Wall Observer BTC/USD - Bitcoin price movement tracking & discussion

[Its About Sharing]

With more and more people getting involved in mining, how profitable can it be for tens of thousands of people to compete for 3600 BTC's a day?
Just running some basic numbers, it doesn't look great. The big miners have an advantage but it is becoming more and more a gamble, for all
the reasons listed (and some unknowns for sure). And the risks are being compounded with BTC's falling price.

Wow, what it must have been like to be an early miner with no competition, great returns and a dream. But that is mostly a dream now.

Personally, I see it as helping the network (whenever my 7Gh BFL arrives) and hopefully I break even then have a nice piece of Nostalgia to show my daughter when BTC is around in 10 years. Seriously, I'll run that bad boy 10 years from now to keep my tea/coffee warm!

I just think at current prices (and lower) and considering the ever increasing amount of competition, mining is turning into something different.
Further, there is the chance that manufacturers become the miners and that is a big no as far as centralization goes.
Now when and if BTC gets into the hundreds and then thousands of dollars, there will probably be another wave of ASIC's in a new fashion...

Very interesting experiment we have on our hands...

[MickeyT2008]

I've been considering building a multi-GPU mining rig, even though it'll be barely profitable but cheap second hand cards would make a difference.

That's the problem with mining. It's filled with irrational actors. If you're looking to make a profit, you'll be competing with people (like me*) who will mine even at a loss. It might have worked for a while when hardware to hash was rare but now it's out there and cheap and you can't even hope to resell it for alternate use later.

Supply and demand dictates that this means miners end up operating at marginal profits or none at all. The only wildcard is the future price of Bitcoin. If it rises as it should, it turns into a good investment for early adopters. Of course, if everyone is expecting high prices later, that increases the loss miners are willing to mine at. Miners who are operating in this zone are likely to hold since an immediate sell means immediate loss (or they may be believers in which case they are holding simply to have later. Not everyone needs to realize short-term profits on their investments).


*I do a little mining on the side as a hobby but it's insignificant.

As I said, I'm basically just looking for a form of heating for my living room which breaks even and doubles as a LAN party gaming setup, I know I'll never make much more than the cost of some used cards (probably HD5870s) and the electricity back.  Even if it doesn't quite break even it should eventually work out cheaper mining LTC with this than paying my gas bill.  And even if it doesn't do that it'll be fun assembling it anyway, I enjoy messing about with computers.

These days attempting to do this as a serious business venture would probably be futile, it's only because the heat the cards put out is useful to me (not now, it's 27C) that it's even worth considering doing this at all.  The heat will be the larger part of what it pays, the LTC probably just enough to make it work at a slight profit as opposed to just being a pointlessly overcomplicated electric heater.

[Ultraviolet]

Rampion is probably correct about the problem that will be caused by ASICs. When people were frenzied to buy AM Blades at 50BTC @ $120-130 USD it was under the condition wherein 13GH would mine you 25-30-40BTC a month. But in the last few weeks difficulty has climbed so high that 13GH will mine you ~7BTC per month, and this is just discussing the problem for people who have Blades, one of the only ASICs you can buy and actually have in-hand without a 2-6 month waiting period, and only discussing the problem in the context of current difficulty, and not considering the fact that $120-130 USD is pretty much out of reach right now.

On top of that, the market has lost a lot of its buyers. These large periods of stagnation and only being able to sustain $97-98 are because Gox is no longer experiencing the "several million USD are being wired to our exchange every day! " phenomena that it was after/during the 266-50-165 era. A lot of the money that _was_ wired to Gox is now sitting in the hands of the whales who profited from the bubbles and in Gox's rake box. After all, the only reason we're not still sitting at 60-70 is because _one_ person put down a 15kBTC market order to push it through $80. It's not because there were hundreds or thousands of people looking to buy, eating through resistance.

The dilemma with ASICs is similar to the dilemma created when lots of people buy at the top of a rush and momentum runs out and it drops hard after. Everyone wants to get out alive. It'll be worse with ASICs because people bought from frauds like BFL and Avalon who can't be fucked to actually deliver the product when it's ready because it's more profitable for them to mine on it themselves as "burn in", only delivering the miners to the people who paid for them when the ship has already sailed.

People are itchy indeed. Right now people are anxiously waiting to see if someone will market buy to carry us into $110s again. If it doesn't happen, we will definitely go down hard.  

[lucas.sev]

I've been considering building a multi-GPU mining rig, even though it'll be barely profitable but cheap second hand cards would make a difference.

That's the problem with mining. It's filled with irrational actors. If you're looking to make a profit, you'll be competing with people (like me*) who will mine even at a loss. It might have worked for a while when hardware to hash was rare but now it's out there and cheap and you can't even hope to resell it for alternate use later.

