Warning - investing in cloud mining GHS with cex.io will lose money

[AJJ]

After seeing the number of orders on Cex.io for GHS above 0.05 BTC I thought I would put together some links to relevant information and tools to estimate the return on investment.

Before you buy any GHS make sure you do the sums to see if it is worthwhile.

Here are my calculations that show that people who are buying GHS with cex.io are set to lose more than they invest.

The going price is about 0.072 BTC per GHS.
According to this calculator that uses the past 4(i think) difficulty rises to predict the increase in difficulty, you are set to lose more than half of your investment.
http://www.coinish.com/calc/#

To use this calculator to calculate the return per GHS,
Set the hash rate to 1000 (1GHS)

Change the currency in the investment section to BTC and enter the price of 1 GHS

Set the power requirements to 1.5 and the power costs to 0.3 as per https://cex.io/maintenance

You will see that considering reduction you stand to loose US$47 from an investment of about US$75

You can play around with the difficulty increase to achieve different results if you believe it is going to slow down.

However, it is hard to imagine it slowing down much if you will soon be able to get 1200GHs for US$7000, about 10 bitcoins, which equates to 0.0083 bitcoins per GHs. Almost 10 times less than the going rate on cex.io
http://bitcoinwisdom.com/bitcoin/calculator

The historical rise in difficulty and the next predicted rise can be found at the link below. The difficulty is set to rise more than 22% next time.
http://bitcoinwisdom.com/bitcoin/difficulty

It is very unlikely that at the current price of GHS that you will break even let alone make a profit.

The over inflated price is probably due to the generous referral system where if you refer someone you get 3% times the amount of GHS they buy. That combined with a lot of people wanting to get in on the mining business makes perfect conditions to exploit Beginners. Consider the advice you receive carefully.

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[elmismo]

Al you pointed is right, actually first time I ever heard of cexio I did the maths and find out that is a total loss. Despite of that you don't count that this is not like other mining contracts. The fact that you can sell the hashing power actully adds an extra figures for your roi. In the rest of mining cloud services you cannot resell your contract at your will.

On the calculation I did. I'd say you could mine 0.0165 BTC @ 1GHs on the next year starting now. On an investment of 0.084 is a total loss as you said, but if the price of GHs is the same, it results that you win!!!
The first time I get into cexio the price was something around 0.07 I though this is not going even to keep the price, as difficult rise this price will go down. But you know what? I was wrong price went up and I think I saw it close to 0.1 what is just crazy, obvious over value.

But you know now i'm in, I'm trading GHs for BTC. and I found out that is an incredible good thing to trade for noobs on trading. As you have the mining profit as back up for your bad trades.

So by the way If you are thinking to get in... look in my signature

[descarte]

not necessary lose money.

1) don't forget you are also mining once you have GHS. so you have to factor in how much GHS you are investing now. Even if you sell your GHS at a later stage, you would have made x bitcoins based on pure mining alone.
2) you also mine other coins.
3) hosting market will boom with bitcoins booming because newbies will want to get in without wanting to mess with equipment and electricity. GHS price will drop but it shouldn't be drastic.

[dominicwin]

I've made some nice coin off cloud mining just the past few days that I have been in it, buying and selling contracts, low selling at high and earning from mining itself.

[AJJ]

not necessary lose money.

1) don't forget you are also mining once you have GHS. so you have to factor in how much GHS you are investing now. Even if you sell your GHS at a later stage, you would have made x bitcoins based on pure mining alone.
2) you also mine other coins.
3) hosting market will boom with bitcoins booming because newbies will want to get in without wanting to mess with equipment and electricity. GHS price will drop but it shouldn't be drastic.

1) yes, that's the reason for the value of GHS. Would you spend 2 gold coins to buy capacity in a gold mining deposit that will only ever mine 1 gold coin worth of gold?
2) you are set to loose about half your bitcoin investment if you hold them indefinitely. I haven't done the calc on how fast you are generating the alt coins, but I don't think their combined value is worth anywhere near half the amount of bitcoin you need to invest to mine them. If you think their value will go up one day, why not just buy some now with bitcoin?
3) that's why I wrote this post, to warn them they will not make back their investment. You could make money mining and intentionally selling your GHS to people for an overinflated price, but there is no gurantee that uou wont be caught holding GHS when people realise it is not woryh it and the price crashes. If you pull it off you are gaining from someone else's misery.

[Tommygun]

Well obviously you need to buy cheap and sell expensive, and in meantime, mine some sweet coins!

[AJJ]

Well obviously you need to buy cheap and sell expensive, and in meantime, mine some sweet coins!

