invest in bitcoin a good idea with ASICs around the corner?

[andydabeast]

If there is already a post about this can someone point me there? I could not find one. So anyway, am I right or wrong in saying-

1. the new ASIC chips are shipping next month
2. they are guaranteed to drive up difficulty
3. difficulty going up is guaranteed to drive bitcoin value up
4. investing in bitcoin before March with the intent of selling it back within a couple months has a very high porbibility of being profitable.

Thoughts?

[andydabeast]

that is why I am asking. What does price follow?

[alir]

Demand. Widespread acceptance. Availability.

[xxjs]

that is why I am asking. What does price follow?

Number of users and their holding preferences.

[KWH]

If there is already a post about this can someone point me there? I could not find one. So anyway, am I right or wrong in saying-

1. the new ASIC chips are shipping next month
2. they are guaranteed to drive up difficulty
3. difficulty going up is guaranteed to drive bitcoin value up
4. investing in bitcoin before March with the intent of selling it back within a couple months has a very high porbibility of being profitable.

Thoughts?

Couldn't you have done a little reading before ANOTHER topic about ASIC's?

[andydabeast]

Couldn't you have done a little reading before ANOTHER topic about ASIC's?

im not talking about ASICs I am asking about how the value of bitcoin is expected to change after they come out. All I could find was crap about how gpu mining will be affected. And I even said to point me in the right direction if this is redundant. I am in the newbies section for a reason 

So is there no solid way to determine what will happen to bitcoin value? Even with such a big change in the works?

[KWH]

Couldn't you have done a little reading before ANOTHER topic about ASIC's?

im not talking about ASICs I am asking about how the value of bitcoin is expected to change after they come out. All I could find was crap about how gpu mining will be affected. And I even said to point me in the right direction if this is redundant. I am in the newbies section for a reason 

So is there no solid way to determine what will happen to bitcoin value? Even with such a big change in the works?

Use the Search just as I would or wait a few hours and someone will post in one. Use that newbie 4 hour delay for something that helps you.

[Peter Lambert]

If there is already a post about this can someone point me there? I could not find one. So anyway, am I right or wrong in saying-

1. the new ASIC chips are shipping next month
2. they are guaranteed to drive up difficulty
3. difficulty going up is guaranteed to drive bitcoin value up
4. investing in bitcoin before March with the intent of selling it back within a couple months has a very high porbibility of being profitable.

Thoughts?

Yes, you are wrong.

Now would be ab bad time to invest in something like a gpu graphics card to use as a bitcoin miner. But ASIC miners should not have much overall affect on the price of bitcoins.

1. There are already ASIC chips mining. A specific company might be shipping large amounts of ASICS next month.
2. Yes, difficulty will rise dramatically.
3. Difficulty rising only raises the value of bitcoins because it means the network is more secure, At this point the network is already secure enough that attacking it would be difficult, so while rising difficulty is good it will only have a small affect. (The law of diminishing returns)
4. The aforementioned facts do not support the conclusion that there is a "high probability" that buying bitcoins will be profitable over the next few months. Bitcoins are still a risky investment. The price has risen dramatically over the past couple months, so there is a large probability that the price will go back down some amount or stay steady.

[andydabeast]

Thanks Peter that is just what I needed. I'll play around with some gpu mining on my current hardware and rule bitcoin out as an investment opportunity.

[Bitc0in_diGGer]

I think that if you are going to invest in bitcoin, then you should actively be using bitcoin.  Through your experience in both mining and making purchases with bitcoin, you will be able to make a determination on whether bitcoin is for you. 

I think what you will find is that the bitcoin is a strong currency, and is the way of the future........unless you like fiat currency, fractional reserve banking practices, and having your currency affected by variables from which you have no control over.  Invest now.....just don't put everything in bitcoin.

[Giddeon]

I think that if you are going to invest in bitcoin, then you should actively be using bitcoin.  Through your experience in both mining and making purchases with bitcoin, you will be able to make a determination on whether bitcoin is for you. 

I think what you will find is that the bitcoin is a strong currency, and is the way of the future........unless you like fiat currency, fractional reserve banking practices, and having your currency affected by variables from which you have no control over.  Invest now.....just don't put everything in bitcoin.

Sounds like good advice to me.

[Peter Lambert]

Thanks Peter that is just what I needed. I'll play around with some gpu mining on my current hardware and rule bitcoin out as an investment opportunity.

I didn't mean to say you should rule out investing in bitcoin completely, just that expecting huge gains in the short term might leave you disappointed. If you temper your enthusiasm and accept the risk, and extend your investment horizons beyond a few months, then bitcoins can be a wonderful investment.

[dascampman]

not too bad and somewhat obtainable

[zkay]

I bought in at $19.70 and I am intending to hold. So I will be in the same boat with you, OP.

[ed8t]

I think investing in bitcoin is meaningless. Invest in yourself.

