Serious qestions about CEX.io and other cloud mining services

[jballs]

The one thing that would likely put a damper on difficulty would be a big crash in the price of BTC. So in a way you could look at CEX as being a short on BTC.

This is an interesting observation. So purchasing the GHS/BTC on CEX is effectively a form of hedge for long term bitcoin holdings? The question is what would it cost in BTC to fully hedge your holdings? And is that cost worth it to you if you think there is a bubble in the current price of BTC/USD?

Complicated but I intend to smoke a doob and think on it some more.

That is counterintuitive... if BTC crashes, lots of miners would stop, but wouldn't that also drive the price of GHS lower also? Like GHS/BTC at 4/3 become 3/2 (making up numbers here). Looking at the long term GHS/BTC chart looked very flat over the last month given that BTC was parabolic, I assume that means GHS was essentially parabolic also.

If that is the case then not a hedge, but please correct me if I have that wrong.

(edit- I think actually you may be correct upon contemplation for a few minutes. The chart DOES appear to be flat, if that is correct, and you can buy GHS/BTC or BTC/GHS, then that would be the first effective hedge I have seen in bitworld. You won't profit off the decline, you just won't lose your open gains in BTC. Does this sound right? If so cex ought to get to marketing it....much needed I believe.)

As for the premium, you're probably right but it's totally normal. You'll have to forgive me I've been a commodities trader/hedger for a long time so I have to use those terms, but when you are trading futures you create what is called a basis. Basis breaks away from cash values as speculation in the futures moves higher or lower from real world prices. I get the impression cex is more focused on the futures business. When you are using that as a vehicle you don't really care what the basis is. This is why most futures contracts are settled against the commodity on a specified date, so that it does not drift eternally away from the underlying product.

I don't know if that is what you are seeing here, I have some more homework to do, but ultimately futures exchanges trend towards having nothing really to do with the commodities they represent (I've never really seen a yen but I've traded a few billion of them, mostly true for soybeans and the rest).





  

[jballs]

The one thing that would likely put a damper on difficulty would be a big crash in the price of BTC. So in a way you could look at CEX as being a short on BTC.

This is an interesting observation. So purchasing the GHS/BTC on CEX is effectively a form of hedge for long term bitcoin holdings? The question is what would it cost in BTC to fully hedge your holdings? And is that cost worth it to you if you think there is a bubble in the current price of BTC/USD?

Complicated but I intend to smoke a doob and think on it some more.

That is counterintuitive... if BTC crashes, lots of miners would stop, but wouldn't that also drive the price of GHS lower also? Like GHS/BTC at 4/3 become 3/2 (making up numbers here). Looking at the long term GHS/BTC chart looked very flat over the last month given that BTC was parabolic, I assume that means GHS was essentially parabolic also.

If that is the case then not a hedge, but please correct me if I have that wrong.

(edit- I think actually you may be correct upon contemplation for a few minutes. The chart DOES appear to be flat, if that is correct, and you can buy GHS/BTC or BTC/GHS, then that would be the first effective hedge I have seen in bitworld. You won't profit off the decline, you just won't lose your open gains in BTC. Does this sound right? If so cex ought to get to marketing it....much needed I believe.)

Okay I went and looked as this is interesting. Here is the chart for GHS/BTC




I haven't quite figured out the multipliers so if you break it down for me that would be awesome. The chart is clearly nothing like BTC alone, unless the multiplier is extremely high and that minor deviation is dramatic. What is the scale? In other words what is the high of .145 on 11/4 and the low .067 on 11/28... does that mean the widest fluctuation in value  was .078 BTC?

Problem as I see it remaining, you're still in a vacuum, in relation to USD etc. So it's not really a hedge. But it is something...past my bedtime I will sleep on it, thoughts welcome.

[odolvlobo]

The one thing that would likely put a damper on difficulty would be a big crash in the price of BTC. So in a way you could look at CEX as being a short on BTC.

