A lot of reserve hashing power is coming

[johnyj]

Based on some latest information, 40nm ASIC chips, 5Gh/s, per chip cost is about $1. With such low cost, there will be a large increase in chip supply and hashing power during the next several months, especially after the end of the year

Consider the following scenario:

1. Large increase in chip delivery and hashing power growth, 20% difficulty increase per period is a conservative estimation

2. Bitcoin exchange rate won't rise quick enough to compensate for the increase in difficulty, because most of the investment capital were already locked in ASIC devices

3. Miner's coin generation will eventually drop to the same level of the electricity cost. No matter how cheap the ASIC devices are, they won't be able to make any significant return, so there will be a mass sell off of ASIC devices, those students/kids with free electricity will still play around with them. At the same time some miners will shut down their ASIC devices and purchase coin directly

4. However, those offline reserve hashing power will work as a difficulty floor, once difficulty dropped or exchange rate increased, they will be brought back online. So the difficulty will almost never drop in the foreseeable future

This is a necessary step to make the bitcoin exchange rate more accurately reflect supply and demand, before, a large part of the demand went into mining devices thus reduce the real demand on the market

[1715309973]

1715309973

[1715309973]

1715309973

[1715309973]

1715309973

[1715309973]

1715309973

[1715309973]

1715309973

[1715309973]

1715309973

[lucas.sev]

Based on some latest information, 40nm ASIC chips, 5Gh/s, per chip cost is about $1. With such low cost, there will be a large increase in chip supply and hashing power during the next several months, especially after the end of the year

Consider the following scenario:

1. Large increase in chip delivery and hashing power growth, 20% difficulty increase per period is a conservative estimation

2. Bitcoin exchange rate won't rise quick enough to compensate for the increase in difficulty, because most of the investment capital were already locked in ASIC devices

3. Miner's coin generation will eventually drop to the same level of the electricity cost. No matter how cheap the ASIC devices are, they won't be able to make any significant return, so there will be a mass sell off of ASIC devices, those students/kids with free electricity will still play around with them. At the same time some miners will shut down their ASIC devices and purchase coin directly

4. However, those offline reserve hashing power will work as a difficulty floor, once difficulty dropped or exchange rate increased, they will be brought back online. So the difficulty will almost never drop in the foreseeable future

This is a necessary step to make the bitcoin exchange rate more accurately reflect supply and demand, before, a large part of the demand went into mining devices thus reduce the real demand on the market

My bet is they will run miners anyway, 500W is a drop in home budget and with everyone hoping for 1k+ USD BTC, they will run them just in case. There will be no asic selloff.

[01BTC10]

This is good for network security now that government may want to act against it.

[zuerdemon]

Next year will be supply of ASICs devices bigger than demand, and because some will be not profitable to run because of electricity costs, we will see demand only for the most power effecient devices

[GigaWave]

2. Bitcoin exchange rate won't rise quick enough to compensate for the increase in difficulty, because most of the investment capital were already locked in ASIC devices

Exchange rate to fiat is not controlled by difficulty. For the 1,000,000th time.

This is a necessary step to make the bitcoin exchange rate more accurately reflect supply and demand, before, a large part of the demand went into mining devices thus reduce the real demand on the market

The only thing necessary is for all ASIC chip makers to stop taking orders and raping the fools that cant do simple math. And ship what has long been paid for. This mess is so bad I'm starting to have a hard time believing it is just stupidity and incompetence of the manufacture and is not just flat out intentional manipulation to fund their get rich and scam everyone else machines.

[reactor]

2. Bitcoin exchange rate won't rise quick enough to compensate for the increase in difficulty, because most of the investment capital were already locked in ASIC devices

Exchange rate to fiat is not controlled by difficulty. For the 1,000,000th time.

This is a necessary step to make the bitcoin exchange rate more accurately reflect supply and demand, before, a large part of the demand went into mining devices thus reduce the real demand on the market

The only thing necessary is for all ASIC chip makers to stop taking orders and raping the fools that cant do simple math. And ship what has long been paid for. This mess is so bad I'm starting to have a hard time believing it is just stupidity and incompetence of the manufacture and is not just flat out intentional manipulation to fund their get rich and scam everyone else machines.