[toz]

3. difficulty going up is guaranteed to drive bitcoin value up

The dependency only goes the other way. If the price of Bitcoin goes up, more people will find it profitable to mine and the difficulty will go up. An equilibrium will be reached as the rising difficulty drives marginal miners out of business.

If new ASICs come out, people start investing in new ASICs instead of other types of mining equipment. Also, people who previously found it unprofitable to mine will start mining. The difficulty will go up. As the difficulty goes up, marginal miners who no longer find it profitable to mine will stop mining. The higher difficulty will drive away potential new miners.

There's no argument I know of that says an increasing difficulty that wasn't itself caused by a higher price would lead to a higher price.

Three things drive up price:

1) Speculation -- people buy Bitcoins in the belief that they will increase in value. This drives up the price as buyers compete for the limited supply. The increase in price encourages more speculation.

2) Demand for a means of exchange -- people buy Bitcoins to use in trade. If the trade volume goes up, that means more Bitcoins are needed to keep the exchange moving.

3) Demand for a store of value -- people buy Bitcoins to hold as a long-term store of value. This doesn't require them to believe they'll go up in value, only that the risk that they will decrease in value is acceptable.

[Cubic Earth]

3. difficulty going up is guaranteed to drive bitcoin value up

There's no argument I know of that says an increasing difficulty that wasn't itself caused by a higher price would lead to a higher price.

Here is the argument:  A higher difficulty makes a 51% attack on the network harder to achieve.  Since that is widely recognized, a higher difficulty makes people more confident in the long term viability of bitcoin, which leads to more hording and acceptance, and THAT drives up the price.

[toz]

Here is the argument:  A higher difficulty makes a 51% attack on the network harder to achieve.  Since that is widely recognized, a higher difficulty makes people more confident in the long term viability of bitcoin, which leads to more hording and acceptance, and THAT drives up the price.

That makes no sense. You could equally well argue that ASICs coming out makes it easier to attack Bitcoin because the cost to achieve a 51% attack goes down. This is perfectly cancelled out by people who buy the ASICs raising the difficulty. The net effect is that the difficulty to attack the network is driven by the price, not the other way around.

An attacker could be buying ASICs for all we know.

[Cubic Earth]

Here is the argument:  A higher difficulty makes a 51% attack on the network harder to achieve.  Since that is widely recognized, a higher difficulty makes people more confident in the long term viability of bitcoin, which leads to more hording and acceptance, and THAT drives up the price.

That makes no sense. You could equally well argue that ASICs coming out makes it easier to attack Bitcoin because the cost to achieve a 51% attack goes down. This is perfectly cancelled out by people who buy the ASICs raising the difficulty. The net effect is that the difficulty to attack the network is driven by the price, not the other way around.

An attacker could be buying ASICs for all we know.

I agree the threshold for attacking the network is primarily an economic one - how much it would cost to get to 51%.  The point you are missing though, is that ASIC's technology has been around since before bitcoin got going, and it has been know from the early days of mining that ASIC's would be the final word on efficiency (in both watts and $$ per GH/s).  If an strong adversary, lets just call him 'Uncle Sam', had decided to attack the network previous to ASIC development and adoption, they would only need to invest in their own ASIC research and manufacture.  A few thousands of chips later, they would own the network.

In short, there was always a fear that the first person out with ASIC's could bring down the network easily.  Now the only way is to make a whole shitload of chips, and the number (cost) required is growing by the day.  There is not another foreseeable shortcut, except perhaps quantum computing, and that is why it is harder to attack now than pre-ASIC.

[toz]

The point you are missing though, is that ASIC's technology has been around since before bitcoin got going, and it has been know from the early days of mining that ASIC's would be the final word on efficiency (in both watts and $$ per GH/s).  If an strong adversary, lets just call him 'Uncle Sam', had decided to attack the network previous to ASIC development and adoption, they would only need to invest in their own ASIC research and manufacture.  A few thousands of chips later, they would own the network.

This doesn't change that. They just also buy half the ASICs on the commercial market. You might argue that it makes an attack cost more, and that is true, but if it raises the value of Bitcoins, it also increases the value of an attack. So again, it would cancel out.

In short, there was always a fear that the first person out with ASIC's could bring down the network easily.  Now the only way is to make a whole shitload of chips, and the number (cost) required is growing by the day.  There is not another foreseeable shortcut, except perhaps quantum computing, and that is why it is harder to attack now than pre-ASIC.

You're assuming the ASICs aren't being bought by the attacker. One could equally well argue that Bitcoins are more of a threat now than ever and an attacker might see the deployment of ASICs as closing their attack window and therefore, now would be the time for them to buy up ASICs to attack.

However, I suppose there is another argument I can't refute -- people might expect ASICs to raise the value of Bitcoins even though there may be no rational reason for this expectation. If that is so, it could be a self-fulfilling prophecy as people buy in the expectation that the price will go up, driving it up. (This could actually happen.)