A rally is inevitable

[johnyj]

Based on latest difficulty and a 20% difficulty change projection, all the ASIC mining rigs will generate 500% of its current difficulty income during its lifespan

This means, if you have a 25Gh device, and start to hash at the beginning of this difficulty, you will make 4 coins total at current difficulty, and 20 coins during its lifespan, so any purchase price higher than 20 coins will never ROI in bitcoin. If the device arrived after one month, it will only generate 10 coins during its lifespan

Take knc's 200GH device for example, costs about 40 bitcoins. If it start to mine after one month, first period will be 16 coins, 80 coins during its life span. After another month (which is shceduled delivery time), first period will be 8 coins, 40 coins during its life span.

This is also true for those buying mining equipments with fiat money, if you spend fiat money to buy those 40 coins, you already had them without all those hassles about managing mining equipments


The positive thing is, soon the mining channel of investment in bitcoin almost fully closed, investment capital will flow back into exchanges

(But it is also possible that most of the investment capitals were trapped in mining devices thus no money can be used to purchase bitcoin now. In such a case we will see lackluster price development and skyrocketing difficulty)

[Zaih]

Works for me.

Leggo.

[Kaiji]

Seems to make a lot of sense. Investing in bitcoins requires a business strategy if you are going to put a lot of wealth into it. I had no idea how few coins one would make with those mining rigs. If you are planning on holding bitcoins then the rigs wouldn't be a bad idea.

[ElectricMucus]

Difficulty follows price not verse visa, this has been debated to death already (tip to OP your side always loses)
So if people overdid it with their mining investment, they made a bad investment, and that's it.

It will get to the point where ASICs don't even pay for the electricity it costs to run them, it happend with GPUs and it will happen again.

[Kupsi]

Difficulty follows price not verse visa, this has been debated to death already (tip to OP your side always loses)

Yes. But when difficulty has reached the right level for the current price, people will start to invest in coins instead of mining equipment.

[ElectricMucus]

Difficulty follows price not verse visa, this has been debated to death already (tip to OP your side always loses)

Yes. But when difficulty has reached the right level for the current price, people will start to invest in coins instead of mining equipment.

The majority of the ASICs is payed for with Bitcoins so that will actually be the opposite effect you guys are hoping for. Added to that existing ASIC miners have an incentive to dump their coins because of increased competition.

The only hope for a new rally is a new media hype.

[Kupsi]

The majority of the ASICs is payed for with Bitcoins so that will actually be the opposite effect you guys are hoping for. Added to that existing ASIC miners have an incentive to dump their coins because of increased competition.

Why will they dump their coins because of increased competition? If I recieved less coins, I would hold on to them stronger than before.

And if you buy ASICs with bitcoins, don't you want bitcoins back (not FIAT)?

[Akka]

Why will they dump their coins because of increased competition? If I recieved less coins, I would hold on to them stronger than before.

And if you buy ASICs with bitcoins, don't you want bitcoins back (not FIAT)?

That's true for small miners, that only run them to get BTC. The guys that run big farms have significant operational costs that have to be covered by selling part of their mining income.

As mining provability decreases, the % of BTC that they have to sell immediately to cover their expenses increases. Therefore the overall % of fresh mined BTC that are sold immediately increases.

But honestly, at this point I don't think that mined BTC have a significant impact on the exchange rate anymore.

To the rally, I don't think we will see a real increase in Value in the next 6 Month or even longer. But that's OK.

All the "big names" we have in BTC now are people that joined it during the 2011 Bubble, staid after in and build the services that made BTC what it is today.

This time 100th the amount of people as during the 2011 Bubble came into Bitcoin, if the same % as 2011 stay and start building services they will harvest the fruits in ~2 Years. But for that I believe it's better if it gets a litte more silent around BTC for a while.

[Kupsi]

That's true for small miners, that only run them to get BTC. The guys that run big farms have significant operational costs that have to be covered by selling part of their mining income.

As mining provability decreases, the % of BTC that they have to sell immediately to cover their expenses increases. Therefore the overall % of fresh mined BTC that are sold immediately increases.