This is an interesting observation. So purchasing the GHS/BTC on CEX is effectively a form of hedge for long term bitcoin holdings? The question is what would it cost in BTC to fully hedge your holdings? And is that cost worth it to you if you think there is a bubble in the current price of BTC/USD?

That is counterintuitive... if BTC crashes, lots of miners would stop, but wouldn't that also drive the price of GHS lower also? Like GHS/BTC at 4/3 become 3/2 (making up numbers here). Looking at the long term GHS/BTC chart looked very flat over the last month given that BTC was parabolic, I assume that means GHS was essentially parabolic also.

The price of GHS/BTC depends on BTC/USD only by its effect on the difficulty. Since GHS/BTC is denominated in BTC and it earns BTC, USD does not have a direct affect on it.

When BTC/USD drops, mining becomes unprofitable for the marginal miner, and he will stop mining. The difficulty will rise more slowly (or even drop in the extreme case), and that will result in rising mining revenue (in BTC) for the miners that remain, causing GHS/BTC to rise.

Note that operating costs are currently very low, and BTC would have to drop quite a bit before high operating costs would make mining unprofitable. On the other hand, falling prices would discourage people from buying mining equipment until its cost adjusts lower. This will cause the difficulty to rise more slowly temporarily.

I also want to point out that GHS/BTC is not a commodity because it earns income and its value is based on the amount of income it earns.

[smooth]

What are some viable, reputable alternatives to CEX?

I would look at some of the group buys where they host the machines for you, and you get a share of the hash. I have a few shares with DZ.

[jamesc760]

What are some viable, reputable alternatives to CEX?

I would look at some of the group buys where they host the machines for you, and you get a share of the hash. I have a few shares with DZ.

I have shares on 2 different group buys on knc jupiter miners. So far, my experience has been a bit negative. On one of the group buys, the organizer, who will remain nameless here, lost power and internet for over 4 days. That's 4 days of lost income for me. The organizer didn't lose anything, because he gets his cut before he pays out. And by the way, he also reneged on his promised 3% fee, a week into the actual mining, he jacked it up to 7% claiming high electricity cost!

I paid over 2 BTC for my shares in the group buys and I have to say that I will never ROI, I will consider myself lucky if I ever get 1 BTC over the life of the group buy (12 month). After 12 month is up, the miners will be sold and the money split over the share=holders.

Had I know about cex.io, I would never have gone with the group buys. Yes, you pay a premium with cex, but there are clear advantages, such as INSTANT hashing power, REDEEMABLE hardware, LIQUIDITY, etc.... Group buys are only good for the organizers, share-holders get the crumbs.

[xavier999]

Pretty much just to echo what other people have said already...from a financial perspective pretty much all of these services will lose you money. They are for people who don't do the calculations. I mean when you first hear "$10 for 1GH/s for a year" it sounds pretty good, but when you add in their maintenance fees and realize that BTC difficulty is only going to keep jumping up then you still won't break even in the end. If you are betting on the price of BTC skyrocketing then you should just buy BTC instead. That way you at least know exactly how much BTC you will get for your money instead of just an estimate based off of hash rate and predicted difficulty.

[BitThink]

Here is a scam service idea that could make a huge profit: set up a cloud mining service that offers better rates than everyone else.  People pay you BTC for GHS.  You don't use this BTC for any hardware, you just sit on it, and you pay them out a diminishing trickle of their own funds that decreases as difficulty increases.  If you did this right you would actually be giving people better value for their buck than CEX.io and still making huge profits.  Actually, how do we know that cex.io or other operations are not doing this?

Yes, actually it is not necessarily a scam and it's called PMB (perceptual mining bond).

[stompix]

Pretty much just to echo what other people have said already...from a financial perspective pretty much all of these services will lose you money. They are for people who don't do the calculations. I mean when you first hear "$10 for 1GH/s for a year" it sounds pretty good, but when you add in their maintenance fees and realize that BTC difficulty is only going to keep jumping up then you still won't break even in the end. If you are betting on the price of BTC skyrocketing then you should just buy BTC instead. That way you at least know exactly how much BTC you will get for your money instead of just an estimate based off of hash rate and predicted difficulty.

