[BTC-TC] Deprived Mining Speculation (DMS)

[Rannasha]

I think that the price of MINING will hold higher than its actual value, because at first glance it's a pretty lucrative PMB-equivalent. That's how I first got into it as well, going full into MINING until I actually read the details (hey, who needs the manual anyway?).

I'm fairly sure that MINING will stabilize above its value, leaving SELLING relatively cheap. Of course, market reactions may be completely opposite, so it'll be interesting to see what happens tomorrow when the difficulty changes.

[Lohoris]

IMHO, the fair value of MINING would be < 0,01 

I've made a slightly higher estimate, but definitely < 0.02.
To be profitable at current prices the difficulty should increase no more than ~5% each step...

[joele]

Then you wouldn't mind to tell us what the one-time dividend for SELLING will be after the difficulty has risen to e.g. 19,200,000  

I might easily have done something wrong:

Current MINING div 0.00016113
Difficulty change 19'402'467.47/15'605'632.68 = 1.24329899773
New MINING div 0.00016113/1.24329899773 = .000129599

Current assets 734.18617511
Current units 11630
Asset/unit 0.06312865

410 with new MINING div .000129599 * 410 = 0.05313559
400 with new MINING div .000129599 * 400 = 0.05183960
Excess asset/unit 0.06312865 - 0.05183960 = 0.01128905

This next difficulty the PURCHASE price will become 0.052487595 = (0.000129599 * 405 )

Is this correct?

[Rannasha]

Then you wouldn't mind to tell us what the one-time dividend for SELLING will be after the difficulty has risen to e.g. 19,200,000  

I might easily have done something wrong:

Current MINING div 0.00016113
Difficulty change 19'402'467.47/15'605'632.68 = 1.24329899773
New MINING div 0.00016113/1.24329899773 = .000129599

Current assets 734.18617511
Current units 11630
Asset/unit 0.06312865

410 with new MINING div .000129599 * 410 = 0.05313559
400 with new MINING div .000129599 * 400 = 0.05183960
Excess asset/unit 0.06312865 - 0.05183960 = 0.01128905

This next difficulty the PURCHASE price will become 0.052487595 = (0.000129599 * 405 )

Is this correct?

That'll be the NAV/U, PURCHASE will sell at 5% over NAV/U and Deprived will buy it back at 2% under NAV/U iirc.

edit: all this assuming that the difficulty indeed goes to 19.4M of course.

[joele]

Then you wouldn't mind to tell us what the one-time dividend for SELLING will be after the difficulty has risen to e.g. 19,200,000  

I might easily have done something wrong:

Current MINING div 0.00016113
Difficulty change 19'402'467.47/15'605'632.68 = 1.24329899773
New MINING div 0.00016113/1.24329899773 = .000129599

Current assets 734.18617511
Current units 11630
Asset/unit 0.06312865

410 with new MINING div .000129599 * 410 = 0.05313559
400 with new MINING div .000129599 * 400 = 0.05183960
Excess asset/unit 0.06312865 - 0.05183960 = 0.01128905

The new Asset will become 602.894548 = (0.000129599 * 400 * 11630)
The difference is 131.29162711 = ( 734.18617511 - 602.894548)
SELLER dividend will be 0.011289047 = (131.29162711 / 11630)

[Birdy]

I see you are getting to the same conclusions as me, but DMS.Mining is rising again xD
(And it's still undervalued in comparison to other PMBs or should I better write not that ridiculously overvalued? I wonder what will happen there? )

We also got >1000 sells of Purchase which will increase the dividends slightly :3

[eltopo]

IMHO, the fair value of MINING would be < 0.01 

I've made a slightly higher estimate, but definitely < 0.02.
To be profitable at current prices the difficulty should increase no more than ~5% each step...

I think it's even worse. At current MINING price (lets take 0.027) and an increasing difficulty of 5% per step it will take 13 months to be profitable (roi on dividends). And if difficulty increases by more (it probably will) you'll never earn anything... 

[Rannasha]

IMHO, the fair value of MINING would be < 0.01  

I've made a slightly higher estimate, but definitely < 0.02.
To be profitable at current prices the difficulty should increase no more than ~5% each step...

I think it's even worse. At current MINING price (lets take 0.027) and an increasing difficulty of 5% per step it will take 13 months to be profitable (roi on dividends). And if difficulty increases by more (it probably will) you'll never earn anything...  

At a 5% increase per step (repeated indefinitely), MINING will earn 21 times its current biweekly dividend in total (sum of a geometric series), which starting tomorrow will be 14 x 0.13 mBTC, so 1.82 mBTC per difficulty readjustment period (approximately, if difficulty rises, the readjustment periods will be less than 2 weeks) for a total of 38.22 mBTC.

With a 10% difficulty increase per step, MINING will only ever pay back 20.02 mBTC.

edit: updated sloppy math

[joele]

What a trading game.
Now I fully understand and set my strategy plan to the next difficulty. Hope it works.

