What would you do? Mine with $40k or purchase Bitcoin?

[Funexec]

hey all

i am new to the forum and have a question as it seems there are much brighter people on this forum than myself.

would you purchase mining hardware (60TH total) and mine or invest that money and just purchase Bitcoin?

i can get the hardware hosted near me in Wa State at a rate of $290 per 6th.

i just paid off my debt and have roughly $40k leftover to invest in this type of endeavor.


appreciate your input,



S

[1715184256]

1715184256

[1715184256]

1715184256

[1715184256]

1715184256

[Tron]

Because you are in Washington state which among the locations with lowest cost of electricity, I would do as much mining as your house/apartment can reasonably handle, and buy bitcoin with the remainder.  You lose most of your competitive advantage (location) when you pay for hosting.  Your hosting is ~$0.10/Kwh when 6Th is calculated using the efficiency of a KNC Neptune or similar.

Below is a paper I've written on bitcoin value and the mining difficulty:

Bitcoin Value and Mining Difficulty

It’s no coincidence that the value of Bitcoin goes up as the mining difficulty rises.  There is a very important linkage between the two.  To understand why, it is important to understand how mining affects the difficulty.

Mining for profit is very similar to a regular manufacturing business.  You have capital costs which is the mining hardware (ASICS, GPUs, CPUs, and perhaps AC).  Then you have your variable cost which is electricity.  The goal is to maximize the profit, which means getting the most out of the hardware, and then knowing when to stop mining and sell the hardware.  Most miners sell their newly mined bitcoin immediately to recoup their costs, which decreases the value of bitcoin because of the market sell pressure.  Those that hold do better in most cases, and miners that hold also benefit the long-term value of Bitcoin -- more on this in another article.

How does this relate to the difficulty and price?  Every miner looks at the cost of equipment, the cost of electricity and then makes two educated guesses.  First, ‘How fast will the difficulty rise?’  And second, ‘How fast will the value of bitcoin rise?’  These two numbers are critically important and impossible to know in advance, but looking back at historical rates and projecting forward will give you an idea of what they might be.

Efficient market theory says that it will eventually be the same cost to purchase a bitcoin as it will be to mine a bitcoin.   Why is this?  Because if it’s cheaper to mine a bitcoin, miners will buy more hardware, burn more electricity, mine, and sell bitcoin into the market pushing the market rate down until mining is no longer profitable.   

Why mine at all?  Because the efficient market theory breaks down at the compressed timescales involved in bitcoin.  Rational market forces haven’t gone away, but they simply can’t adapt as quickly as the bitcoin ecosystem changes.  If you are prepared to mine when the price rockets on speculation and before the difficulty adjusts to compensate, there are significant profits to be made.

We’ve all heard stories from the early Bitcoin days, literally only a few years ago, when mining bitcoin with a laptop would yield blocks of fifty bitcoin.  We’ve also heard stories of those same people turning off their computers because it just wasn’t worth it.  “WHAT WERE YOU THINKING?!”, you want to scream knowing that those same bitcoins are now worth tens of thousands of dollars.  But they were operating logically.  The cost of electricity exceeded the value of the bitcoins at the time.  It would have been better to buy them on the open market with the same money that would have been spent on electricity, although few did.

So what changed from those easy, breezy, laptop mining days?  The difficulty has changed.  By design, half of all the bitcoins that will ever be mined were mined in the first four years.  Does this mean they were easier to find in the beginning?   Yes, but not because they were just laying around.  The careful and considered design of the software by its creator, Satoshi Nakamoto, makes them statistically easier to mine at the beginning and harder as more miners join the party.   These details are controlled by the Bitcoin software, and while software can easily be changed, it’s necessary that all miners use software that follows the same rules.  The rules are working well for the miners so it would be nearly impossible to change the rules.

Not only are there fewer bitcoins to mine, the restricted number of bitcoins are distributed proportionately among the miners based on the resources they marshal for mining.  Add more miners and each miner gets fewer bitcoins until some miners drop out because their mining equipment is not as efficient or their electricity costs are too high.

Mining is a great way to equitably distribute bitcoin, but it simultaneously does two interesting things.  First, it takes value away from bitcoin because resources are spent on mining equipment and electricity instead of purchasing bitcoin on the open market.  Second, it increases the mining difficulty making each new bitcoin more expensive to obtain and therefore more valuable.   These two competing forces are in tension.