If the price would only be 10$/GH. But is 0.07 BTC right now , which makes it almost 60usd/GH.
I honestly don't understand why somebody would buy this , unless he has no clue about math.

[siameze]

cex is a was of money and time imo

I couldn't agree more.

[infinitybo]

@OP Sure someone can convince you that the whole thing is not an huge 'scam' however noone can't convince a believer of anything.

[siameze]

@OP Sure someone can convince you that the whole thing is not an huge 'scam' however noone can't convince a believer of anything.

So very true. No one wanted to believe TradeFortress was not trustworthy 6 months ago, when the writing was on the wall. Now he is nowhere to be found and his "true believers" were left with slack jaws.

cex.io will most likely meet the same sort of end.

[johningreece]

Yesterday morning my cex.io account was hacked and also my email. The hacker sold the GHS I had and withdrew the funds. I had deposited 10 btc into my cex account. My cex account is now frozen by cex and they are investigating – whatever that means. Does not cex have the obligation to make this right??

2FA should be mandatory, not an option. In addition, they need tighter security for withdrawals.

[Late_Miner]

Ok I've been running some thoughts and numbers in my head about CEX. Right now it is .04189 a GH so 1 Bitcoin would get you about 23 GH's. I have about $14,000 in a couple stocks right now that I am thinking about cashing out and buying bitcoins at the current price of $850 I could get about 16 Bitcoins. Now if I bout GH's with those 16 bitcoins I would have 368 Gh's (not including my BFL 60), at the next predicted difficulty level of 1,549,680,471 I would earn .1194 BTC per day according to bitcoinx.com. So if I did this for 30 days I would earn 3.582 bitcoins but with difficulty increase probably 3 bitcoins in a month.  Then I sell my Gh's hopefully for what I paid for them or more I could make a profit here I think, and then put my money back into stocks. My goal is to just get about 5 bitcoins total and then store them on a flash drive and CD for the next 10 years and then come back and look at them.

Any thoughts if this could work?
Thanks.

[jballs]

Ok I've been running some thoughts and numbers in my head about CEX. Right now it is .04189 a GH so 1 Bitcoin would get you about 23 GH's. I have about $14,000 in a couple stocks right now that I am thinking about cashing out and buying bitcoins at the current price of $850 I could get about 16 Bitcoins. Now if I bout GH's with those 16 bitcoins I would have 368 Gh's (not including my BFL 60), at the next predicted difficulty level of 1,549,680,471 I would earn .1194 BTC per day according to bitcoinx.com. So if I did this for 30 days I would earn 3.582 bitcoins but with difficulty increase probably 3 bitcoins in a month.  Then I sell my Gh's hopefully for what I paid for them or more I could make a profit here I think, and then put my money back into stocks. My goal is to just get about 5 bitcoins total and then store them on a flash drive and CD for the next 10 years and then come back and look at them.

Any thoughts if this could work?
Thanks.

Is cex.io legal?

Never really occurred to me to ask but they are uk based I believe, stringent financial regs. Since they don't take money money I am not sure what the status would be. Technically they are running an exchange (buying selling hash power basically the same as trading electricity in the eyes of a bleary bureaucrat).

I would have concerns about that putting a big chunk in and keeping it for months. Risk not worth a few extra coins considering opportunity loss if they grabbed your stash.

Just something to think about, like I said I don't know.

