Dead cat bounce

[malevolent]

Dead cat bounce - when is it going to stop?

And also - wouldn't you expect the difficulty go down? It's no longer profitable to invest in new mining rigs, moreover, many people are scarcely making any profit with such low exchange rates.

[BitMagic]

And also - wouldn't you expect the difficulty go down? It's no longer profitable to invest in new mining rigs, moreover, many people are scarcely making any profit with such low exchange rates.

If things stay the same, it will. Takes time for people to recalculate (if they bother in the first place). Also, there's sunk cost fallacy, and delayed electrical bills to help stall miners from pulling the plug.

[Stephen Gornick]

delayed electrical bills to help stall miners from pulling the plug.

That's like gambling with borrowed money.

[ElectricMucus]

Well there are alot of small scale miners at around 300mh who would most likely never stop.
How often do you leave the lights on? 

[casascius]

No one really knows how many botnet miners there are, and miners who manage to put the bill on someone else (landlord, etc.)... they will mine at any price.

[BubbleBoy]

It's no longer profitable to invest in new mining rigs, moreover, many people are scarcely making any profit with such low exchange rates.

There's a little something called sunk cost, and it's by no means a fallacy: when you've already committed a large budget of money and time on a mining project, you can't simply pull out if you are not "living the dream". It makes sense to keep mining for as long as you can pay the power bill, any extra is passive income that goes towards amortizing your sunk cost.

A 2Mhash/Joule, 2Ghash/second rig  draws 1KW (24KWh/day) and earns ฿1.15/day at current difficulty.There are places (Canada) where you can get a KWh for under 5c, so those people will still be mining at 1.2$/BTC, even if difficulty does not change. Conversely, people who have quality hardware but expensive electricity will (20c/KWh) should pull the plug below 4.8$/BTC.

On the other hand disruptive technology could arrive any day now (ASICs), and easily increase the difficulty by an order of magnitude with no price impact.

[BitMagic]

There's a little something called sunk cost, and it's by no means a fallacy: when you've already committed a large budget of money and time on a mining project, you can't pull out if you are not "living the dream".

You don't know a damn thing about what you're talking about. It doesn't matter how much you spent up front, if you're lose money, net, you should stop mining. Also, read once in a while.

[ElectricMucus]

There's a little something called sunk cost, and it's by no means a fallacy: when you've already committed a large budget of money and time on a mining project, you can't pull out if you are not "living the dream".

You don't know a damn thing about what you're talking about. It doesn't matter how much you spent up front, if you're lose money, net, you should stop mining. Also, read once in a while.

So this means miners are stupid? :p

[BubbleBoy]

There's a little something called sunk cost, and it's by no means a fallacy: when you've already committed a large budget of money and time on a mining project, you can't pull out if you are not "living the dream".

You don't know a damn thing about what you're talking about. It doesn't matter how much you spent up front, if you're lose money, net, you should stop mining. Also, read once in a while.

That aggressive tone is unwarranted - stopping from mining when you still earn enough to pay the electricity bill is a bad business decision. If you can't comprehend this simple fact then there's really nothing to talk about.

Indeed, continuing to mine when you can't cover current expenses is "throwing good money after bad" - what the Wikipedia article denotes as "Sunk cost fallacy". I thought you were implying that the whole notion of sunk cost is a fallacy.

[teukon]

Buying and paying off a card in this climate looks very tough and cannot be advised.  However, if you already have the hardware and you aren't so worried about hardware deterioration then mining is surely still quite profitable.

My miner is still (price = 4.8 USD, difficulty = 1755425) just about beats electricity and not only do I pay the equivalent of about .17 USD for each kWh of electricity but my dual 5850 miner is currently housing an AMD Phenom II x6 1100T: overvolted, overclocked to 4.0 GHz, and running at 100% on all cores.

Perhaps some people have much higher electricity costs or are still trying to mine with Nvidia cards but I'd imagine the bulk of the miners are comfortably covering their electricity costs with their earnings.

[Minsc]

The intrinsic value is bitcoins is their use as an uncontrollable internet monetary system and their brand recognition as being the first to do this.  This in itself is what gives bitcoins their value.

[PatrickHarnett]

If short run marginal cost is below what you can sell for, you produce more.  You hope to recover your "sunk" cost over the life of the project.

My cats still like the warmth from the computers.

[BitMagic]

I'm so sorry guys, but is this forum just full of a bunch of illiterate fools? If you read anything in this post, read the big bold line.

So this means miners are stupid? :p

Nah, just you.

That aggressive tone is unwarranted - stopping from mining when you still earn enough to pay the electricity bill is a bad business decision. If you can't comprehend this simple fact then there's really nothing to talk about. I thought you were implying that the whole notion of sunk cost is a fallacy.

If short run marginal cost is below what you can sell for, you produce more.  You hope to recover your "sunk" cost over the life of the project.

