Bitcoin Shrinking - The Long View

[grod]

How again is mining currently highly profitable? Aren't we at near the least profitable levels it has ever been?

That is correct.  But it is still far more profitable than just about any other investment.  My gross margin on every bitcoin is: 500 watts * 96 hours = 48 kwhr.  At 4.6c/kw/hr+tax&fees (6c/kwhr reverse computed from final bill) my manufacturing cost per bitcoin is ... a bit under 3 dollars.   With a sale price of $8, well, even Apple doesn't get that kind of gross margins.

The only wrinkle is I don't believe it'll remain highly profitable long enough to be a decent ROI on the upfront investment.  When I got into bitcoin my gross margins were around 3500%.

[mmortal03]

How again is mining currently highly profitable? Aren't we at near the least profitable levels it has ever been?

That is correct.  But it is still far more profitable than just about any other investment.  My gross margin on every bitcoin is: 500 watts * 96 hours = 48 kwhr.  At 4.6c/kw/hr+tax&fees (6c/kwhr reverse computed from final bill) my manufacturing cost per bitcoin is ... a bit under 3 dollars.   With a sale price of $8, well, even Apple doesn't get that kind of gross margins.

The only wrinkle is I don't believe it'll remain highly profitable long enough to be a decent ROI on the upfront investment.  When I got into bitcoin my gross margins were around 3500%.

You have crazy low electricity costs.  No wonder you've been saying it's highly profitable.  My electricity is 13c/kWh so I'm just about breaking even at this point. The national average in the US is something like 11c/kWh, so it's not highly profitable for the average person in the U.S. at this point, unless they aren't paying for electricity. 

By the way, what's your hashrate? I'm also curious if you are figuring in the cost of your air conditioning, but at your electricity cost, it probably doesn't matter as much for you.

[grod]

You have crazy low electricity costs.  No wonder you've been saying it's highly profitable.  My electricity is 13c/kWh so I'm just about breaking even at this point. The national average in the US is something like 11c/kWh, so it's not highly profitable for the average person in the U.S. at this point, unless they aren't paying for electricity. 

By the way, what's your hashrate? I'm also curious if you are figuring in the cost of your air conditioning, but at your electricity cost, it probably doesn't matter as much for you.

My hash rate is now... 600 Mhash.  I managed to sell two of my XFX 5830s for $120 a pop, and I'm left with my last 2 undervolted-at-910-mhz cards.  A/C is a non-issue, my mining hardware is in the basement and even without AC the cards rarely get up over 64C.

http://www.think-energy.net/electricitycosts.htm implies most of the US is under 10C a kw/hr (by state/land area, not population), and my state isn't the only one with power costs half yours.   So that's 30-50% lower than your costs for quite a few people -- if you're barely breaking even that means a good chunk of the US has a 30-50% gross margins.   Not spectacular, but still solid.

At any rate, even with sub-$8 BTC people are still mining at the same rate as ever.  5.4 ghash on deepbit at the moment, which is roughly peak.

[mmortal03]

http://www.think-energy.net/electricitycosts.htm implies most of the US is under 10C a kw/hr (by state/land area, not population), and my state isn't the only one with power costs half yours.   So that's 30-50% lower than your costs for quite a few people -- if you're barely breaking even that means a good chunk of the US has a 30-50% gross margins.   Not spectacular, but still solid.

At any rate, even with sub-$8 BTC people are still mining at the same rate as ever.  5.4 ghash on deepbit at the moment, which is roughly peak.

It would be nice to see it in terms of population. But besides that, keep in mind that oil prices are up significantly since 2009, so energy costs should be up from that. However, considering that I live in one of the most expensive places in that map's second tier of states, and I'm still near that category's upper threshold, it may be close enough to still use.  So, what I need to do is set up a rig for my family who live in one of the cheaper and colder states!

[grod]

It would be nice to see it in terms of population. But besides that, keep in mind that oil prices are up significantly since 2009, so energy costs should be up from that. However, considering that I live in one of the most expensive places in that map's second tier of states, and I'm still near that category's upper threshold, it may be close enough to still use.  So, what I need to do is set up a rig for my family who live in one of the cheaper and colder states!