^^^ Truth.  Everyone seems to be in agreement on the fact that manufacturers and resellers have BTC by the balls right now and there doesn't seem to be anything else on the horizon for when get-rich-mining isn't the purpose anymore.  I have yet to hear a valid argument from a hero/senior member as to how BTC has a future once people stop making loot from mining or buying into the impossible dream that a unit ordered today that is being delivered in October is still relevant. 

Have your part in a decentralized network where only few people make money, otherwise the constant price fluctuations mean you can't do much with it because it is too risky a currency for most to get involved in?  Sign me the hell up!

[FeedbackLoop]

Based on some latest information, 40nm ASIC chips, 5Gh/s, per chip cost is about $1.

That is quite brutal. Can you post some links or so?

Thanks!

[Adrian-x]

Also I agree with OP re effect significant mining investments have on bitcoin exchange rate, temporarily suppressing it as significant part of incoming capital is being diverted into large scale mining projects

This is interesting; in effect understanding this eases some distribution concerns I have. Correct me if I am not understanding this correctly, the Bitcoin economy is in recession when the Fiat to XBT rate is increasing. IE the result is outflow of XBT - in effect a trade deficit in XBT (the prevailing activity is speculation, and the effect is new market participants and the Bitcoin converts become euphoric - dollar extraction  and saving are the economic activities)

Then as we switch (the crash/ correction we call it) to a trade surplus, increased outflow of XBT relative to Fiat, we enter a boom in the business cycle, the low demand for XBT is actually reflected as a higher demand for Fiat, which in turn is "sometimes" diverted into projects. (The prevailing activity is infrastructure development, and the effect is new market participants and the Bitcoin converts become bearish and worried about exchange rate - "imported resources are invested and shorting XBT are the economic activities)

Glad this isn't part of a central planning committee.

This seems to me to create a faceted Economy one that grows competing areas in the economy. The amount of Fiat invested in infrastructure during the Business Boom will impact the Value of XBY in Fiat during the Bust.
And when maximum capacity is reached the cycle switches again.   

[johnyj]

My bet is they will run miners anyway, 500W is a drop in home budget and with everyone hoping for 1k+ USD BTC, they will run them just in case. There will be no asic selloff.

The problem is the time, with a high difficulty, a 500W machine might take you two months to mine a coin, why not just buy one coin directly

[johnyj]

This is interesting; in effect understanding this eases some distribution concerns I have. Correct me if I am not understanding this correctly, the Bitcoin economy is in recession when the Fiat to XBT rate is increasing. IE the result is outflow of XBT - in effect a trade deficit in XBT (the prevailing activity is speculation, and the effect is new market participants and the Bitcoin converts become euphoric - dollar extraction  and saving are the economic activities)

Then as we switch (the crash/ correction we call it) to a trade surplus, increased outflow of XBT relative to Fiat, we enter a boom in the business cycle, the low demand for XBT is actually reflected as a higher demand for Fiat, which in turn is "sometimes" diverted into projects. (The prevailing activity is infrastructure development, and the effect is new market participants and the Bitcoin converts become bearish and worried about exchange rate - "imported resources are invested and shorting XBT are the economic activities)

In traditional forex pricing theory, if country A export goods to country B, country B must first buy country A's currency and then purchase country A's goods. So, a trade_surplus for country A will increase the demand for its currency, thus raise its currency's value and in turn discourage its export, thus reach a balance

But this is just a best guess, the power difference between those two forces could be magnitudes. In fact, the currency itself often becomes some investment target because they carry an interest rate, so the forex exchange rate are largely affected by the interest rate difference between currencies

Bitcoin itself is also an investment vehicle. Unlike other currencies that can give some interest return, holding bitcoin won't give you any return in bitcoin. But it will act as a benchmark for other currency's supply. If other currencies supply increased exponentially while bitcoin's supply is always fixed, just from supply and demand point of view, its forex exchange rate will rise exponentially

It is not bitcoin that worth so much, it is fiat money that worth so little

[Cluster2k]

My bet is they will run miners anyway, 500W is a drop in home budget and with everyone hoping for 1k+ USD BTC, they will run them just in case. There will be no asic selloff.

