[BTC-TC] Deprived Mining Speculation (DMS)

[Deprived]

On what basis do you decide it has a higher volatilty?  Here's the graph for MINING (go to 30-day):

http://www.coinflow.co/chart/DMS.MINING

Indeed there WAS a big drop after the difficulty rise on 22nd June.  But thing is, the price rebounded back up again afterwards.  In fact the price now (1 day before a large rise in difficulty) is basically exactly the same as it was on 21st June (the day before the large difficulty rise 2 rises ago).  The evidence just doesn't support your agrument that DMS.MINING has more volatilty.

I'm basing my argument on the fact that the entire security was designed to give a double exposure to changes and that people convinced of a shift in either direction would choose to get that double exposure.

DMS.Purchase is essentially a two-ticket bet; one FOR, one AGAINST. Assuming someone believes in FOR, then it makes no sense to hold the AGAINST, so they sell that. To get in on the FOR bet, they also have to vote against AGAINST. I think you even wrote this in your prospectus.

Right now, there is a 'panic' of sorts due to the difficulty shift, and what I'm seeing is that DMS.Mining drops 20% in 24 hours, whereas BFMines has dropped less than 10% and TAT.VM has dropped just around 10%. A seller that wants to liquidate DMS.Mining now has lost far more than whoever wanted to liquidate his or her BFMines today.

.b

If someone wants to sell right now then yes - they'd make a heavy loss.  But at least they CAN sell - on BFMINES there's next to zero bids above HALF the IPO price even though nothing has changed.  So right now it's choice between selling at 20% below where it was yesterday or selling at 50% below where it was yesterday.  And something in IPO which hasn't yet paid a single dividend or done anything shouldn't be dropping at all.

I DO agree that MINING isn't any use for speculators who want to buy something at IPO and watch the price rise.
For investors who buy to hold for dividends the daily trading price ONLY matters when they want to sell.
And if the price is low because of panic now (as you think) rather than being an actual correction from being overvalued (which some think - as it basically hasn't fallen for 3 weeks) then it's a great time to buy it right?

IF your theory about the double pressure making panics move the price is right then it's actually a BETTER option for the specific people you identified.  They just have to time their buy for one of those panics - then worst case is they sell at bottom of another (getting same profit as alternatives but with less capital tied up) and best case is they make an immediate profit when the price rises back up.

Your logic is just terribly flawed as assume people will do the worst possible thing - then use the assumption that people CAN do worse on MINING than BFMINES ((if they pick the worst timing for everything and do some half-hearted mix of investing/speculating) as somehow meaning that they will.

We'll find out in a few days whether this was a panic dump or an overdue correction - a lot of the volume was actually some people buying SELLING because of its dividend tomorrow then others arbitraging via PURCHASE and dropping MINING to balance.

The real key today is the lack of people BUYING PMBs at all - suggesting a price move downwards is coming for all.  Majority of volume on TAT.VM was TAT offloading a load more into the bids of people who naively believed they could buy then flip for a profit.  The price didn't  fall lower there as he opened up a nice spread, so noone other than him was selling much into bids and he was only selling down to .004.  

Anyone desperate to be able to sell securities immediately without significant loss shouldn't invest in EITHER of MINING or BFMINEs (or any other security without a guaranteed bid-wall from the issuer).  MINING can move around a lot (bids tend to be small but replaced quite a lot - so even if price is stable it can take a while to sell any quantity) and BFMINES has near zero demand above 50% of IPO - so no way for anyone to sell any sort of amount anyway without having a haircut that's near a decapitation.  If people want immediate liquidty stick to securities where the issuer provides it - or don't invest at all.

If people can wait a day or two then IF this is just a panic/over-reaction/excessive arbitrage of SELLING demand then price will recover.

Pretty much regardless of everything else, it's generally better to buy the under-priced one than the over-priced one (speaking relatively - both may be under-priced or both over-priced).  Either MINING is so cheap it can be bought and forgot about, confident of profit or it isn't.  And if MINING isn't cheap then BFMINES must be over-priced (or the chances of profit slim).  

You'd better hope MINING price rises - or your sales are going to drop through the floor.  As I don't think there's THAT many 'investors' who will pay 1/3 more for non-delivered hardware just because they're worried MINING occasionally spikes downwards AND have faith that bids will appear from nowhere on BFMINES if they ever need to sell.

[Deprived]

I should add one thing.

There IS a good reason why there'll usually be high volatility on MINING the day before the first dividend after a large difficulty change.  SELLING will get a massive dividend the next day - because of that people have to pull SELLING bids in advance of the didivend.  That process starts the day before - and results in a wide spread on SELLING (with maybe a few orders from those who didn't cancel in the gap).