Out of curiosity, what makes you think a rig would "mine its weight" at this point?  Viable FPGA mining is on our doorstep (with a 90% gross margin advantage over GPU it doesn't matter what the Mhash/$ advantage GPUs have -- mining any amount of coins at a loss per coin vs mining some coins at a profit means difficulty will adjust) not to mention 7 series on the way from AMD.  Do you really think we'll still be looking at 30-50% gross margins for GPU mining in the next 6-9 months to cover hardware?  And yes, I put a value on existing hardware -- it still sells at 90-120% of original purchase price.

Seeing as we went from a 3500% to a 30% gross margin in ~3 months I am a bit skeptical we'll suddenly start maintaining current GPU profit margins.

[mmortal03]

Out of curiosity, what makes you think a rig would "mine its weight" at this point?  Viable FPGA mining is on our doorstep (with a 90% gross margin advantage over GPU it doesn't matter what the Mhash/$ advantage GPUs have -- mining any amount of coins at a loss per coin vs mining some coins at a profit means difficulty will adjust) not to mention 7 series on the way from AMD.  Do you really think we'll still be looking at 30-50% gross margins for GPU mining in the next 6-9 months to cover hardware?  And yes, I put a value on existing hardware -- it still sells at 90-120% of original purchase price.

Seeing as we went from a 3500% to a 30% gross margin in ~3 months I am a bit skeptical we'll suddenly start maintaining current GPU profit margins.

I agree with you.  The only rig I would set up at this point would be my current rig at a better location (somewhere with cheaper electricity and cooler weather).

[zachcope]

The long term trend for bitcoin value is contraction, not expansion.

Here's the fact of the matter:

+ Bitcoin just enjoyed more media exposure over the past 3 months than can reasonably be expected to occur anywhere in the near future. There's just nothing newsworthy forthcoming unless there is something scandalous that happens again, and we're just about out of interesting scandals. We've made the rounds from illegal purchasing to hacking to market failures.
  There's just nothing left to get the attention of corporate media. The fact is that no-one cares about bitcoin as a medium of exchange, except a small core constituency of idealists here on these forums. It HAD newsworthy spectacle value as prices skyrocketed and people "got rich quick," but those times are over.  There is nothing left of newsworthy value.

+ The price run-up happened SOLELY on hype alone. There's not much analysis that needs to be done here. It was clearly a bubble that started with the Silk Road coverage, inflated with the mining craze, and ended with the Gox scandal. That's it folks. Bitcoin jumped the shark 3 weeks ago.

+ The current "stability" is no such thing. There is no stability when there's no backing economy.  The only "stability" we're seeing is roughly the same sub 10-15,000 (could be exceedingly lower, and possibly a bit higher though doubtfully) "investors" propping up the price and using trading bots to maintain the appearance of a functioning market and "stability."
  The fact is that the market has been on a slow and steady DECLINE ever since Gox came back online. This is because there is no new blood entering the market, just the same old speculators throwing more of their paychecks into it; BUT, not enough to grow the market. That's why were seeing a steady loss of a few cents of USD value everyday. And this will continue for the long haul.

+ Echoing the same dilemma of 3 months ago when bitcoin began catching on with speculators, "Where is the bitcoin economy."  Well folks, this is it. The list of bitcoin merchants hasn't grown at all, and in fact if you browse the Trade section of bitcoin.org itself, and explore some of the merchants there you'll find that some of them have removed their bitcoin advertisements and no longer APPEAR to accept it. I encourage you to peruse them and see for yourself, because during that excercise you'll also see that basically all businesses listed are extremely small time, mom and pop shop operations, and most of them quite amateur at that.  That is your bitcoin economy. That is what you have to work with now, and for any reasonable foreseeable future.

This is not a thread about the speculation of bitcoin's future, these are the facts.

Lol maybe some of my coins were once yours!
BTC

[cypherdoc]

The long term trend for bitcoin value is contraction, not expansion.

Here's the fact of the matter:

+ Bitcoin just enjoyed more media exposure over the past 3 months than can reasonably be expected to occur anywhere in the near future. There's just nothing newsworthy forthcoming unless there is something scandalous that happens again, and we're just about out of interesting scandals. We've made the rounds from illegal purchasing to hacking to market failures.
  There's just nothing left to get the attention of corporate media. The fact is that no-one cares about bitcoin as a medium of exchange, except a small core constituency of idealists here on these forums. It HAD newsworthy spectacle value as prices skyrocketed and people "got rich quick," but those times are over.  There is nothing left of newsworthy value.