[smooth]

Ok I've been running some thoughts and numbers in my head about CEX. Right now it is .04189 a GH so 1 Bitcoin would get you about 23 GH's. I have about $14,000 in a couple stocks right now that I am thinking about cashing out and buying bitcoins at the current price of $850 I could get about 16 Bitcoins. Now if I bout GH's with those 16 bitcoins I would have 368 Gh's (not including my BFL 60), at the next predicted difficulty level of 1,549,680,471 I would earn .1194 BTC per day according to bitcoinx.com. So if I did this for 30 days I would earn 3.582 bitcoins but with difficulty increase probably 3 bitcoins in a month.  Then I sell my Gh's hopefully for what I paid for them or more I could make a profit here I think, and then put my money back into stocks. My goal is to just get about 5 bitcoins total and then store them on a flash drive and CD for the next 10 years and then come back and look at them.

Any thoughts if this could work?
Thanks.

Is cex.io legal?

Never really occurred to me to ask but they are uk based I believe, stringent financial regs. Since they don't take money money I am not sure what the status would be. Technically they are running an exchange (buying selling hash power basically the same as trading electricity in the eyes of a bleary bureaucrat).

I would have concerns about that putting a big chunk in and keeping it for months. Risk not worth a few extra coins considering opportunity loss if they grabbed your stash.

Just something to think about, like I said I don't know.

I see no advantage whatsoever (and significant disadvantages) if the plan is to buy and hold (mine).  Just buy some mining gear (which will likely be cheaper).  Why introduce a middleman who might implode, might be a scam, etc.?

If you are going to trade I could possibly see the merit, but not for mining.

[Hunterbunter]

Well, you can buy GHs, mine for a month and sell it.

If the prices of a GHs lower at the constant rate it has been lowering at, you can make a profit like that.

The logic behind that is flawed.

If you buy for a month and sell it, does what you said also apply to the person who bought from you?

What if you are the person who bought from the person who'd be already using it for a month?

[LunarLuna]

i dont see a lot of people agreeing with you

[stompix]

Well, you can buy GHs, mine for a month and sell it.

If the prices of a GHs lower at the constant rate it has been lowering at, you can make a profit like that.

The logic behind that is flawed.

If you buy for a month and sell it, does what you said also apply to the person who bought from you?

What if you are the person who bought from the person who'd be already using it for a month?

Everybody will make a lot of cash , err bitcoins. Wasn't supposed to be like that , everyone getting rich out of nowhere? =))))

[miroman86]

This chart helped me get a better idea of CEX >>> https://cryptfolio.com/historical?id=cexio_btcghs_daily&days=180

I use CEXio... before my goal was to trade, then I wasnt careful and had around BTC 0.4 of losses mainly because I thought the price of GHS would go up (I started just before prices went down)...

Looking at the graph in the link above, and the graph on CEXio, I've had some luck getting back those BTC that I lost...

If the price of GHs is destined to go down, trading would really be profitable. Just buy when it gets to that big drop (you really have to spend time watching it though). The more GHs or BTC you trade, the bigger the profits of course. Don't expect to be rewarded by trading one GHS/BTC at a time... Those .000x wouldn't matter if you're not trading big, youre better off mining that difference for the time being...

In the end, I think its the same thing if you're mining in the cloud or have your own hardware. Bottom line, YOU GOTTA SPEND MONEY TO MAKE MONEY! It's as simple as that...

[Sonny]

OK, this all sounds like there is some possibility for me to buy cloud hashing time and potentially actually see a return on my investment right?  Looking at their own calculator: https://cex.io/calc we can see an estimate of predicted investment VS return. 

The current rate for GHS/BTC is .0850, so say I spend 8.5BTC for 100GH/S, their calculator shows that in the first month I will make back 2.39BTC, second 1.59BTC...etc until the twelth month when it has dwindled to .03BTC and is fast dropping.  The most I ever make back is 6.92BTC plus a few specks of dust after 12 months as the return approaches 0.

WHY WOULD ANYONE DO THIS?  Please I don't want to hear about trading of GHS/BTC, I realize that this is how people are using it to make money, but cex.io themselves isn't only focusing on this, they are selling themselves as a mining service that makes sense, and to me it makes absolutely no sense.

Very simple.
Some people don't check the profit calculator, and some don't even understand what difficulty is.