Because MINING and SELLING can be arbitraged vs PURCHASE that leads to uncertainty and a wider than usual spread on MINING.  Because this only occurs after a large difficulty rise that it going to tend to be demonstrated by a downward movement of MINING.

So larger spreads and a bit more volatility ARE expected on the day before large SELLING dividends.  Which has zero impact on actual investors - and adds lots of potential fun for those trading.  On the previous two occasions the price recovered back to where it was before - which can't continue forever as we know the value of PMBs falls over time.

[furuknap]

If someone wants to sell right now then yes - they'd make a heavy loss.  But at least they CAN sell - on BFMINES there's next to zero bids above HALF the IPO price even though nothing has changed.  So right now it's choice between selling at 20% below where it was yesterday or selling at 50% below where it was yesterday.  And something in IPO which hasn't yet paid a single dividend or done anything shouldn't be dropping at all.

I was trying to show you that when it moves, DMS moves more than regular PMB assets because it was designed that way. It's a great asset; don't get me wrong, but by its design, it will move faster and probably further than what is reasonable from the facts.

Difficulty didn't go up the 37% that a drop of 28% should indicate. DMS is thus more volatile than other assets because emotion drives it further. It is a speculator's toy, perfect for its use, but carries additional risk. If today's numbers don't convince you of that risk, I don't know what would.

Also, I don't think I've ever said that DMS.Mining is more expensive for it's PMS-style mhs. I even used the most favorable numbers for straight PMBs when comparing the prices, _and_ I published them, showing that at the time, DMS.Mining was 8% cheaper than BFMines.

For people that saved those 8% that day, however, they have now lost 18% more than they had with TAT.VM or BFMines, in a worst case situation. My statement about added risk must therefore be true.

It may go up again, which is great for some, but the risk is there, and it is larger than for other comparable assets. That has been my argument, not one of price. DMS.Mining is currently much cheaper per PMB-style mhs. That cheapness, as demonstrated today, comes at a price. If you are willing to pay that price, you can save money.

.b

[Deprived]

If someone wants to sell right now then yes - they'd make a heavy loss.  But at least they CAN sell - on BFMINES there's next to zero bids above HALF the IPO price even though nothing has changed.  So right now it's choice between selling at 20% below where it was yesterday or selling at 50% below where it was yesterday.  And something in IPO which hasn't yet paid a single dividend or done anything shouldn't be dropping at all.

I was trying to show you that when it moves, DMS moves more than regular PMB assets because it was designed that way. It's a great asset; don't get me wrong, but by its design, it will move faster and probably further than what is reasonable from the facts.

Difficulty didn't go up the 37% that a drop of 28% should indicate. DMS is thus more volatile than other assets because emotion drives it further. It is a speculator's toy, perfect for its use, but carries additional risk. If today's numbers don't convince you of that risk, I don't know what would.

Also, I don't think I've ever said that DMS.Mining is more expensive for it's PMS-style mhs. I even used the most favorable numbers for straight PMBs when comparing the prices, _and_ I published them, showing that at the time, DMS.Mining was 8% cheaper than BFMines.

For people that saved those 8% that day, however, they have now lost 18% more than they had with TAT.VM or BFMines, in a worst case situation. My statement about added risk must therefore be true.

It may go up again, which is great for some, but the risk is there, and it is larger than for other comparable assets. That has been my argument, not one of price. DMS.Mining is currently much cheaper per PMB-style mhs. That cheapness, as demonstrated today, comes at a price. If you are willing to pay that price, you can save money.

.b

You can't have it both ways.

Either the price will recover - in which case they haven't made a loss.
Or it won't recover - in which case how can it keep happening?  How much cheaper does it have to be before having to maybe wait a few days to sell is worth it?

And people who bought, saving that 8%, haven't lost it unless they planned to sell now (there's a very minor exception to that if difficulty now dropped - but that's not what's happening).  They'll receive exactly the same dividends as they'd have got if the price had doubled, halved or remained unchanged.

People buying PMBs or contracts buy an income stream.  They still have it and its underlying value hasn't changed.  What HAS changed is the price the market is trading it at.

There's precisely one reasonable scenario in which your agrument definitely makes sense (other than for a tiny minority of people with horrible cash-management skills).  That's if BOTH of MINING and BFMINING were sginficantly over-priced at the start.  In that scenario, a falling price of MINING represents the market realising it was over-priced - and BFMINING not reacting so fast gives investors there more time to get out, possibly losing less.  Or it would if there were any bids.