+ The price run-up happened SOLELY on hype alone. There's not much analysis that needs to be done here. It was clearly a bubble that started with the Silk Road coverage, inflated with the mining craze, and ended with the Gox scandal. That's it folks. Bitcoin jumped the shark 3 weeks ago.

+ The current "stability" is no such thing. There is no stability when there's no backing economy.  The only "stability" we're seeing is roughly the same sub 10-15,000 (could be exceedingly lower, and possibly a bit higher though doubtfully) "investors" propping up the price and using trading bots to maintain the appearance of a functioning market and "stability."
  The fact is that the market has been on a slow and steady DECLINE ever since Gox came back online. This is because there is no new blood entering the market, just the same old speculators throwing more of their paychecks into it; BUT, not enough to grow the market. That's why were seeing a steady loss of a few cents of USD value everyday. And this will continue for the long haul.

+ Echoing the same dilemma of 3 months ago when bitcoin began catching on with speculators, "Where is the bitcoin economy."  Well folks, this is it. The list of bitcoin merchants hasn't grown at all, and in fact if you browse the Trade section of bitcoin.org itself, and explore some of the merchants there you'll find that some of them have removed their bitcoin advertisements and no longer APPEAR to accept it. I encourage you to peruse them and see for yourself, because during that excercise you'll also see that basically all businesses listed are extremely small time, mom and pop shop operations, and most of them quite amateur at that.  That is your bitcoin economy. That is what you have to work with now, and for any reasonable foreseeable future.

This is not a thread about the speculation of bitcoin's future, these are the facts.

Lol maybe some of my coins were once yours!
BTC

Synaptic was one of the worst trolls around BitcoinTalk. 

he was relentless and used all sorts of foul language.  i battled him more than once.

what happened to him?

[ElectricMucus]

lol that's not relentless.

[derpinheimer]

Just looking at the charts, he was right.. [when he posted it.]

Went from $14 to $2, taking well over a year to get back to $14.

[antimattercrusader]

The long term trend for bitcoin value is contraction, not expansion.

Here's the fact of the matter:

+ Bitcoin just enjoyed more media exposure over the past 3 months than can reasonably be expected to occur anywhere in the near future. There's just nothing newsworthy forthcoming unless there is something scandalous that happens again, and we're just about out of interesting scandals. We've made the rounds from illegal purchasing to hacking to market failures.
  There's just nothing left to get the attention of corporate media. The fact is that no-one cares about bitcoin as a medium of exchange, except a small core constituency of idealists here on these forums. It HAD newsworthy spectacle value as prices skyrocketed and people "got rich quick," but those times are over.  There is nothing left of newsworthy value.

+ The price run-up happened SOLELY on hype alone. There's not much analysis that needs to be done here. It was clearly a bubble that started with the Silk Road coverage, inflated with the mining craze, and ended with the Gox scandal. That's it folks. Bitcoin jumped the shark 3 weeks ago.

+ The current "stability" is no such thing. There is no stability when there's no backing economy.  The only "stability" we're seeing is roughly the same sub 10-15,000 (could be exceedingly lower, and possibly a bit higher though doubtfully) "investors" propping up the price and using trading bots to maintain the appearance of a functioning market and "stability."
  The fact is that the market has been on a slow and steady DECLINE ever since Gox came back online. This is because there is no new blood entering the market, just the same old speculators throwing more of their paychecks into it; BUT, not enough to grow the market. That's why were seeing a steady loss of a few cents of USD value everyday. And this will continue for the long haul.

+ Echoing the same dilemma of 3 months ago when bitcoin began catching on with speculators, "Where is the bitcoin economy."  Well folks, this is it. The list of bitcoin merchants hasn't grown at all, and in fact if you browse the Trade section of bitcoin.org itself, and explore some of the merchants there you'll find that some of them have removed their bitcoin advertisements and no longer APPEAR to accept it. I encourage you to peruse them and see for yourself, because during that excercise you'll also see that basically all businesses listed are extremely small time, mom and pop shop operations, and most of them quite amateur at that.  That is your bitcoin economy. That is what you have to work with now, and for any reasonable foreseeable future.

This is not a thread about the speculation of bitcoin's future, these are the facts.

LOL I saw this and didn't look at the date and was like WTF, what is he smoking. (Especially about the decline of several cents per day, and declining merchants) lol.