rpietila Wall Observer - the Quality TA Thread ;)

[rpietila]

Someone has some secret sauce ASIC that is ahead of the curve and is mining with it instead of selling it.

Rather selling the proceeds.

Of course yes. But the distinction I was drawing is that the growth in hash rate doesn't flow from an open market of miners believing that increased investment in capacity expansion is a good idea (which could be interpreted as a mid term bullish indicaator). It is simply someone who has made hashes cheaper (to them) so they can shovel out a lot of them.

And my point was that the extensive investment in proprietary hashing capacity has an upfront capital cost that must be recouped by liquidating the coins as soon as possible in a downtrend.

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[smooth]

Someone has some secret sauce ASIC that is ahead of the curve and is mining with it instead of selling it.

Rather selling the proceeds.

Of course yes. But the distinction I was drawing is that the growth in hash rate doesn't flow from an open market of miners believing that increased investment in capacity expansion is a good idea (which could be interpreted as a mid term bullish indicaator). It is simply someone who has made hashes cheaper (to them) so they can shovel out a lot of them.

And my point was that the extensive investment in proprietary hashing capacity has an upfront capital cost that must be recouped by liquidating the coins as soon as possible in a downtrend.

If your suggestion is that large farm-based mining (or a likely expansion of large farm-based mining) is a negative pricing factor, I definitely agree, both on short term technical grounds and also broader long term (or at least mid-term) reasons.

[BldSwtTrs]

Can someone explain me why the hashrate going up is good for the price?

I mean, I know economics. I know that the supply is a function of price and cost. So if cost goes up for miners, then the supply will shrink. But why the hashrate should be consider as proxy of cost?

It's is quite possible that the cost for most of the miners is actually going down while the hashrate and difficulty are increasing. If there is a consolidation of the mining market, big mining farms are making economy of scales, so their margins increase while the hashrate increase too, so they could very well selling a greater proportion of their mined coins to enjoy their high margin.

All of that to say that I am not convince that the hashrate is a good proxy for evaluating the cost of mining BTC, therefore not necessary a good indicator for the future price of BTC.

[Eastwind]

What I'm asking myself is if and when bitcoin will fail. To me, now seems the most likely time for bitcoin to just fade out and never come back which makes me uncomfortable

Selling at a bottom is a fail. If you feel prone to it, just get a vacation of 6 months and check back then.

What I mean is if bitcoin were to ever fail then now would be the time. I doubt bitcoin would fail and fade out when we are at $5k

I hope you're right though

When BTC is $5k, I would think Wall Street is in. The momentum will keep it going.

[BuildTheFuture]

Can someone explain me why the hashrate going up is good for the price?

I mean, I know economics. I know that the supply is a function of price and cost. So if cost goes up for miners, then the supply will shrink. But why the hashrate should be consider as proxy of cost?

I think because a lot of mines are actually funded by folks looking for a way to buy BTC more cheaply than they can get it via exchange. Aminorex for example has mentioned in the wall observer thread how he has had contact with folks who contract with mines to buy their produced BTC for accumulation purposes.

Ok, so that works great as long as mines can produce BTC at a cost below the current exchange rate. But this essentially puts a floor beneath the exchange rate as the costs of mining continue to rise. Eventually the cost increases to a point where it might be actually cheaper to buy BTC on an exchange.

So from this view, the cost of mining and exchange price can be linked, with large BTC accumulators buying BTC from whichever source is cheapest at a given time.

As for hashrate being a proxy for cost, I think this is demonstrably true. In cases where hashing technology is roughly stable such in the CPU mining era, it quite clearly takes more silicon and electricity to mine a bitcoin if the difficulty factor increases. Economies of scale help, but the current large mining operations are already at that scale so there isn't much left to squeeze from that. If you search around you can find pretty good estimates of current mining costs, I think the current BTC price is in the ballpark for probably the overall hashrate, although newer mines are probably still slightly profitable here.

