Cryptocurrency mining has hit the mainstream and everyone and their dog wants to build a rig and rake in the dollars. This signals the beginning of the end. The only reason mining continues to be profitable is the coin prices keep going up. Take ethereum for example. The difficulty has doubled over the last month due to the massive increase in miners but the profit hasn't gone down because the price has gone up even more. When eth stops rising, there will still be more new miners coming online for a while and the difficulty will continue to rise resulting in a plummeting mining profit.
If eth stagnates for a while or even (heaven forbid) drops a lot, then mining will quickly become unprofitable for all but those with the cheapest electric. Quickly you will see ebay full of people trying to sell their no longer profitable RX470/480/570/580 etc. If I was thinking of buying a decent video card for gaming, I would wait till the end of the year as I'm sure I will be able to pick up a used RX570 for less than $50.
The same thing applies to all other cryptocurrencies. They will only be profitable if their price keeps rising faster than the difficulty. This is very unlikely to continue for long. The best way to make money is directly investing in the coins themselves. Either way, profit depends on increasing coin value. But the difference is that unprofitable mining rigs will not be worth much as ebay will be bloated with used parts and resulting low prices. Whereas coins will still have value long after their mining profitability drops into negative territory.
What will kill GPU mining profitability? Easy, too many people jumping on the bandwagon. That will kill it for sure for most. I expect this to happen by the end of the year if not sooner. GPU mining should be looked at more as a hobby than a way to get rich. If you starting out now, the best you can realistically hope for is a break even ROI. Maybe you will do better, maybe worse but forget about riches. The lucky ones are those who were setup last year before it got so popular. I wish I was one of them.
I think you're wrong with your arguments. People that get into mining, also will HODL some coins and they may even buy some (back) when the price drops.
Plus I doubt a (GPU) miner will sell its coin at a loss. (power costs)
So I do think the large number of miners is the main reason why the prices are quite high right now.