Supply and demand dictates that this means miners end up operating at marginal profits or none at all. The only wildcard is the future price of Bitcoin. If it rises as it should, it turns into a good investment for early adopters. Of course, if everyone is expecting high prices later, that increases the loss miners are willing to mine at. Miners who are operating in this zone are likely to hold since an immediate sell means immediate loss (or they may be believers in which case they are holding simply to have later. Not everyone needs to realize short-term profits on their investments).


*I do a little mining on the side as a hobby but it's insignificant.

As I said, I'm basically just looking for a form of heating for my living room which breaks even and doubles as a LAN party gaming setup, I know I'll never make much more than the cost of some used cards (probably HD5870s) and the electricity back.  Even if it doesn't quite break even it should eventually work out cheaper mining LTC with this than paying my gas bill.  And even if it doesn't do that it'll be fun assembling it anyway, I enjoy messing about with computers.

These days attempting to do this as a serious business venture would probably be futile, it's only because the heat the cards put out is useful to me (not now, it's 27C) that it's even worth considering doing this at all.

You will get almost same return mining LTC and BTC, as they are basically pegged long term.

[wachtwoord]

It sounds like mr Market's manic depressive phase is on :p

[N12]

MtGox price is decoupling from Bitstamp and BTC-e again. There seems to be concern because there hasn't been a single person sighted who has actually successfully withdrawn money from MtGox since they announced the end of the hiatus. If this is true, then money hasn't been allowed to flee MtGox for at least a month. I'd consider the MtGox price distorted, and I'm not sure how long Bitstamp and BTC-e are going to follow it that much, so the price gap will probably widen more.

Personally, I doubt MtGox is broke, but clearly they are having major problems probably with their banks, and they aren't forthright about things and keeping silent.

[MickeyT2008]

You will get almost same return mining LTC and BTC, as they are basically pegged long term.

And with LTC I'm up against other GPU miners, not ASICs

[Frozenlock]

Personally, I doubt MtGox is broke, but clearly they are having major problems probably with their banks, and they aren't forthright about things and keeping silent.

Who? Gox? Nooooo, I can't believe that!

 

[lucas.sev]

You will get almost same return mining LTC and BTC, as they are basically pegged long term.

And with LTC I'm up against other GPU miners, not ASICs

What difference does it make if you mine LTC or BTC if LTC price is constant fraction of BTC? (long term)

[bitcryptonit]

(...)
This already happened after the 2011 bubble, and I don't see why it won't happen again.

You didn't factor one thing. To this day people who wanted to have bitcoins could just simply mine them or buy graphics card they would use anyway and mine. But now all of the small fishes will have to buy bitcoins because their mining is not profitable. Which means that even if asic miners will sell bitcoins most people will have to buy them to use.

[Rampion]

MtGox price is decoupling from Bitstamp and BTC-e again. There seems to be concern because there hasn't been a single person sighted who has actually successfully withdrawn money from MtGox since they announced the end of the hiatus. If this is true, then money hasn't been allowed to flee MtGox for at least a month. I'd consider the MtGox price distorted, and I'm not sure how long Bitstamp and BTC-e are going to follow it that much, so the price gap will probably widen more.

Personally, I doubt MtGox is broke, but clearly they are having major problems probably with their banks, and they aren't forthright about things and keeping silent.

Pretty much agree. The price feels completely distorted, there's even been a bounty for someone to show a wire going thru after the hiatus and nobody was able to post a screenshot. Wow, that's puzzling. If people cannot withdraw their fiat, they will slowly buy BTC to move it to other exchanges, maintaining the price artificially high on Gox; the other exchanges, keep following Gox (even if they are decoupling now) because at the end of the day, MtGox its still the biggest market by far.

[Its About Sharing]

MtGox price is decoupling from Bitstamp and BTC-e again. There seems to be concern because there hasn't been a single person sighted who has actually successfully withdrawn money from MtGox since they announced the end of the hiatus. If this is true, then money hasn't been allowed to flee MtGox for at least a month. I'd consider the MtGox price distorted, and I'm not sure how long Bitstamp and BTC-e are going to follow it that much, so the price gap will probably widen more.

Personally, I doubt MtGox is broke, but clearly they are having major problems probably with their banks, and they aren't forthright about things and keeping silent.

They discussed the insolvency possibility on this episode of Let's Talk Bitcoin? http://feedproxy.google.com/~r/TheDailyBitcoinShow/~5/Bv_o-_Nqxog/100831526-mindtomatter-e23-1-is-mt-gox-insolvent-lets.mp3

One of the hosts makes a fairly good case to worry about things.

Gox (and other exchanges) can be like banks. But, they hold BTC's and they Hold $$$. Well, people will not take all their coins out at one time (no runs) and Gox knows this (they observe this). The coins are just on the books (and offline) and there is no transparent way to see if they actually say they have what they have. Sort of fractional reserve Bitcoining. Anything like this happens and that would be terrible. Right now the pressure is on Gox, but any exchange can do likewise. They can sell BTC when they think it will be going lower and then buy it back later. This can get them in trouble of course. They can likewise be creative with their cash. I mean look at what banks do with our cash. (You deposit 10,000 and they can loan out 9,000 roughly, and so on, and so on.)