[smooth]

If you search around you can find pretty good estimates of current mining costs

No you really can't because the biggest share of costs is the mining gear and it has been very difficult if not impossible for anyone to buy such gear at prices that don't lose money. The reason of course is that ASIC developers themselves mine in large farms and their costs are totally opaque (and likely quite different from one another). The way the competitive mining market works is the least efficient miners break even or lose money. That's basically everyone in the public. How much everyone else (ie ASIC developers) make only they know.

[BuildTheFuture]

If you search around you can find pretty good estimates of current mining costs

No you really can't because the biggest share of costs is the mining gear and it has been very difficult if not impossible for anyone to buy such gear at prices that don't lose money. The reason of course is that ASIC developers themselves mine in large farms and their costs are totally opaque (and likely quite different from one another). The way the competitive mining market works is the least efficient miners break even or lose money. That's basically everyone in the public. How much everyone else (ie ASIC developers) make only they know.

I've seen chip production costs mentioned in the "ASICMINER: Entering the Future of ASIC Mining by Inventing It" thread of between $0.25/GH and $0.35/GH in the past few months.

[smooth]

If you search around you can find pretty good estimates of current mining costs

No you really can't because the biggest share of costs is the mining gear and it has been very difficult if not impossible for anyone to buy such gear at prices that don't lose money. The reason of course is that ASIC developers themselves mine in large farms and their costs are totally opaque (and likely quite different from one another). The way the competitive mining market works is the least efficient miners break even or lose money. That's basically everyone in the public. How much everyone else (ie ASIC developers) make only they know.

I've seen chip production costs mentioned in the "ASICMINER: Entering the Future of ASIC Mining by Inventing It" thread of between $0.25/GH and $0.35/GH in the past few months.

Production cost (measured per chip) is not an equipment mining cost (measured per hash), because the latter depends on useful lifespan. No ASICs have had very long lives (more than a year or so), but they certainly vary depending on efficiency, underclockability, electricity costs, reliability, etc. Other designers ASIC designs will have a different set of tradeoffs, aside from some just being overall better or worse (remember, only the least efficient lose money in this market, so every design but the very worst is viable; they need not be comparable as is the case in most other competitive markets). As I said, all over the map.

[rpietila]

According to the OP, this is the official thread for enjoying wine and cigars. I recently came to Malla after a longish break. While I was quietly minding my own business with some reasonable quality wine (Dow's 20yo Tawny Port) and some really nice vintage cigars, including, but not limited to Bossner Baron 2000, Davidoff Eminentes, and Diamond Crown 2004, I decided to go out since it had already become dark.

The day had been really quiet of cars, so a sight of a large pick-up coming, immediately caught my attention, especially as it turned from the road to my yard. When walking towards it, it did not stop to greet me, rather passed, went to turn around in the other side of the yard, and passed me again while I just walked towards it and stared at it in my friendly way.

A similar incident, my staff told me, had already happened this week with a car with no licence plates.

I should have no enemies in Estonia, and I am not doing any business here really that would interfere with somebody else's business without me even knowing. So what comes to the incidents, I have to deduce that either it is some larger agency conducting intelligence (very plausible, because several agencies are not doing their job unless they have a plan for raiding this place, just in case) or common thieves conducting intelligence in a similar way, but for somewhat different ends.

The conference is starting Tuesday, so we have had some preliminary action. Hopefully this was it, but you never know.

[podyx]

According to the OP, this is the official thread for enjoying wine and cigars. I recently came to Malla after a longish break. While I was quietly minding my own business with some reasonable quality wine (Dow's 20yo Tawny Port) and some really nice vintage cigars, including, but not limited to Bossner Baron 2000, Davidoff Eminentes, and Diamond Crown 2004, I decided to go out since it had already become dark.

The day had been really quiet of cars, so a sight of a large pick-up coming, immediately caught my attention, especially as it turned from the road to my yard. When walking towards it, it did not stop to greet me, rather passed, went to turn around in the other side of the yard, and passed me again while I just walked towards it and stared at it in my friendly way.

A similar incident, my staff told me, had already happened this week with a car with no licence plates.