I understand the argument now. Thank you 

[azw409]

I think that we are already at the stage where no future mining investment will pay for itself. This means fewer miners and therefore fewer people with Bitcoin to spend. This either means that Bitcoins become more valuable because they are harder and more costly acquire or, more likely, the whole thing will pretty much die because business won't bother to make the investment to accept it because there are fewer people with it and so it will lose its current popularity and never gain any more traction.

The best thing going for Bitcoin was the democracy of mining in that anybody with a graphics card can generate a small amount, now you need serious investment in ASIC kit that is unlikely to make a return. All the GPU's are now useless and so the generation phase that was anticipated in the original design has ended. Without significant market share and large transactions fees, its pointless for anybody to make an investment in mining.

So my prediction is a slow downward spiral in value from now on. Meanwhile hash rates will continue to rocket until the ASIC manufacturers start to fold resulting in one or two large miners left operating i.e. a large likelihood of the dreaded 51% scenario. Then Bitcoin will be truly worthless.

It's a real shame, I really wanted it to succeed but I think ASIC's came too soon in its life cycle and killed it.

[Kupsi]

I think that we are already at the stage where no future mining investment will pay for itself. This means fewer miners and therefore fewer people with Bitcoin to spend. This either means that Bitcoins become more valuable because they are harder and more costly acquire or, more likely, the whole thing will pretty much die because business won't bother to make the investment to accept it because there are fewer people with it and so it will lose its current popularity and never gain any more traction.

The best thing going for Bitcoin was the democracy of mining in that anybody with a graphics card can generate a small amount, now you need serious investment in ASIC kit that is unlikely to make a return. All the GPU's are now useless and so the generation phase that was anticipated in the original design has ended. Without significant market share and large transactions fees, its pointless for anybody to make an investment in mining.

So my prediction is a slow downward spiral in value from now on. Meanwhile hash rates will continue to rocket until the ASIC manufacturers start to fold resulting in one or two large miners left operating i.e. a large likelihood of the dreaded 51% scenario. Then Bitcoin will be truly worthless.

It's a real shame, I really wanted it to succeed but I think ASIC's came too soon in its life cycle and killed it.

I know, in real life, 8 people with bitcoins and none of them has ever mined. I have mined for half an hour, only because I wanted to see how it works. People will continue to invest in bitcoins as a store of value, buying them at an exchange.

[Akka]

Not like we already had this a 100 times, but well:

I think that we are already at the stage where no future mining investment will pay for itself. This means fewer miners and therefore fewer people with Bitcoin to spend. This either means that Bitcoins become more valuable because they are harder and more costly acquire or, more likely, the whole thing will pretty much die because business won't bother to make the investment to accept it because there are fewer people with it and so it will lose its current popularity and never gain any more traction.

The best thing going for Bitcoin was the democracy of mining in that anybody with a graphics card can generate a small amount, now you need serious investment in ASIC kit that is unlikely to make a return. All the GPU's are now useless and so the generation phase that was anticipated in the original design has ended. Without significant market share and large transactions fees, its pointless for anybody to make an investment in mining.

So my prediction is a slow downward spiral in value from now on. Meanwhile hash rates will continue to rocket until the ASIC manufacturers start to fold resulting in one or two large miners left operating i.e. a large likelihood of the dreaded 51% scenario. Then Bitcoin will be truly worthless.

It's a real shame, I really wanted it to succeed but I think ASIC's came too soon in its life cycle and killed it.

After the 2011 Bubble mining was not privitable, too. For some time the difficult even decreased as people stopped mining. It didn't kill Bitcoin.
If you have some basic understanding of economics you will see that mining is designed to be a 0 sum game for the miner. The device used for it doesn't matter. As long as mining is profitable, people will start mining to make money until it reaches an equilibrium with running expenses. This is true no matter what is used to mine, be it CPUs, GPUs, ASICs or Windmills.

Also, that mining get's professional and more mining companies develop that have advantages over private miners and push them out is expected, no matter what device is used. That's just how any marked develops. Why should BTC (or cryptocurrency in general) be a difference here?