[somestranger]

Well shit, after seeing the math worked out I was clearly trading the wrong side. Time to cut my losses on MINING before the value tanks. It will be interesting to see how this will affect the already more expensive PMBs.

[eltopo]

Who buys SELLING @ 0.044? Better buy PURCHASE, convert and then sell MINING, this way you can get SELLING < 0.04 at current rates...

[Lohoris]

Who buys SELLING @ 0.044? Better buy PURCHASE, convert and then sell MINING, this way you can get SELLING < 0.04 at current rates...

True, but converting takes time, and during that time the prices might have already adjusted.

[joele]

Who buys SELLING @ 0.044? Better buy PURCHASE, convert and then sell MINING, this way you can get SELLING < 0.04 at current rates...

True, but converting takes time, and during that time the prices might have already adjusted.

and this is crucial if no one buy your higher offer because SELLING only has 0.037232 bids, and MINING has 0.026003 bids .
Better to buy PURCHASE after the diff adjustment, so you will start fresh.  Just my opinion.

[odolvlobo]

The dividend return on SELLING is more than 4x higher than the dividend return on MINING (compared to their current price per unit).

Keep in mind that DMS.SELLING dividends work just like stocks. Dividends are not like interest -- you don't gain anything by receiving dividends. A dividend just converts share value into cash. Assuming the value of DMS.MINING is unchanged (it is unaffected by the DMS.SELLING dividend, after all), then the NAV of a DMS.SELLING share will drop by the amount of the dividend because the dividend is paid from the capital that determines the share's NAV.

For example, suppose the NAV of a share is 100 BTC (because it is backed by 100 BTC of something). Paying a dividend of 1 BTC will lower the NAV to 99 BTC because it is now backed by 99 BTC of something. After the dividend, you still have 100 BTC -- 1 BTC plus a share worth 99 BTC.

Also, keep in mind that mining dividends are different.

There are other factors in play here, so although this is a fundamental concept, the results could be different.

[Deprived]

Then you wouldn't mind to tell us what the one-time dividend for SELLING will be after the difficulty has risen to e.g. 19,200,000 

I might easily have done something wrong:

Current MINING div 0.00016113
Difficulty change 19'402'467.47/15'605'632.68 = 1.24329899773
New MINING div 0.00016113/1.24329899773 = .000129599

Current assets 734.18617511
Current units 11630
Asset/unit 0.06312865

410 with new MINING div .000129599 * 410 = 0.05313559
400 with new MINING div .000129599 * 400 = 0.05183960
Excess asset/unit 0.06312865 - 0.05183960 = 0.01128905

Was going to make a post after today's dividend and explain the math of predicting a SELLING dividend - but I see someone else has explained it already.

That's the correct way to work it out - and would be almost the correct dividend (dividend is paid AFTER a MINING dividend so you'd need to take off today's dividend AND tomorrow's).  Note also that if the difficulty doesn't happen until after midnight (GMT) tonight then tomorrow's dividend for MINIGN would be at al old rate - so the first MINING dividend at new rate (and SELLING's first dividend at all) wouldn't happen until Tuesday.

IMPORTANT : DO NOT LEAVE BIDS UP ON SELLING BEFORE THE SELLING DIVIDEND IF YOU DON'T KNOW WHAT YOU'RE DOING.

Why SELLING not MINING?

In theory, whenever a dividend is paid the price of that share AFTER (post) dividend should be exactly the amount of the dividend lower than it was before (pre) dividend.  With MINING dividends being small and regular that has no real impact.  But the SELLING dividend is likely to be much larger (unless a LOT of the network stops mining in the next few hours).  If the dividend is around .01 then payment of the dividend represents a transfer of .01 of the value of SELLING from being held by the fund (me) to being held by those holding SELLING shares.  That should have ZERO effect on the price of MINING (their VALUE hasn't changed) but should cause a drop of about .01 in the price of SELLING (and also of PURCHASE).

I do NOT intend to clear market orders on SELLING.  I WILL clear market orders on PURCHASE if there are any bids placed above the new selling price of PURCHASE (as those clearly wouldn't be intended to stay up).  The only time I'd clear market orders for MINING or SELLING would be if something unexpected occurred.  This dividend is NOT unexpected - it could be calculated and predicted with  great accuracy for at least 3-4 days now (from before any shares were sold at all in fact).

Any changes to the price of MINING are NOT due to the PAYMENT of the dividend - but could well be due to people recognising the existence of the dividend (in which case they SHOULD be priced in well before the dividend is actually paid).

As ever, dividend payments for MINING will continue to mirror those of 'PMBs' very closely.  In the short to medium term it is almost certain they will be exactly the same - and will only ever fall below if difficulty stops rising, falls, or rises very slowly for a protracted period of time.  None of those are likely this year.  So ANY conclusions you make about the value of MINING do very much apply to ALL 'PMBs'.  Potentially MINING will have total life-time payments (assuming payments forever) of 5% or less below 'PMBs' (and MORE than any PMB-type offering which has a lower buy-back clause).  Do NOT fall into the trap of believing that MINING is somehow going to pay out a lot less than PMBs - if they pay more then the extra will be a small amount given out in tiny dividends over a period of many years once MINING has been bought back.