I should have no enemies in Estonia, and I am not doing any business here really that would interfere with somebody else's business without me even knowing. So what comes to the incidents, I have to deduce that either it is some larger agency conducting intelligence (very plausible, because several agencies are not doing their job unless they have a plan for raiding this place, just in case) or common thieves conducting intelligence in a similar way, but for somewhat different ends.

The conference is starting Tuesday, so we have had some preliminary action. Hopefully this was it, but you never know.

Most likely a hitman

[rpietila]

I left that out of the speculation, since a hit would have been quite easy in the headlights from 20 meters.

[molecular]

Can someone explain me why the hashrate going up is good for the price?

I mean, I know economics. I know that the supply is a function of price and cost. So if cost goes up for miners, then the supply will shrink. But why the hashrate should be consider as proxy of cost?

It's is quite possible that the cost for most of the miners is actually going down while the hashrate and difficulty are increasing. If there is a consolidation of the mining market, big mining farms are making economy of scales, so their margins increase while the hashrate increase too, so they could very well selling a greater proportion of their mined coins to enjoy their high margin.

All of that to say that I am not convince that the hashrate is a good proxy for evaluating the cost of mining BTC, therefore not necessary a good indicator for the future price of BTC.

I agree with you. There have been lengthy arguments about "hashrate follows price" or "price follows hashrate" for years now. I'm in the former camp.

Also: supply is not a function of price and cost in the case of bitcoin mining. Supply is pretty much constant, miners just fight among each others over the fixed-sized cake. So only way in which mining influences price is by one variable: the percentage of coins sold by miners into the market.

I think this percentage is increasing with falling price, up to some point... some miners will reach > 100% and switch off. If they want BTC they'll buy instead. Mining efficiency (of the remaining miners) increases and cost decreases. Their selling-percentage decreases. All this has positive effect on price, further decreasing the percentage that has to be sold to cover cost. I'm not sure we've reached low enough price (or competitive enough mining landscape) for this to play out to a meaningful extent.

[Wekkel]

Someone interested in your digital wealth?

[NewLiberty]

Someone interested in your digital wealth?

Maybe moat dredging and gatehouse time is coming after the thaws?

[iCEBREAKER]

Someone interested in your digital wealth?

Maybe moat dredging and gatehouse time is coming after the thaws?

Palace intrigue!   

My God, Monero has the best drama of any altcoin bar none and is rapidly gaining on Bitcoin's stellar histrionics.

Of course Monero attracts the best trolls too.  BCX wouldn't being FUDing for cheap Monero if he wasn't worried about the threat to his BTC and LTC hoards.

I'm going to need slightly larger glasses!

[yefi]

I agree with you. There have been lengthy arguments about "hashrate follows price" or "price follows hashrate" for years now. I'm in the former camp.

Also: supply is not a function of price and cost in the case of bitcoin mining. Supply is pretty much constant, miners just fight among each others over the fixed-sized cake. So only way in which mining influences price is by one variable: the percentage of coins sold by miners into the market.

I think this percentage is increasing with falling price, up to some point... some miners will reach > 100% and switch off. If they want BTC they'll buy instead. Mining efficiency (of the remaining miners) increases and cost decreases. Their selling-percentage decreases. All this has positive effect on price, further decreasing the percentage that has to be sold to cover cost. I'm not sure we've reached low enough price (or competitive enough mining landscape) for this to play out to a meaningful extent.

If the price drops so that the increased portion of the cake they earn is worth less in fiat terms, then would they not need to sell a larger percentage of coins to cover costs?

[prophetx]

According to the OP, this is the official thread for enjoying wine and cigars. I recently came to Malla after a longish break. While I was quietly minding my own business with some reasonable quality wine (Dow's 20yo Tawny Port) and some really nice vintage cigars, including, but not limited to Bossner Baron 2000, Davidoff Eminentes, and Diamond Crown 2004, I decided to go out since it had already become dark.

The day had been really quiet of cars, so a sight of a large pick-up coming, immediately caught my attention, especially as it turned from the road to my yard. When walking towards it, it did not stop to greet me, rather passed, went to turn around in the other side of the yard, and passed me again while I just walked towards it and stared at it in my friendly way.