If they weren't overpriced initially then MINING dropping BELOW a fair price isn't bad news at all as :

a)  It will almost certainly recover once people realise it's underpriced.
b) The investor can buy more at bargain prices if they want.

The sole time it's THEN bad news is if they have an overwhelming need to sell right now (i.e. they're horrible at managing their money and shouldn't be touching ANY security without issuer-provided liquidity).  But, as already pointed out, they can't sell any volume on BFMINES near starting price either (anyone in a desperate rush to sell needs bids waiting).

On the subject of percentages be careful what you look at when considering what people are reacting to.  Some people are using sites that predict NEXT difficulty based on current hash-rate - those are suggesting a 20% rise next time as well, so they may be basing their judgment on that.  I think thay's unwise - as with only a tiny sample since difficulty change there's no way to distinguish between increased has-power and good network luck.  But don't assume all price movements are necessarily just because of what HAS happened - some people factor in other things (not all of which SHOULD be factored in of course).

[FloatesMcgoates]

If someone wants to sell right now then yes - they'd make a heavy loss.  But at least they CAN sell - on BFMINES there's next to zero bids above HALF the IPO price even though nothing has changed.  So right now it's choice between selling at 20% below where it was yesterday or selling at 50% below where it was yesterday.  And something in IPO which hasn't yet paid a single dividend or done anything shouldn't be dropping at all.

I was trying to show you that when it moves, DMS moves more than regular PMB assets because it was designed that way. It's a great asset; don't get me wrong, but by its design, it will move faster and probably further than what is reasonable from the facts.

Difficulty didn't go up the 37% that a drop of 28% should indicate. DMS is thus more volatile than other assets because emotion drives it further. It is a speculator's toy, perfect for its use, but carries additional risk. If today's numbers don't convince you of that risk, I don't know what would.

Also, I don't think I've ever said that DMS.Mining is more expensive for it's PMS-style mhs. I even used the most favorable numbers for straight PMBs when comparing the prices, _and_ I published them, showing that at the time, DMS.Mining was 8% cheaper than BFMines.

For people that saved those 8% that day, however, they have now lost 18% more than they had with TAT.VM or BFMines, in a worst case situation. My statement about added risk must therefore be true.

It may go up again, which is great for some, but the risk is there, and it is larger than for other comparable assets. That has been my argument, not one of price. DMS.Mining is currently much cheaper per PMB-style mhs. That cheapness, as demonstrated today, comes at a price. If you are willing to pay that price, you can save money.

.b

The volatility is one of the main draws of this asset -at least for traders. Simply keeping up with the latest here on the forums as well as having blockchain.info open to examine how the hashrate is going allows a trader to gain a significant lead on any drops or rises SELLING/MINING will experience - the volatility simply makes the peaks and valleys extra violent and more profitable.

Believe it or not when Deprived launched this instrument I only had 2 bitcoins, now after a month or so I am up to 11 BTC almost solely on trading, with a solid 40% chunk of that coming from taking advantage of how violent yet predictable the DMS stocks behave.

[furuknap]

The volatility is one of the main draws of this asset -at least for traders. Simply keeping up with the latest here on the forums as well as having blockchain.info open to examine how the hashrate is going allows a trader to gain a significant lead on any drops or rises SELLING/MINING will experience - the volatility simply makes the peaks and valleys extra violent and more profitable.

Believe it or not when Deprived launched this instrument I only had 2 bitcoins, now after a month or so I am up to 11 BTC almost solely on trading, with a solid 40% chunk of that coming from taking advantage of how violent yet predictable the DMS stocks behave.

I fully agree, if I hadn't been busy responding to idiocy about ming assets all over the place, I'd have traded it much more. It's a fun construct for those that care to follow it.

For those that may happen to be in a position where they want to get out, twice a month, this probably isn't a good way of investing in mining.

.b

[furuknap]

You can't have it both ways.

Either the price will recover - in which case they haven't made a loss.
Or it won't recover - in which case how can it keep happening?  How much cheaper does it have to be before having to maybe wait a few days to sell is worth it?

Now you're just being argumentative.

What about the next time? Or the time after that? We're looking at twice per month where, for two days, this asset is a really bad thing for those who believe in mining but wants to free up money for whatever reason, forced or not.

Let me see if I've understood this right.

DMS.Mining is designed to prove that mining is unprofitable, but if it is profitable, the asset will close. People investing here will have no chance of winning the bet because you'll have an ejection seat that shuts down if you approach a point where it is profitable over time.