Back to the original premise that bitcoin’s value rises when the difficulty rises.  When the difficulty rises to the point that mining is unprofitable, it makes more sense to purchase bitcoin which adds buying pressure to the market and the price rises.  Resources that would go to mining will go to purchasing bitcoin instead.  The buyers of bitcoin force the market price up.  The value of a single bitcoin is dependent on a high difficulty.  The mining difficulty is dependent on a high price.  They can both go up, or both go down, but they will not separate - at least for very long.

[gperez2000]

Mining is almost unprofitable unless you make it big and quick 'cause difficulty rises almost every 10 days now and cloud mining only the one selling makes money, sorry 290 for 6TH a month?(that's cheap)

[nwfella]

Wouldn't recommend anymore than a 10/90 distribution (10% mining, 90% purchasing) at this point.  Difficulty jumps are getting pretty serious again and more than likely will be for next 6-9 months at least.  If profit is your motive mining sure ain't the answer.

[ChuckBuck]

How would you purchase 60TH worth of mining equipment with only $40k?  Most miners are above $1 per GH/s so trying to figure out which miners you'd be buying

Trying to figure that bit out.

[kendog77]

How would you purchase 60TH worth of mining equipment with only $40k?  Most miners are above $1 per GH/s so trying to figure out which miners you'd be buying

Trying to figure that bit out.

Agreed. You'd be lucky to get 30TH worth of mining equipment for 40k right now.

[jonsi]

Definetly just buy btc and hold. There is no mining equipment on the market right now that you can reach a positive ROI. You can always buy later if you find a good deal.

[smoothie]

It is an arms race and will be very difficult to ROI.

I would buy bit coin outright.

[DrG]

Buying the coin requires about 10 clicks of a mouse and a few keyboard keystrokes.

Mining would require setting them up, testing, configuring, monitoring for failures and tracking income.  All this wasted energy could be spent working to earn more coins.

I vote for buying, unless you want to solo mine your own clean coins.

[trand]

buying BTC and keep  it until u have around 15-30% profit and sell it
it more profitable than buy mining eqp but use your money for bitcoin forex more risky than mining if you dont know how to

[cryptnutter]

Seems like everyone is recommending to just buy Bitcoin outright.

So does this mean that mining will truly become centralized eventually and only done by companies with very deep pockets? If so, Satoshi cannot be happy with this outcome wherever he or she is 

[DrG]

Seems like everyone is recommending to just buy Bitcoin outright.

So does this mean that mining will truly become centralized eventually and only done by companies with very deep pockets? If so, Satoshi cannot be happy with this outcome wherever he or she is 

There's no reason that every home user cannot run a small device (say the equivalent of 500GH/s currently).  If 1 million people ran this in their homes no company short of a government backed takeover (I consider the banksters part of government since they are in bed with them) would be able to centralize the network.  You don't need to go crazy and have a 25TH farm at home.

We just need to get rid of vendors like BFL who promise a device in November of 2013 and by the end of June 2014 still don't have a working prototype.  A little prudence would go a long way.

[rapsaodan84]

It seems the only way mining is profitable is if the BTC price rises in the future, so your coins are worth more later than when mined.

So, it's easier and more profitable just to buy the coins and hold.

It's be better for the network if you buy miners and point to a p2pool, but honestly I think it's better for you to just buy BTC.

[philipma1957]

hey all

i am new to the forum and have a question as it seems there are much brighter people on this forum than myself.

would you purchase mining hardware (60TH total) and mine or invest that money and just purchase Bitcoin?

i can get the hardware hosted near me in Wa State at a rate of $290 per 6th.

i just paid off my debt and have roughly $40k leftover to invest in this type of endeavor.


appreciate your input,



S

okay  I recommend a multi prong attack.

40k for 60th is a monster amazing stone cold bargain .

Buy the gear sell half  and host the other half.

You could sell 30th for 30 to 35 k   no worries.      this means  you have 30th for under 10k.    just mine the 30th. and pay the 290 x 5 = 1500 a month to host.     you roi in under 30days.

hold those mined coins for 1 year and then decide if you want to sell them.

[feverpitch]

If you have 40K in Bitcoin, I would certainly keep it in Bitcoin rather than put it in miners, but that's just me.

[RoadStress]

I say you diversify and go 50% mining and 50% bitcoins. This way you are making money whether the exchange rate increases or it stays flat.

[FeodoroAndy]

If you can buy so cheap mining hardware, do it and sell it and then buy again BTC for gained value.

[DrG]

okay  I recommend a multi prong attack.