A similar incident, my staff told me, had already happened this week with a car with no licence plates.

I should have no enemies in Estonia, and I am not doing any business here really that would interfere with somebody else's business without me even knowing. So what comes to the incidents, I have to deduce that either it is some larger agency conducting intelligence (very plausible, because several agencies are not doing their job unless they have a plan for raiding this place, just in case) or common thieves conducting intelligence in a similar way, but for somewhat different ends.

The conference is starting Tuesday, so we have had some preliminary action. Hopefully this was it, but you never know.

time to buy a surveillance drone

[molecular]

I agree with you. There have been lengthy arguments about "hashrate follows price" or "price follows hashrate" for years now. I'm in the former camp.

Also: supply is not a function of price and cost in the case of bitcoin mining. Supply is pretty much constant, miners just fight among each others over the fixed-sized cake. So only way in which mining influences price is by one variable: the percentage of coins sold by miners into the market.

I think this percentage is increasing with falling price, up to some point... some miners will reach > 100% and switch off. If they want BTC they'll buy instead. Mining efficiency (of the remaining miners) increases and cost decreases. Their selling-percentage decreases. All this has positive effect on price, further decreasing the percentage that has to be sold to cover cost. I'm not sure we've reached low enough price (or competitive enough mining landscape) for this to play out to a meaningful extent.

If the price drops so that the increased portion of the cake they earn is worth less in fiat terms, then would they not need to sell a larger percentage of coins to cover costs?

Yes, at first. What I meant was when inefficient miners start to drop out, the collective selling-percentage would decrease again.

[molecular]

According to the OP, this is the official thread for enjoying wine and cigars. I recently came to Malla after a longish break. While I was quietly minding my own business with some reasonable quality wine (Dow's 20yo Tawny Port) and some really nice vintage cigars, including, but not limited to Bossner Baron 2000, Davidoff Eminentes, and Diamond Crown 2004, I decided to go out since it had already become dark.

The day had been really quiet of cars, so a sight of a large pick-up coming, immediately caught my attention, especially as it turned from the road to my yard. When walking towards it, it did not stop to greet me, rather passed, went to turn around in the other side of the yard, and passed me again while I just walked towards it and stared at it in my friendly way.

A similar incident, my staff told me, had already happened this week with a car with no licence plates.

I should have no enemies in Estonia, and I am not doing any business here really that would interfere with somebody else's business without me even knowing. So what comes to the incidents, I have to deduce that either it is some larger agency conducting intelligence (very plausible, because several agencies are not doing their job unless they have a plan for raiding this place, just in case) or common thieves conducting intelligence in a similar way, but for somewhat different ends.

The conference is starting Tuesday, so we have had some preliminary action. Hopefully this was it, but you never know.

how subtle

[yefi]

I agree with you. There have been lengthy arguments about "hashrate follows price" or "price follows hashrate" for years now. I'm in the former camp.

Also: supply is not a function of price and cost in the case of bitcoin mining. Supply is pretty much constant, miners just fight among each others over the fixed-sized cake. So only way in which mining influences price is by one variable: the percentage of coins sold by miners into the market.

I think this percentage is increasing with falling price, up to some point... some miners will reach > 100% and switch off. If they want BTC they'll buy instead. Mining efficiency (of the remaining miners) increases and cost decreases. Their selling-percentage decreases. All this has positive effect on price, further decreasing the percentage that has to be sold to cover cost. I'm not sure we've reached low enough price (or competitive enough mining landscape) for this to play out to a meaningful extent.

If the price drops so that the increased portion of the cake they earn is worth less in fiat terms, then would they not need to sell a larger percentage of coins to cover costs?

Yes, at first. What I meant was when inefficient miners start to drop out, the collective selling-percentage would decrease again.

Well, I see two counteractive forces at work - each remaining miner will solve more blocks and at a lower cost collectively, yet the reward from each block is shrinking in terms of fiat. Therefore, to lower the selling-percentage, the benefit of the former must outweigh the latter for a given price drop. Maybe this is what you're saying however.