[johnyj]

I suppose that those who bought large amount of mining equipments are long term investors, they have certain amount of risk fiat money that they would like to throw into bitcoin,  mining equipment is one of the investment option. They don't want to cash out quickly, since anyway those risk money will be converted into bitcoin and stay there for a couple of years. And if their financial situation improved (Which is likely after huge amount of QE3 money), they might invest more

But the risk is that they didn't know how large BFL's order queue is, and how many underground ASIC factories are opening up in china. That will eventually make each devices' daily coin return less than 0.1 coin

Once for a while, GPU mining rig also mined at a loss at the end of 2011, but that never lasted long, since people turned off mining rigs and purchased coin directly, which supported the exchange rate

The next natural step is that people will start to use mbtc as a unit of count, the day that you can acquire a single bitcoin without huge amount of capital will soon be gone

[johnyj]

Just read the latest Avalon update, it also showed how a terrible mess the mining industry is now, someone might kidnap their relatives to get chips delivered  

This spring's rally is caused by reward halving and an anticipation of 20x increase in difficulty when ASIC devices are mass deployed, but now difficulty has almost reached 20x without any sign of stop, the projection of future exchange rate will change accordingly

[azw409]

The big difference between the 2011 bubble and now is that most people already had graphics cards so there was no barrier to enter mining so you didn't need to make a profit. Now you need serious money to buy ASIC hardware so you have to make a return which is unlikely. Already 5GH/s Jalepenos will struggle to break even and most buyers have yet to receive them. If there's no profit in mining who will do it ?

[ElectricMucus]

The big difference between the 2011 bubble and now is that most people already had graphics cards so there was no barrier to enter mining so you didn't need to make a profit. Now you need serious money to buy ASIC hardware so you have to make a return which is unlikely. Already 5GH/s Jalepenos will struggle to break even and most buyers have yet to receive them. If there's no profit in mining who will do it ?

Suckers

[lucas.sev]

The big difference between the 2011 bubble and now is that most people already had graphics cards so there was no barrier to enter mining so you didn't need to make a profit. Now you need serious money to buy ASIC hardware so you have to make a return which is unlikely. Already 5GH/s Jalepenos will struggle to break even and most buyers have yet to receive them. If there's no profit in mining who will do it ?

People will buy the 6k USD mining rigs and run them anyway, because why not. 400W power drain is a drop in the home budget.

[ElectricMucus]

The big difference between the 2011 bubble and now is that most people already had graphics cards so there was no barrier to enter mining so you didn't need to make a profit. Now you need serious money to buy ASIC hardware so you have to make a return which is unlikely. Already 5GH/s Jalepenos will struggle to break even and most buyers have yet to receive them. If there's no profit in mining who will do it ?

People will buy the 6k USD mining rigs and run them anyway, because why not. 400W power drain is a drop in the home budget.

You can grow pretty decent pot with 400W of power.

[hacknoid]

The big difference between the 2011 bubble and now is that most people already had graphics cards so there was no barrier to enter mining so you didn't need to make a profit. Now you need serious money to buy ASIC hardware so you have to make a return which is unlikely. Already 5GH/s Jalepenos will struggle to break even and most buyers have yet to receive them. If there's no profit in mining who will do it ?

People will buy the 6k USD mining rigs and run them anyway, because why not. 400W power drain is a drop in the home budget.

I think the other thing that is looming is the glut in the ASIC market; there are a lot of people that have pre-ordered hardware, and they will still get it on put it online.  However the hardware manufacturers are still going to keep pumping out new ASICs even as the ROI on new purchases becomes achievable; this will lead to a glut on the market.  At that time, prices of the ASICs will begin to drop; we have already seen it with the Block Erupters price going down as people are realizing that there is no way to recover their investment.  That will slow growth in the mining sector until the prices become reasonable again.

Of course the other factor is the exchange rate, which if it goes up again will drive renewed interest in mining.


Bottom line - price of hardware will balance with value of BTC and difficulty, so that anyone can still invest in it.  

[phatsphere]

Of course the other factor is the exchange rate, which if it goes up again will drive renewed interest in mining.

in the past we have seen, that a lot are still mining although it is clearly not profitable. they only speculated on higher prices a few months later, and my guess is they were right. if that pattern repeats, i don't know where the mining-top is. and even less, where the price top is (or should be).