, only if you pool, and at that point investing would be the better option as your return to time to risk ratio would be much profitable than any other method of acquiring bitcoins.

I am actually looking to invest in bitcoins very soon. is it even possible to buy large amounts of btc at once?

Some are hobbyists who do it for the enjoyment. Remember those who ran SETI farms? There was almost no personal benefit to the individual other than the enjoyment and challenge of learning how to set up all your rigs. Folding@Home is another example although the justification there is to aid medical research.

If you enjoy tinkering, go ahead and buy a rig, if you want to have a dabble in trading then just buy coin.

and yes, it is possible to buy lots of coin. I'd recommend not buying it all at once though, maybe over the course of a day.

julz
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September 18, 2012, 07:57:38 AM
 #11

My take on buying mining equipment is that if you've made a decent gain in terms of Bitcoin value - it's reasonable to spend some of that towards decentralising and securing the network and helping protect your investment.
Of course from a purely selfish perspective, it makes sense to just let others do that. (tragedy of the commons)

I have a very modest mining operation, and would be happy just to break even.

Quote from: Stephen Gornick
Anyone buying one today either has free electricity or doesn't understand math hasn't performed the proper profitability computations.
Guilty (not of having free elec.. the other bit!)... but as I can't predict the future price, mining difficulty, merchant uptake, technology changes, regulatory environment, etc etc  - I wouldn't have a clue what numbers to plug in to such a computation anyway.

It's perhaps a hedge against the possible edge case where both Bitcoin price and difficulty drop massively due to a sustained slump in the whole bitcoin phenomenon....keep on mining til it eventually returns to its former glory. (well.. not really a 'hedge' as presumably then you could just buy cheap coins - but a way of buying via elec bill without exchange & bank transfer fees)

I also like the idea of having some freshly mined coins which have no 'history'.

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September 18, 2012, 10:43:59 AM
 #12

Presumably it would be easy enough to operate your miners via Tor... so I don't really see how they could know you were mining even if they were packet-inspecting for mining traffic.



Inspect power usage. Find weed farm or bit farm.
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September 18, 2012, 02:28:58 PM
 #13

I suspect that investors are important to miners and miners are important to investors.

For each its probably better to have lots of the other than lots of the same.

So maybe each should be saying the other is more important.

-MarkM-

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WITRcenter
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September 18, 2012, 04:03:55 PM
 #14

I don't understand why people spend 1700 dollars on a mining rig, when they could spend that same 1700 dollars on investing into bitcoins, because you are not guaranteed a return if you mine solo, only if you pool, and at that point investing would be the better option as your return to time to risk ratio would be much profitable than any other method of acquiring bitcoins.

It has been proved in the history that if you mine, you earn more bitcoin than you buy for most of the time. People act according to what history suggests, though not necessarily right.

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https://bitcointalk.org/index.php?topic=132035.msg1414857#msg1414857
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September 18, 2012, 05:43:03 PM
 #15

...
For me to take on mining it would require several things:
 - confidence that mining technology was approaching a theoretical optimal state (that is, optimized ASIC gear.)
 - an operating base in a country which I felt was least likely to harass miners (Ecuador seems to be a freedom loving country who does not immediately bow their heads to power.)

How would a country 'harrass miners'? 
Presumably it would be easy enough to operate your miners via Tor... so I don't really see how they could know you were mining even if they were packet-inspecting for mining traffic.


I would not mine unless I were willing to put down tens of thousands of USD's worth on a setup.  In this case, I would not wish to risk that kind of outlay on what I consider the very real possibility that the gear would be deemed contraband and subject to confiscation (and I have little doubt that it could be tracked down regardless of the cloaking mechanisms I might try to arrange.)

Beyond that, if I were to get into mining, it would likely be in large part because I anticipate a wide-spread crackdown on mining and confiscation of gear.  That is to say, part of my calculations would be that I may be able to capitalize on an artificial limitation of competition...at least for a period of time.

I have zero confidence in the US court system to come up with any ruling which is not in the interest of corp/gov and little doubt that when the time is most opportune, Bitcoin will be labeled a national security threat and subject to draconian counter-measures.  And furthermore, that the general public will be taken a bit by surprise as to just how prone to attack the Internet is as long as the infrastructure is owned by corporations.  These elements factor into my personal strategies about how to speculate on Bitcoin.


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September 19, 2012, 07:49:29 AM
 #16

...it could be tracked down regardless of the cloaking mechanisms I might try to arrange ... I anticipate a wide-spread crackdown on mining and confiscation of gear.  ...
How would that work ? The government is going to track mining hardware.

I hope you're joking or know nothing about how the Internet work.

[OMG]
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September 19, 2012, 03:30:36 PM
 #17

...it could be tracked down regardless of the cloaking mechanisms I might try to arrange ... I anticipate a wide-spread crackdown on mining and confiscation of gear.  ...
How would that work ? The government is going to track mining hardware.

I hope you're joking or know nothing about how the Internet work.

[OMG]

If you are planning to put a relatively large chunk of capital down, it is probably worthwhile to not only understand how the Internet works today, but also to anticipate the various paths of evolution it could take in the future.  I hope you've been paying attention to how much money the US government is putting into technologies which store and monitor traffic.  I hope you don't believe that multiple simultaneous undersea fiber-cuts a few years ago was a matter of chance.  I hope you've actually tried to run a reasonably high traffic and reliable service through the onion.


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