MINING is a BAD investment if bought at too high a price (and PMBs bought for much more per MH/S are even worse).  It is a GOOD investment if bought cheaply (and PMBs bought for much more per MH/S are worse) .  The same is true for SELLING - whether it is a good buy or not depends on what you pay for it.  This fund is about allowing investors to effectively bet based on where they believe the correct price split lies - in the process the market is also defining what it believes the cost of 5 MH/S of PMB to be worth.

PMBs are NOT inherently a bad investment by design.  They're a bad investment if bought at too high a price.  Nearly all PMBs have been sold at prices where investors will not ever make back what they paid.

[Rannasha]

42 blocks left until the difficulty readjustment, so it's looking likely that it will happen before midnight GMT (since blocks are coming in faster than every 10 minutes, hence the need for a diff readjustment) and the SELLING dividend will pay out tomorrow.

[Lohoris]

MINING is a BAD investment if bought at too high a price (and PMBs bought for much more per MH/S are even worse).  It is a GOOD investment if bought cheaply (and PMBs bought for much more per MH/S are worse) .  The same is true for SELLING - whether it is a good buy or not depends on what you pay for it.  This fund is about allowing investors to effectively bet based on where they believe the correct price split lies - in the process the market is also defining what it believes the cost of 5 MH/S of PMB to be worth.

PMBs are NOT inherently a bad investment by design.  They're a bad investment if bought at too high a price.  Nearly all PMBs have been sold at prices where investors will not ever make back what they paid.

In other words, "price is paramount".
Anyone who isn't familiar with this concept would better at least read this article (though this post by Deprived is already a good explanation).

[Deprived]

42 blocks left until the difficulty readjustment, so it's looking likely that it will happen before midnight GMT (since blocks are coming in faster than every 10 minutes, hence the need for a diff readjustment) and the SELLING dividend will pay out tomorrow.

Yes that looks likely (and has done so since Wednesday - before that it looked likely change would be after midnight).  A fairly small drop in hashing power and/or bad luck could still push it back - but it looks increasingly less likely.

I will NOT be able to announce the exact dividend in advance - as it's impacted slightly by any sales of PURCHASE, so can't be calculated at all until after I've taken down the PURCHASE Ask wall.

[Deprived]

MINING is a BAD investment if bought at too high a price (and PMBs bought for much more per MH/S are even worse).  It is a GOOD investment if bought cheaply (and PMBs bought for much more per MH/S are worse) .  The same is true for SELLING - whether it is a good buy or not depends on what you pay for it.  This fund is about allowing investors to effectively bet based on where they believe the correct price split lies - in the process the market is also defining what it believes the cost of 5 MH/S of PMB to be worth.

PMBs are NOT inherently a bad investment by design.  They're a bad investment if bought at too high a price.  Nearly all PMBs have been sold at prices where investors will not ever make back what they paid.

In other words, "price is paramount".
Anyone who isn't familiar with this concept would better at least read this article (though this post by Deprived is already a good explanation).

Yes - that's where Bitcoin investors have historically consistently got it wrong.  They focus on whether something is a 'good' or 'bad' investment when (other than for scams) there's no such thing.  In the context of investing 'good' and 'bad' aren't absolute concepts - they're relative concepts that only have useful meaning when discussed for a particular price-point.   Most Bitcoin investors' efforts to determine a price for a security don't go beyond looking at what it's being sold for and assuming that must have some correlation to its value.

[Deprived]

Sold   1936
Price   0.066116
Total   128.000576
Less Fee   127.7445748
Man Fee   3.832337245

Management fee of 3.832 BTC paid.

BTC Balance (BTC-TC)    756.83177809
10000 LTC-ATF.B1    100.00000000
TOTAL ASSETS    856.83177809
   
Outstanding MINING   13014
Outstanding SELLING   13014
Outstanding PURCHASE   552
Effective Units   13566
   
Block reward   25
Difficulty   15605633
Hashes per MINING   5000000
   
Daily Dividend    0.00016113
50 days (Min Liquid)    0.00805649
100 days (Forced Close)    0.01611298
365 days (Buyback)    0.05881238
405 days (IPO)    0.06525757
400 days (Post SELLING div)    0.06445192
410 days (Pre SELLING div)    0.06606322
   
NAV Post MINING Div    854.64589117
NAV/U Post MINING Div    0.06299911
Days Dividend Post Div   390.98
SELLING Dividend    -         
NAV Post SELLING Div    854.64589117
NAV/U Post Selling Div    0.06299911
PURCHASE selling price    0.06614906
PURCHASE buy-back price    0.06173913