If mining difficulty, like some believe, will flatten out after say 1.5-2PHs, your asset will close within 200 days. If you had to run it for two years at steady difficulty, you shut it down according to the contract, paying out less than people would expect to get from a steady difficulty over time.

What part of this am I not getting?

.b

[Deprived]

It is a speculator's toy, perfect for its use, but carries additional risk.

This the absolute core of what you get wrong.

Yes - DMS is great for some speculators (for others its absolutely horrible - e.g. IPO flippers).
But MINING is also great for investors  - if any PMB is profitable in current price range then MINING is.  That's a HUGE IF of course - there's a whole load of people holding SELLING who think even at the current price MINING will never make a profit (and nor will any other higher priced PMBs if so).

[Deprived]

You can't have it both ways.

Either the price will recover - in which case they haven't made a loss.
Or it won't recover - in which case how can it keep happening?  How much cheaper does it have to be before having to maybe wait a few days to sell is worth it?

Now you're just being argumentative.

What about the next time? Or the time after that? We're looking at twice per month where, for two days, this asset is a really bad thing for those who believe in mining but wants to free up money for whatever reason, forced or not.

Let me see if I've understood this right.

DMS.Mining is designed to prove that mining is unprofitable, but if it is profitable, the asset will close. People investing here will have no chance of winning the bet because you'll have an ejection seat that shuts down if you approach a point where it is profitable over time.

If mining difficulty, like some believe, will flatten out after say 1.5-2PHs, your asset will close within 200 days. If you had to run it for two years at steady difficulty, you shut it down according to the contract, paying out less than people would expect to get from a steady difficulty over time.

What part of this am I not getting?

.b

The part that we're nowhere near the levelling off yet.  So dividends AFTER the levelling off represent a very small part of ALL dividends that will be received.  If there was any reasonable chance of levelling off (by which I mean less than about 3% rise per difficulty change on average) in the near  future then DMS couldn't work - for the reasons you describe.  But that's not where we are.

You also misunderstand how closure is likely to work - specifically that MINING get a years worth of dividends assuming ZERO increase as a lump sum.  Unless growth completely halts for a long time that's a pretty good final payment.

So yes - in a steady difficulty environment MINING wouldn't work.  But in a fast-rising difficulty it keeps up with payments well then (theoretically if SELLING act rationally) just as difficulty drops below a rate of 3% they get a payment of 365 days at CURRENT difficulty.

News-flash - there's these things called ASICs being made and as they arrive difficulty is rising a lot.  We aren't at - or near - steady difficulty : but it we were then each MINING share could receive 90% of the PURCHASE price very quickly - rather than in the years it would take to get the same from other PMBs.

Don't underestimate the value of 365 days of dividends immediately rather than waiting years for them whilst praying difficulty doesn't start rising fast again.  And they get paid that by contract (unless SELLING gamble and don't close - when MINING get more but not all at once) - I can't get off cheap by talking the market price down then buying back based on market price.

EDIT:  Short version is you're totally ignoring the value of CP-less cash now rather than CP-exposed cash trickled to you over years.

[Deprived]

DMS.Mining is designed to prove that mining is unprofitable,

Missed that part.

Not to prove mining is unprofitable but that PMBs were horribly over-priced - and offer a more reasonably priced alternative (and allow those who believed them over-priced to express that with BTC rather than just with forum posts).

If you buy a mining rig and mine with it you may make some profit.  If you buy its output at 20 times the cost of the hardware then likely you won't.  Not the same thing

[furuknap]

The part that we're nowhere near the levelling off yet.  So dividends AFTER the levelling off represent a very small part of ALL dividends that will be received.  If there was any reasonable chance of levelling off (by which I mean less than about 3% rise per difficulty change on average) in the near  future then DMS couldn't work - for the reasons you describe.  But that's not where we are.

You also misunderstand how closure is likely to work - specifically that MINING get a years worth of dividends assuming ZERO increase as a lump sum.  Unless growth completely halts for a long time that's a pretty good final payment.

So yes - in a steady difficulty environment MINING wouldn't work.  But in a fast-rising difficulty it keeps up with payments well then (theoretically if SELLING act rationally) just as difficulty drops below a rate of 3% they get a payment of 365 days at CURRENT difficulty.

News-flash - there's these things called ASICs being made and as they arrive difficulty is rising a lot.  We aren't at - or near - steady difficulty : but it we were then each MINING share could receive 90% of the PURCHASE price very quickly - rather than in the years it would take to get the same from other PMBs.