The problem is the time, with a high difficulty, a 500W machine might take you two months to mine a coin, why not just buy one coin directly

Many people I know have no idea how much electricity costs, apart from "too much".  Power bills don't pop out separate billing for mining and some people are spectacularly bad at maths or just ignorant.  You would be surprised how many people consider spending $1 per day for 180 days to be cheaper than buying a bitcoin for $100 solely because they see the $100 hit all in one go.

Then there's the case of junior running a mining operation from his bedroom (early bitcoin miners would have plenty of 50c per bitcoin coins) and dad not noticing until it's too late.  Junior may not have $1k to buy some bitcoins but he sure can leech off daddy's power bill as it's 'free'.

[greenbtc]

Based on some latest information, 40nm ASIC chips, 5Gh/s, per chip cost is about $1. With such low cost, there will be a large increase in chip supply and hashing power during the next several months, especially after the end of the year

Consider the following scenario:

1. Large increase in chip delivery and hashing power growth, 20% difficulty increase per period is a conservative estimation

2. Bitcoin exchange rate won't rise quick enough to compensate for the increase in difficulty, because most of the investment capital were already locked in ASIC devices

3. Miner's coin generation will eventually drop to the same level of the electricity cost. No matter how cheap the ASIC devices are, they won't be able to make any significant return, so there will be a mass sell off of ASIC devices, those students/kids with free electricity will still play around with them. At the same time some miners will shut down their ASIC devices and purchase coin directly

4. However, those offline reserve hashing power will work as a difficulty floor, once difficulty dropped or exchange rate increased, they will be brought back online. So the difficulty will almost never drop in the foreseeable future

This is a necessary step to make the bitcoin exchange rate more accurately reflect supply and demand, before, a large part of the demand went into mining devices thus reduce the real demand on the market

My bet is they will run miners anyway, 500W is a drop in home budget and with everyone hoping for 1k+ USD BTC, they will run them just in case. There will be no asic selloff.

Not to mention people in colder climates, or people that experience winters, can use these to heat their houses and also create bitcoins at the same time. While my interest in this didn't start with computer hardware, it was certainly incorporated. I have set up a lot of duct work in my house so in the summer that I can exhaust excess heat outside and in the Spring/Fall & Winter, I can adjust the amount of excess heat from hardware / electronics to flow inside the house, thus making my miners and other equipment serve a dual purpose

[greenbtc]

Yep! Once Bitcoin hits mainstream "Bitcoin subsidized heating" is going to be in vogue. It will put further pressure on mining margins as it will make feasible mining with negative profit margins i.e. mining to have a discount on one's heating bill.

Indeed! I know in the Northeast here some people go through at least one tank of oil a winter, sometimes two (this can be anywhere from $900-1800 per winter season). Heating with wood, pellets, and even LNG can be significantly cheaper, but using these rigs to supplement heat is surely a real thing in the future.

I personally have oil, wood, and electric sources of heat just so I don't get caught with my pants down too often.

[FeedbackLoop]

Yep! Once Bitcoin hits mainstream "Bitcoin subsidized heating" is going to be in vogue. It will put further pressure on mining margins as it will make feasible mining with negative profit margins i.e. mining to have a discount on one's heating bill.

Indeed! I know in the Northeast here some people go through at least one tank of oil a winter, sometimes two (this can be anywhere from $900-1800 per winter season). Heating with wood, pellets, and even LNG can be significantly cheaper, but using these rigs to supplement heat is surely a real thing in the future.

I personally have oil, wood, and electric sources of heat just so I don't get caught with my pants down too often.

One day, with bitcoin or not, spending power to heat without doing any information processing will look like an insane waste. That is, if humanity doesn't start regressing rapidly under all the usual and very popular forces for ignorance...