40k for 60th is a monster amazing stone cold bargain .

Buy the gear sell half  and host the other half.

You could sell 30th for 30 to 35 k   no worries.      this means  you have 30th for under 10k.    just mine the 30th. and pay the 290 x 5 = 1500 a month to host.     you roi in under 30days.

hold those mined coins for 1 year and then decide if you want to sell them.

[/quote]

But if you could sell 30th for 30-35k, why not just resell 60th for 60-70k and use the 20 to 30K profit to just buy Bitcoins.  This would not take more than 1 total day of your time and you could move onto the next venture instead of having to babysit 60TH for 9 months 

[Instamatic]

It is an arms race and will be very difficult to ROI.

I would buy bit coin outright.

I used the arms race remark in a conversation with a friend the other day.  Buying outright means working at market value hoping for an increase in price.  Mining direct means losing money at market value hoping for either a ROI or price increase.  I somewhat see them as one & the same except they both have additional benefits.  Buying outright also stimulates price exchange rates and liquidity of the coin, however, mining secures the network and introduces new coins to the overall amount distributed (not to mention distributes network hashrate).  They're both good options, but mining can't be completely eliminated from the equation either.

[DrG]

It is an arms race and will be very difficult to ROI.

I would buy bit coin outright.

I used the arms race remark in a conversation with a friend the other day.  Buying outright means working at market value hoping for an increase in price.  Mining direct means losing money at market value hoping for either a ROI or price increase.  I somewhat see them as one & the same except they both have additional benefits.  Buying outright also stimulates price exchange rates and liquidity of the coin, however, mining secures the network and introduces new coins to the overall amount distributed (not to mention distributes network hashrate).  They're both good options, but mining can't be completely eliminated from the equation either.

I used to post the 5 main reasons to mine.  It has really dwindled down to 3 now since most veteran miners agree unless you get an insane deal no miner will + ROI in BTC terms.  The only reasons to mine are:
1) you just have too much fun doing it.  Well than hats off to you and enjoy your shiny new toys
2) you want to support the network and help keep it distributed.  Make sure you don't mine on a near 51% then
3) you want to solo mine to get untainted coins which you use to make physical coins or just want untainted coins

So mining has its purpose, but it's just an economically losing venture at present.  Having kids means losing money too since you could earn so much more and not have to "waste" money on them but I still chose to have mine

[philipma1957]

okay  I recommend a multi prong attack.

40k for 60th is a monster amazing stone cold bargain .

Buy the gear sell half  and host the other half.

You could sell 30th for 30 to 35 k   no worries.      this means  you have 30th for under 10k.    just mine the 30th. and pay the 290 x 5 = 1500 a month to host.     you roi in under 30days.

hold those mined coins for 1 year and then decide if you want to sell them.

But if you could sell 30th for 30-35k, why not just resell 60th for 60-70k and use the 20 to 30K profit to just buy Bitcoins.  This would not take more than 1 total day of your time and you could move onto the next venture instead of having to babysit 60TH for 9 months  
[/quote]

yeah but mining is such fun. Or  As my wife says the fans are too loud it is too hot in the garage.

 Frankly  I am drifting into holding btc and ltc more then mining right now.

 I think I have more in coins then in gear right now.  Not sure .

[DrG]

okay  I recommend a multi prong attack.

40k for 60th is a monster amazing stone cold bargain .

Buy the gear sell half  and host the other half.

You could sell 30th for 30 to 35 k   no worries.      this means  you have 30th for under 10k.    just mine the 30th. and pay the 290 x 5 = 1500 a month to host.     you roi in under 30days.

hold those mined coins for 1 year and then decide if you want to sell them.

But if you could sell 30th for 30-35k, why not just resell 60th for 60-70k and use the 20 to 30K profit to just buy Bitcoins.  This would not take more than 1 total day of your time and you could move onto the next venture instead of having to babysit 60TH for 9 months  

yeah but mining is such fun. Or  As my wife says the fans are too loud it is too hot in the garage.

 Frankly  I am drifting into holding btc and ltc more then mining right now.

 I think I have more in coins then in gear right now.  Not sure .
[/quote]

Yes I know it's fun.  I'm coming up on my 3 year mining anniversary for my original 6870s that go me started.  But it's also a pain in the ass sometimes.  I have 3 cards I need to RMA and 1 fan to replace.  I've been meaning to RMA those cards for 3 months now.

With summer here in full force on my end I won't be missing the heat that's for sure.