Don't underestimate the value of 365 days of dividends immediately rather than waiting years for them whilst praying difficulty doesn't start rising fast again.  And they get paid that by contract (unless SELLING gamble and don't close - when MINING get more but not all at once) - I can't get off cheap by talking the market price down then buying back based on market price.

All of this is fine, it's how I understood it.

My argument is, and always was, that DMS.Mining is not a mining asset and acts like one in times of difficulty increases only. If difficulty stops rising, DMS.Mining will stop acting like a mining asset (and, in fact, stop completely). It doesn't matter whether they get a payout, whether a rise is likely for some time still, or whether there is a failsafe for what would then be considered idiots buying DMS.Selling. It is not a mining asset, and acts like one as long as difficulty keeps rising only.

Does Average Joe, as a believer in the profitability of mining, understand this? If difficulty stopped rising, however, do you think prices would remain at 50% of a year's return? They'd shoot through the roof, except that DMS.Mining would close down. Suddenly, when Average Joe is proven right and that mining is indeed profitable, he'll have to sell DMS.Mining as quickly as possible to get into an asset that doesn't close its doors in the next month or so. The 200% proceed he'd get from the closing wouldn't even be close to covering what he'd need to get into mining again. A 200% rise in prices would still mean that assets yield 67% return, which is mind-boggling to any investor.

Can you see my argument of why I don't want to compare BFMines to DMS.Mining? One is a mining asset that does real mining (with the security of PMBs payouts, even) with the potential upsides of that, whereas the other is a mathematical construct that pulls the ejection seat if profitability is an option.

.b

[ThickAsThieves]

The argument boils down to this:

DMS.MINING is less prone to profit from ignorance than any other mining asset.

This doesn't make it actually worth less than the others, it makes the others more prone to being overvalued.

[alexius89]

Happy to see the high SELLING Dividend in 6 5 hours! ( from that post)

any estimates of winnings about the investment stuff?

[eltopo]

It's in 5 hours from your post and you could estimate the investment profit from the last report. Or just wait 5 hours.

[Deprived]

SLight delay is because the wallet balance didn't exactly match what was in the spreadsheet.  Turns out I hadn't scheduled todays MINING dividend.  That's going through now - after which everything should balance and SELLING dividends will go out.

[Mabsark]

SLight delay is because the wallet balance didn't exactly match what was in the spreadsheet.  Turns out I hadn't scheduled todays MINING dividend.  That's going through now - after which everything should balance and SELLING dividends will go out.

Don't forget to re-enable PURCHASE.

[Deprived]

Sold   1177
Swapped   0
Total   1177
Price   0.048759
Total   57.389343
Less Fee   57.27456431
Man Fee   1.718236929

BTC Balance (BTC-TC)   1496.221803
12581 LTC-ATF.B1    125.81000000
Coinlenders CD    201.76530809
Just-Dice Balance    108.23866033
TOTAL ASSETS    1,932.03577165
   
Outstanding MINING   40943
Outstanding SELLING   40943
Outstanding PURCHASE   634
Effective Units   41577
   
Block reward   25
Difficulty   26,162,876
Hashes per MINING   5000000
   
Daily Dividend    0.00009611
50 days (Min Liquid)    0.00480554
100 days (Forced Close)    0.00961107
365 days (Buyback)    0.03508041
405 days (IPO)    0.03892484
400 days (Post SELLING div)    0.03844428
410 days (Pre SELLING div)    0.03940539
   
NAV Post MINING Div    1,928.03977667
NAV/U Post MINING Div    0.04637275
Days Dividend Post Div   482.49
SELLING Dividend    0.00792846
NAV Post SELLING Div    1,598.39799215
NAV/U Post Selling Div    0.03844428
PURCHASE selling price    0.04036650
PURCHASE buy-back price    0.03767540

As noted, delay was because I hadn't scheduled the MINING dividend for PURCHASE which meant wallet balance didn't get to where spreadsheet said it should (it was less than 0.1 BTC off but wrong by enough not to be due to rounding of dividends).  Every day before posting the report I make sure the apreadsheet matches what actually happened.  With a SELLING dividend I do so after paying the MINING dividend - which found my error today.  Only 2nd time they haven't matched - previous one was where someone had bought PURCHASE right as I was cancelling the order so my outstanding count was wrong.

[eltopo]

Damnit - who sold into the bids immediately after div was paid? Thats my part! 

[FloatesMcgoates]

Damnit - who sold into the bids immediately after div was paid? Thats my part! 

You can't win all the time

[twentyseventy]

Damnit - who sold into the bids immediately after div was paid? Thats my part! 

You can't win all the time

Guess I need to work on my reflexes next div! Still happy with it, though-