It's a zero sum game. Everytime someone gains by trading someone else loses. The price will hold while everyone thinks they are smarter than everyone else. Once a few people get nervous and decide to cut their losses the price will crash hard. You will need to do quite well at trading to double your money, because the highest reasonable price is half the current value.

[uray]

which one is better :

store all my btc in a wallet and doing nothing and hope that btc price will increase, when the time come then sell all btc into usd and enjoy the money

or

put all btc into cex.io, convert all into ghs, and doing nothing and hope that btc prices will increase and get btc by mining, when the time come then sell all ghs into btc and btc into usd and enjoy the money

?

[AJJ]

which one is better :

store all my btc in a wallet and doing nothing and hope that btc price will increase, when the time come then sell all btc into usd and enjoy the money

or

put all btc into cex.io, convert all into ghs, and doing nothing and hope that btc prices will increase and get btc by mining, when the time come then sell all ghs into btc and btc into usd and enjoy the money

?

Option A, because if the price of GHS corrected to a value where one bitcoin investment would eventually mine one bitcoin, that it is to break even. It would probably be worth about half of what it is now and you would loose about half of your bitcoin. For some reason the price of GHS is worth more bitcoins than it will ever mine, about double. If the price stays that way then good for you, you can mine and sell your GHS for close to the price you paid and make a nice profit. But why should the price stay high? I think it is the rush of people wanting to join and trusting the market price without doing the calculations properly. The dificulty is going to rise, as people see they are getting less and less at some point they will panic and sell. Those who don't get out first will lose their BTC

[AJJ]

It is also important to have a feeling for where the price of bitcoin is going
http://bitcoincharts.com/charts/mtgoxUSD#rg10ztgSzm1g10zm2g25zv
At the moment it is rising fast and has bounced back quickly from the adjustment a few days ago. This will create an incentive for people who can spend USD on developing faster chips, which will lead to a faster and more sustained increase in the total hashing power, meaning increased difficulty. The returns from each GHS will then reduce faster.

It should also be noted that during the gold rush more money was made selling mining equipment than mining gold. Macro psychology whoud suggest that it is likely that the same will be true with the bitcoin boom.

[Tommygun]

OH MEIN GOTT CEX PRICES ARE FALLING!! EVERYONE, START SELLIN!

[AJJ]

The hash rate has jumped in the past few days, expect another significant dificulty increase and reduction in mining returns in about 8 days. http://bitcoinwisdom.com/bitcoin/difficulty

[siameze]

I liked them in the beginning, did some trading, etc. Then they decide to rewrite their TOS and yanked all my bonus shares. You can't trust them not to just change TOS at any time and leave you with a worthless account.

[ajw7989]

In the beginning cex.io was amazing. I remember putting .7 bitcoin and just trading gh/s back and forth and tripling my bitcoins. This was back when bitcoin was 150ish or so but man those were the days. That was when you could buy gh/s cheap and the difficulty wasnt 100 million yet lol. Now that the difficulty is so high the the usd per gh/s is high its a lose lose situation for most.

[AJJ]

The difficulty is set to rise 30% in a few hours but the price is still 0.068 btc/ghs

[infinitybo]

About to increase the Bitcoin mining difficulty so Th/s gonna be the minimum.

[AJJ]

I have updated the calculations at the current difficulty. I used 0.068 btc per GHS and 650 US per btc which gave an initial investment of US44.2 the expected return considering reduction was US-33.15 (note i use the expert setting). This means if you spend 1 btc to buy ghs you will probably only ever mine 0.25 btc! To break even the price needs to be 0.0175 btc per GHS. This game of chicken holding GHS to trade is getting ridiculous.

[Wendigo]

I have ghs in that site and was wondering it the price would increase in 2014?

[AJJ]

I have ghs in that site and was wondering it the price would increase in 2014?

I don't see why it would. It might bounce around a bit but the difficulty is increasing so the return is diminishing.

[dalepa]

I calculate about the same results...    0.0175 BTC/GHS or lower to make $$.   I can only assume that everyone there is holding on hoping for more suckers to enter the market.

I have yet to understand how CEX adds GHS to the market....   I'm guessing they drop it in for a guaranteed profit?

Something smells funny with CEX.IO...

I have updated the calculations at the current difficulty. I used 0.068 btc per GHS and 650 US per btc which gave an initial investment of US44.2 the expected return considering reduction was US-33.15 (note i use the expert setting). This means if you spend 1 btc to buy ghs you will probably only ever mine 0.25 btc! To break even the price needs to be 0.0175 btc per GHS. This game of chicken holding GHS to trade is getting ridiculous.