God, I wish my tone was unwarranted, but it sometimes reminds people to go back and read the OP. Clearly not in any of your cases. Maybe I can help you with that. Just read the bold bits:

It's no longer profitable to invest in new mining rigs. [Under this assumption], why isn't mining stopping?

And my response:

If things stay the same, it will.

In other words, it doesn't make sense to mine if you are losing money doing it. Yes! That's what I said! And I only had to read the OP once! I bet you can figure out what this all means, Patrick? Well, let me help you along: If the short run marginal cost is above what you can sell it for, we will be seeing a difficulty drop. Indeed!

Buying and paying off a card in this climate looks very tough and cannot be advised.  However, if you already have the hardware and you aren't so worried about hardware deterioration then mining is surely still quite profitable.

My miner is still (price = 4.8 USD, difficulty = 1755425) just about beats electricity and not only do I pay the equivalent of about .17 USD for each kWh of electricity but my dual 5850 miner is currently housing an AMD Phenom II x6 1100T: overvolted, overclocked to 4.0 GHz, and running at 100% on all cores.

Perhaps some people have much higher electricity costs or are still trying to mine with Nvidia cards but I'd imagine the bulk of the miners are comfortably covering their electricity costs with their earnings.

Thanks for actually participating, Teukon. No sarcasm at all.

[cbeast]

In other words, it doesn't make sense to mine if you are losing money doing it.

http://www.youtube.com/watch?v=y8Et28kBi1A&feature=related

[evoorhees]

BitMagic - stop being a douche. lol

[BubbleBoy]

It's no longer profitable to invest in new mining rigs. [Under this assumption], why isn't mining stopping?

And my response:

If things stay the same, it will.

In other words, it doesn't make sense to mine if you are losing money doing it.

Everybody here agrees that a new GPU mining rig is a bad investment. However most people are not loosing money on the short run, they are making electricity and something extra - just read my numeric examples. This is the complete quote of the OP, the important part bolded for your reading pleasure:

It's no longer profitable to invest in new mining rigs, moreover, many people are scarcely making any profit with such low exchange rates.

The fact of the matter is they are still making profit (in the EBIDTA sense), low as it may be, and as long as this continue they can't stop mining(*). Some of them are still underwater because the unamortised initial hardware costs, but that's rather irrelevant - they continue mining to minimize the total loss.

(*) Truth be told, this analysis is incomplete if you don't factor the opportunity cost of liquidating your setup and selling the hardware on eBay. The decision to do that may or may not make sense depending on your personal present value of cash money and the anticipated resell value of hardware. Anyway, if you decide to liquidate you should do it sooner rather than later, and maybe sell it to some other sucker who wants to get in the mining game (sort of like the GPU ponzi scheme). My psychic powers predict a huge glut of graphic cards hitting eBay in about 6 months time - that's what under 1$ prices or ASICs or both can do.

[old_engineer]

In other words, it doesn't make sense to mine if you are losing money doing it.

Sorry, BitMagic, but it looks like today is your day to be the idiot.  There are many reasons to participate in the experiment called BitCoin besides making money, and these alternate reasons are perfectly valid and make sense.  Just because it doesn't make sense TO YOU with YOUR value system and needs RIGHT NOW, doesn't mean it doesn't make sense to others.

In fact, for most of bitcoin's existence, mining has not been immediately profitable, and the past few months are an anomaly.  I don't know how you can be here and not have noticed that bitcoin was primarily designed to facilitate freedom and privacy in financial matters, not as a way to make money by mining.   Ironically, it's because of the early miners that mined when it didn't "make sense" that you are now here, loudly advertising your ignorance by saying it doesn't make sense to mine if you can't make an immediate profit.  I give away money all the time, and I suppose that doesn't make sense to you, either: it's called donating. 

If all you want to do is safely invest USD with a guaranteed short-term return, go buy a treasury bond, and stop using 15 point bold font to annoy us with your myopic viewpoints.

[fivebells]

Yes, people keep talking about rational actors, but you can't think sensibly about rationality until you've pinned down the goals.  The implicit goal when someone talks about rationality in this forum is fiscal acquisition, but that is a bit silly.  There are people who are going to mine bitcoin even if the exchange rate is 1c/BTC, because they like the idea.  On the other hand, such people are less likely to dump all the BTC they mine into an exchange for fiat currency.

[old_engineer]

I think the high volatility is the primary obstacle to the wider adoption of bitcoin, and the primary reason I speculate is to help reduce exchange volatility.  I'm happiest when I see that one of my buy or sell orders was partially filled before the market switched directions, meaning that I "shaved the peak", so to speak, off the market rally or the drop.

Boring though it may be, I hope the market stagnates between $4.80 and $5.20 for the next few weeks to months, and allows developers and users to get a taste of price stability.

[grondilu]

I witnessed a dead cat bouncing once.  Quite impressive.  I didn't even know this english expression at that time and I thought it was surnatural or something.  I think I saw it bouncing on the road at least ten times.  I thought it would go on forever and I actually didn't see it stop as I had to leave the place.