Crowd funded Bitcoin Mining is dead at current BTC price

[lo1]

Deciding to mine is an important matter, also because this is a contribution to the network stability. How much can one decide to risk in this anyway?. I decided to share my analysis of the situation here (sorry, I don't know if such a self linking is ok with the TOU):

http://laurent.henocque.com/post/2013/09/16/On-Bitcoin-Mining-and-the-vallue-of-Bitcoin

My conclusion is that to account for risks, the value of a BTC is grossly fourfold underestimated. The reason is that to mine, one must expect obtaining more BTC (not $) than by buying them now.

BTC break even can be theoretically expected using mining hardware paid today (assuming 139$/BTC - but bitstamp rates make it worse) at:
    16 dollars/GH if you expect mid october delivery
    11 dollars/GH if you expect early november delivery
    8 dollars/GH if you expect mid november delivery
    6 dollars/GH if you expect early december delivery
    4 dollars/GH if you expect mid december delivery
    3 dollars/GH if you expect early january 2014 delivery
    ...

However, if you look at the table, the correct figures are in BTC
 
To be on a 'safe' side should mean to at least anticipate a one month late delivery, and to expect doubling the BTC. So 3$ / Gh paid today for a delivery in january is not good. I would not accept to pay more than 0.7 $ for this.

More badly, a KNCMiner Saturn expected 'sometime in October, or November' will never mine the BTC it cost (from June to now).

I may be wrong indeed...

(edit - typos)

[bbxx]

More badly, a KNCMiner Saturn expected 'sometime in October, or November' will never mine the BTC it cost (from June to now).
I may be wrong indeed...

Some of people paid 80-110 btc for jupiter with vat and hosting.
They will never get those btc back.

[lo1]

Some of people paid 80-110 btc for jupiter with vat and hosting.
They will never get those btc back.

sure, lots of money went in smoke here.

[murraypaul]

My conclusion is that to account for risks, the value of a BTC is grossly fourfold underestimated. The reason is that to mine, one must expect obtaining more BTC (not $) than by buying them now.

My conclusion would be that mining hardware is 4 times overpriced.
Price is not simply a question of supply, but also of demand.

[lo1]

My conclusion would be that mining hardware is 4 times overpriced.
Price is not simply a question of supply, but also of demand.

ok, you're right.
Unless the complete asic design/fabrication costs more than we can imagine.

At current BTC price and prepaid mining equipment cost, no offer on the market is viable. So crowdfunding should stop.

[polarhei]

The controlled method is using contract with TSMC based suppliers to aim the R.O.I

Currently, I only trust ASICMiner's, GPUs and Pyramining as Pyramining is doing the right job.

[lo1]

The controlled method is using contract with TSMC based suppliers to aim the R.O.I

Currently, I only trust ASICMiner's, GPUs and Pyramining as Pyramining is doing the right job.

quoting pyramining: "Investing in Pyramining is indeed very profitable: the complete reward is estimated to be reached in less than 43 months."

To me, this is definitively a scam. Pay first, get your money back in 43!!! months :-)

[bcp19]

The controlled method is using contract with TSMC based suppliers to aim the R.O.I

Currently, I only trust ASICMiner's, GPUs and Pyramining as Pyramining is doing the right job.

quoting pyramining: "Investing in Pyramining is indeed very profitable: the complete reward is estimated to be reached in less than 43 months."

To me, this is definitively a scam. Pay first, get your money back in 43!!! months :-)

It's also a true pyramid.  The more people you recruit the more and faster you reach payout.

[AndrewWilliams]

l01, you are spot on.

I've done my own research on GB (group buys and cooperatives), and none of them would be profitable at the current $ to Ghz. Spoke to a an organizer and they reluctantly admitted the same.

My theory is, once the blood starts flowing in the streets come January or February, and the common miner comes to the realization they will not hit ROI, they will stop buying new hardware. Then, and only then would be the appropriate time to buy. Once the "overeager" money is wiped out.

Thoughts?

[lo1]

My theory is, once the blood starts flowing in the streets come January or February, and the common miner comes to the realization they will not hit ROI, they will stop buying new hardware. Then, and only then would be the appropriate time to buy. Once the "overeager" money is wiped out.

Thoughts?

Agreed. I cannot think of the current situation in words different than a bubble. However, what happens is that people waiting for asic *will* put them to work. So considering the current level of demand, the difficulty will continue to jump for a while.

I have improved my estimation using the current next difficulty estimate (78% increase, not 100%). The price to reasonably pay for a miner is in mBTC. This price involves one month delivery security (yes - optimistic) and one month insurance against huge difficulty increase

https://dl.dropboxusercontent.com/u/4813922/mining%20profitability.png

[AndrewWilliams]

My theory is, once the blood starts flowing in the streets come January or February, and the common miner comes to the realization they will not hit ROI, they will stop buying new hardware. Then, and only then would be the appropriate time to buy. Once the "overeager" money is wiped out.

Thoughts?

Agreed. I cannot think of the current situation in words different than a bubble. However, what happens is that people waiting for asic *will* put them to work. So considering the current level of demand, the difficulty will continue to jump for a while.

I have improved my estimation using the current next difficulty estimate (78% increase, not 100%). The price to reasonably pay for a miner is in mBTC. This price involves one month delivery security (yes - optimistic) and one month insurance against huge difficulty increase

Even if those people put their ASIC's to work (order coming in November - January), the newest ASICS coming out in March and June will be so much more ahead of their predecessors, that the "overeager money" that is buying now, will not be able to mine profitably anymore.
1. Orders shipping from now to December will be obsolete (not producing income) in about 6 months time. Most people agree about this point.
2. Those people will not have hit ROI given every projection given. They in turn, will not have the money to purchase for "Round 2," come March-June, and will drop out of the ASIC arms race

My whole point, to summarize, is all participants buying ASICS now will not hit ROI, and because of that, will drop out of any future buys due to lack of funds/lack of interest due to unprofitably.

[kendog77]

While I agree that now is a terrible time to buy ASIC hardware, and the more prudent thing to do is to buy BTC directly, the one thing that could bail out a lot of miners and hardware makers is an increase in BTC price.

If BTC rises to ~$500 or $1000 in the next few months, returns in fiat don't look so bad and may work out for some folks. Sure, they could have had more if they had bought BTC directly, but they may still make ROI in dollars.

Folks that are not buying hardware hoping to pick it up early next year cheap had better hedge their bets and buy BTC directly now or else they may end up getting left behind forever.

If BTC increases dramatically in price, those overpriced ASICs may not fall in fiat price at all.

[lo1]

expecting a positive return in fiat is irrelevant to me.
bitcoin mining may be the only activity to analyze only in terms of bitcoin, without reference to fiat at all.

you spend some bitcoin for hardware at T0. You start mining at T1. You must plan full bitcoin break-even in at most 3 month time after T1, otherwise, you're likely to have lost your money.