[ChartBuddy]

[wonkytonky]

MtGox price is decoupling from Bitstamp and BTC-e again. There seems to be concern because there hasn't been a single person sighted who has actually successfully withdrawn money from MtGox since they announced the end of the hiatus. If this is true, then money hasn't been allowed to flee MtGox for at least a month. I'd consider the MtGox price distorted, and I'm not sure how long Bitstamp and BTC-e are going to follow it that much, so the price gap will probably widen more.

Personally, I doubt MtGox is broke, but clearly they are having major problems probably with their banks, and they aren't forthright about things and keeping silent.

so.  up we go right?

[micalith]

(...)
This already happened after the 2011 bubble, and I don't see why it won't happen again.

You didn't factor one thing. To this day people who wanted to have bitcoins could just simply mine them or buy graphics card they would use anyway and mine. But now all of the small fishes will have to buy bitcoins because their mining is not profitable. Which means that even if asic miners will sell bitcoins most people will have to buy them to use.

Fair point, and quite encouraging. But that won't happen until they're convinced we've reached the bottom.

Whenever that happens, I look forward to the buyers vs commercial-miners battle!

[N12]

I'm actually becoming more bearish now in the longer term because such a dysfunctional market (where you can't withdraw for over a month!) is certain to repel any large money from flowing into MtGox. And what the market leader does also manifests in people's confidence in the others.

And when MtGox finally opens the valves again, the damage (confidence erosure) is already done.

This bear market has only begun.

[stereotype]

Even the major betting houses are offering bitcoin price speculation... http://www.paddypower.com/bet/novelty-betting/current-affairs/bitcoin-betting

OT but, I thought the Julian Assange 'How will he leave the Ecuadorian Embassy?', had a funny option....by Jetpack - 500/1   

[JimboToronto]

It sounds like mr Market's manic depressive phase is on :p

Mr. Market? I thought it was Ms. Market.

Sometimes I think it's dirty old Uncle Market.  

[Adrian-x]

problem is, allot of those miners won't get ROI for many months. Knowing this, I would expect most (except for those who took out loans) to choose to wait for higher prices before getting their fiat back.

Exactly, I dont see why on this forums people seem to think that miners want to get ROI as soon as possible. I think 90% of them will just mine and hoard, for years

Well, if the price gets high, it would make sense to sell to lock in profits. But if that's what people were doing, the bubble would not have been quite so crazy.

I'm sure you know the bubble started more or less when block reward halved, which was a moment when nobody had ASICs yet, 99% of the network were GPU and FPGA miners... Those already had their rigs paid off long ago (no new GPU and FPGA miners for a while because everybody was expecting ASICs since last summer), so as soon as they saw their proceeds halved they started to hold like mofos, creating scarcity of coins, which made the price to grow - the growing price attracted speculators, speculators bought driving the price high, the media started to run stories about how Bitcoin price was growing, which attracted more speculators, etc... Wash rinse and repeat, speculative bubble in its purest form.

This cycle is about to invert when ASICs will be widespread. Same thing happened in 2011 with GPUS.

You really think people took loans to buy ASICs? I bet you most asic owners are early adopters from GPU times.

I surely don't know what's the %, but I surely know there are a lot of newcomers spending all their fiat savings (tens of k's of $) in miners because they think they will break even in one month and then they will have a x10 ROI in the first year... Loan or no loan I don't know, but you can be sure they are throwing at this more money they can afford to lose because they think this is a "no brainer" and they do not want to "miss the train".

I know for sure because I've been meeting/discussing with a lot of guys like that since March, both in cyber and meatspace.

There will be a lot of pain for miners very soon, you will see.

What I have learned from observation is most miners save the XBT, some spend X% and a few triad with X% but the majority are saved.

ASICMiner is a new type of miner they get about 900 coins a day and those coins go to "investors" not miners. (The new dollar extraction)


Not much Fiat is entering the system to buy ASIC's the ASIC suppliers who are delivering are charging XBT, and there is a long ROI on those purchases up to 3 years calculated when in XBT. (ROI in XBT = saving XBT)

The ASIC manufacturers (and Mining funds) on the other hand have hard expenses in fiat, so they are converting new XBT to fiat at the moment.  

If we stay in the $100 target, the ASIC manufactures do more of the same and difficulty increases exponentially, if the price dips the demand for high priced Asics will diminish and the manufacturers will have to innovate.  

We are approaching equilibrium with difficulty related to price, so we should expect change soon.  

[Spaceman_Spiff]

Why do you keep saying XBT when almost everyone uses BTC?