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Author Topic: Bitcoin Mining and dividend reinvesting on Cryptsy (MN1, MN2)  (Read 2226 times)
DrBitcoin
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May 02, 2014, 06:33:33 PM
 #1

This is a question for the serious investor/mathematicians out there. One of my favorite forms of investing is dividend reinvestment and long term exponential growth. Cryptsy has been offering Bitcoin mining shares that pay daily "dividends" and can be traded like stock. You can also now buy  partial shares, so that the dividend earnings can be reinvested on a weekly or monthly basis.

For the sake of argument, lets take the biggest risk out of the equation. Let's assume Cryptsy is not going anywhere, and that the money you invest will not be "Mt Goxxed."  

Let's also assume that while the original principal investment will fluctuate, it will remain fairly constant and will not go down to $0.00. Obviously, this could happen, but for the sake of argument let's assume your original principal is moderately safe.

Now, I bought one share of MN2 at .180BTC
My average daily dividend is currently .00051724BTC
Weekly that comes out to .00362068BTC
This equals a roughly 2.011% return each week on the principal

Assuming that the payouts remain fairly constant over the next few years, if I were to reinvest the dividends on a weekly basis by buying fractions of shares...how long would it take to see some reasonable exponential growth? A few years?

Obviously there are a lot of "what ifs," including increase in hash rates (and thus decrease in payouts), transaction fees, etc.  But I'm playing around with the numbers because something like this could be a good addition to someone's investment portfolio. Obviously we are in early days, but it is interesting stuff.

18ddkpxg3oQHr1NHmNNbpYzyvAeXxst2dH
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ghur
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May 02, 2014, 06:37:38 PM
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Assuming that the payouts remain fairly constant over the next few years

It won't. With difficulty increases your payouts will drop 15-20% every 2 weeks.

Just like CEX the only way to make profit off these shares is through day trading.
They lose value fast and currently are not even close to a rate at which holding would be profitable.

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DrBitcoin
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May 02, 2014, 07:07:40 PM
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Assuming that the payouts remain fairly constant over the next few years

It won't. With difficulty increases your payouts will drop 15-20% every 2 weeks.

Just like CEX the only way to make profit off these shares is through day trading.
They lose value fast and currently are not even close to a rate at which holding would be profitable.

According to Crypstsy, the original principal will be made back through dividends in a year or less. That's 100% ROI in a year. Stocks don't have anything even close to that type of ROI.

The difference, like you said is that these will eventually depreciate in value. Which is why there needs to be diversification. At set intervals, reinvest some of the dividend payouts into newer vehicles. MN3, MN4 eventually when they come out.

Also...these shares have gone down from .180 to .100 back up to roughly .150. That means as of today, I've lost .030BTC off the principal, or about 16%. According to my very rough calculations, I'll make up that 16% loss in 7-8 weeks if it stays at that price, and will be even despite the loss to principal.

I actually think there is some long term money to be made here without day trading. I'm just trying to wrap my head around it.

18ddkpxg3oQHr1NHmNNbpYzyvAeXxst2dH
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