[Instamatic]

Glad it's not just me!  I've become an RMA/store exchange expert these days.  Tip:  even if the store says they only make returns for 30 days you can always play dumb and bring something in later hoping to get that clerk that just doesn't care (saved me the hassle on a motherboard & 2 video cards once).

p.s.  it is too fun.

[ALToids]

Glad it's not just me!  I've become an RMA/store exchange expert these days.  Tip:  even if the store says they only make returns for 30 days you can always play dumb and bring something in later hoping to get that clerk that just doesn't care (saved me the hassle on a motherboard & 2 video cards once).

p.s.  it is too fun.

It is fun until you awake at 2:47AM to the smell of fried PSU with your smoke detector going off and the lights in the house are out.  yeah good times 

[DrG]

Glad it's not just me!  I've become an RMA/store exchange expert these days.  Tip:  even if the store says they only make returns for 30 days you can always play dumb and bring something in later hoping to get that clerk that just doesn't care (saved me the hassle on a motherboard & 2 video cards once).

p.s.  it is too fun.

It is fun until you awake at 2:47AM to the smell of fried PSU with your smoke detector going off and the lights in the house are out.  yeah good times 

Ahh I remember sitting next to my BFL SC Single and 5 days after I got it the damn thing went POP and smoke came out as the fans spun down.  Then it started to crackle a little, I yanked the cord out of my UPS.  Good times indeed 

[philipma1957]

Glad it's not just me!  I've become an RMA/store exchange expert these days.  Tip:  even if the store says they only make returns for 30 days you can always play dumb and bring something in later hoping to get that clerk that just doesn't care (saved me the hassle on a motherboard & 2 video cards once).

p.s.  it is too fun.

It is fun until you awake at 2:47AM to the smell of fried PSU with your smoke detector going off and the lights in the house are out.  yeah good times 

tell me more.  how did you do it?

did you break the number one rule of psu?   

 run that mofo  psu  24/7/365 at 90 percent capacity =  why did my psu die?

[ALToids]

Glad it's not just me!  I've become an RMA/store exchange expert these days.  Tip:  even if the store says they only make returns for 30 days you can always play dumb and bring something in later hoping to get that clerk that just doesn't care (saved me the hassle on a motherboard & 2 video cards once).

p.s.  it is too fun.

It is fun until you awake at 2:47AM to the smell of fried PSU with your smoke detector going off and the lights in the house are out.  yeah good times 

tell me more.  how did you do it?

did you break the number one rule of psu?   

 run that mofo  psu  24/7/365 at 90 percent capacity =  why did my psu die?

Seasonic X750 Gold running 24/7 at about 60% of capacity (2x7950 Litecoin mining).  PSU made it made it 3 months from date of purchase.  Surprised my Seasonic went when the Enermax Lepa and ChannelWell stuff never failed.

[philipma1957]

Glad it's not just me!  I've become an RMA/store exchange expert these days.  Tip:  even if the store says they only make returns for 30 days you can always play dumb and bring something in later hoping to get that clerk that just doesn't care (saved me the hassle on a motherboard & 2 video cards once).

p.s.  it is too fun.

It is fun until you awake at 2:47AM to the smell of fried PSU with your smoke detector going off and the lights in the house are out.  yeah good times 

tell me more.  how did you do it?

did you break the number one rule of psu?   

 run that mofo  psu  24/7/365 at 90 percent capacity =  why did my psu die?

Seasonic X750 Gold running 24/7 at about 60% of capacity (2x7950 Litecoin mining).  PSU made it made it 3 months from date of purchase.  Surprised my Seasonic went when the Enermax Lepa and ChannelWell stuff never failed.

That is surprising .  Should not have happened.

[scribbles]

I had a similar choice about a month ago and looked into mining vs buying BTC (I also live in WA). With the incremental increase in difficulty, it's hard to ROI as an individual. If you're interested in mining, I say buy BTC and mine altcoin for fun.

[DrG]

I had a similar choice about a month ago and looked into mining vs buying BTC (I also live in WA). With the incremental increase in difficulty, it's hard to ROI as an individual. If you're interested in mining, I say buy BTC and mine altcoin for fun.

You know it's scarry when people in WA state are contemplating buying over mining.  My family in WA is paying 1/10th of what I pay here in Southern California.  What a difference 1000 miles and 2 states makes.

[Funexec]

thanks for the responses guys!

i went the 50/50 route however dropped the total amount spent to $30K.


thanks again,


S