Is mining profitable? Um, duh?

[the joint]

I often wonder about those who engage in the "Is it still profitable to mine?" debate, particularly those who fall on the "no" side of the fence.

Consider how many miners turned off their machines around Nov.-Dec. 2011 when BTC price approached $2.  Their reasoning was simple - they stopped because their little calculators told them that they'd be losing money by continuing to mine.

But what if they had continued anyway?  And what if they held onto those coins until today?  Would such foresight have changed their decisions?  Would they have continued to mine anyway?  I'm sure they would have if they knew that in early 2013 the coins they were mining would become almost 10 times as valuable.

This brings up another question: why did people give up CPU mining?  And why not continue to mine BTC with your *gasp* NVIDIA card?  After all, if so many people here believe that BTC value could reach five or six digits, then why aren't they squeezing out as much future profit as they possibly can?

So, what's your excuse?  Why did you stop mining?

[Luno]

You are right. The is this common idea that miners sell right away and stops the second profiability goes in the red.

if you believe that price will rise, you are taking the same risk as someone who is long in Bitcoin on an exchange.

you are only mining at a loss if you sell your coins when their price is to low!!

[casascius]

Wouldn't this be like comparing someone who decided that the family budget didn't allow them to take a vacation to Las Vegas with someone else who decided to go and won a million dollar jackpot?

In November 2011, people were either in the process of leaving Bitcoin for dead, or seeing how low the price was gonna go before buying back in.  Either way, in November 2011, buying bitcoins instead of mining them was a more sensible decision.

I mined for a little while in early 2011.  My conclusion was that the initial money I spent on mining gear would have been better spent on bitcoins, but after selling the mining gear and factoring in a recovery of the residual value of the hardware, the net money I spent yielded more bitcoins via mining than buying.  It was an interesting experience.

[the joint]

Wouldn't this be like comparing someone who decided that the family budget didn't allow them to take a vacation to Las Vegas with someone else who decided to go and won a million dollar jackpot?

In November 2011, people were either in the process of leaving Bitcoin for dead, or seeing how low the price was gonna go before buying back in.  Either way, in November 2011, buying bitcoins instead of mining them was a more sensible decision.

I mined for a little while in early 2011.  My conclusion was that the initial money I spent on mining gear would have been better spent on bitcoins, but after selling the mining gear and factoring in a recovery of the residual value of the hardware, the net money I spent yielded more bitcoins via mining than buying.  It was an interesting experience.

Well, I'd say it's a lot like your analogy except that I doubt that any budget limitations would have prohibited anyone from mining.  Mining may not have been profitable for a lot of people due to electrical costs and whatnot, but seriously, it couldn't have been that bad unless some dumb miners jacked their mining configurations. Besides, if they wanted to buy outright, they could have sold their gear for BTC.

If people sold their rigs for cash and sold all their BTC, I'd understand that.
If people sold their rigs for cash and kept all their BTC, I'd understand that.
If people kept mining and kept their BTC, I'd understand that.
If people kept mining and sold their BTC, I'dunderstand that.
If people stopped mining but kept their rigs and kept their BTC, I wouldn't understand that.
If people stopped mining but kept their rigs and sold their BTC is irrelevant 

[Luno]

The mining nation of the world has been the US. Last year the Russians were in the lead for a while. As mining gets more difficult, mining becomes less and less an option. Individual mining will be out of the question.

Your only chance will be to buy shares in a corprate scaled enterprise. Large capital investments in ASIC monster farms, but if they get competition from China, the profitability wil be determined by power costs, as it is now.

Mining is attractive when the price is going up, as you can recoup your investment if you time your sale of your coins.

In a falling market, people take their miners offline. As we approaches 21M mined coins, the race will be to get the last of them. A lot of businesses will loose big in the final race.

So however you view it, mining at best is a very risky business, more likely just down right stupid to put money in.

If you really want to get in, your best bet is to wait for a collapse in price, as used ASIC's will be a bargin then, but in such a scenario, the better option might still be to just buy coins.

[dust]

But what if they had continued anyway?  And what if they held onto those coins until today?  Would such foresight have changed their decisions?  Would they have continued to mine anyway?  I'm sure they would have if they knew that in early 2013 the coins they were mining would become almost 10 times as valuable.

No. It is stupid to mine at a loss, even if one believes the value of BTC will buy higher in the future.  Instead of mining at a loss, it would be better to not mine at all and buy bitcoins on the market instead.  Mining at a loss is simply paying a premium to acquire BTC.

[dree12]

Mining never makes sense when unprofitable, even if Bitcoin will go up tomorrow. That's cause it is always the inferior option. Take the following comparison when mining was unprofitable:

Option A: Mine
Electrical bill: $5 / day.
Gross profit: 0.4 BTC / day @ $10 / BTC

Option B: Shut off the rigs and use electrical bill money to buy BTC instead
Investment: $5 / day
Gross profit: 0.5 BTC / day @ $10 / BTC

No matter which way the price of 1 BTC goes henceforth, Option B will have earned more money.