rpietila Calling the Bottom

[JayJuanGee]

September was not half-way. Price was about $120 then.

If it now rises to $660, many are tempted to sell.

DON'T.

I agree.

However, I remember being worried when the price hit the ATH at around $266 last November thinking everyone would panic and sell off but we just kept on going up without any hesitations.

I would like to think that would happen again on the next run up.  Will we stall at $1200 or just keep on going?  That is the bigger question I have.

So if the price rises to $1200 and you are tempted to sell,  DON't!  

(of course I say all this knowing that I have a trip to India to finish paying for very soon here.  So I am actually praying for a price increase soon.  It is way too painful selling coins at this low of a price, even the coins that have been so generously donated by a kindhearted benefactor!  I have even put things on a no interest credit card this past month so I haven't had to sell any.  Crazy I know. But selling at this price seems even crazier!!)

that was more or less the point that I was attempting to make about the $1200  issue.. that we should expect prices to go quite a bit beyond $1200; however, a question remains regarding how far, and at what point one should be tempted to sell?  $1800?  $2200? $3000?  $3900?   $5500?  $8101?   Each of us will determine the sell point at a different price point, and some will be more correct than others and some will be more emotionally driven than others.

[JayJuanGee]

 
Network effects (Metcalf's Law) has nothing to do with price.  Its only describes user adoption. 

You are sounding like the latest troll - with your simplistic and inaccurate statements. 

You may need to go back and reread metcalf's law and then consider how it would apply to BTC....   You may even need to use some imagination about what greater networking effects would cause for BTC prices.

 Bitcoin price is purely speculative.  It can be $1000 or $50 and still be used for for the same amount of transactions.  You have to consider velocity.

If Bitcoin's price were $50, then the market cap would be around $650million.    You would NOT be able to perform very large or very many transactions without creating considerable volatility.  Even with a $1000 price, BTC's market cap is around $14 billion, which is certainly more functional than  $50, but if anyone were to attempt any billion dollar transactions, the price would likely be too heavily affected.  BTC's price in the $10k plus arena brings more utility and $100k would bring even more utility with a $1.4 trillion market cap (about 1/5 of Gold's market cap).

  I'm not sure if I agree Austrians are proponents of bitcoin.  I was reading some bitcoin articles on Mises.org and it seems like the guys who comment who knew what they are talking about were opponents of bitcoin.  I only see more bitcoiners claiming to be Austrian & the Austrians response was that bitcoiners don't understand Austrian Economics

What you are saying here makes NO sense because it lacks specifics, and appears to serve as pure mudslinging...

[BitCoinNutJob]

How does someone even transfer say.... 25mil in BTC and cash out without crashing the market atm, is that size even possible?

[rpietila]

How does someone even transfer say.... 25mil in BTC and cash out without crashing the market atm, is that size even possible?

Not without knowing the right people. And this is one requirement too much.

"cash out" is a little bit undefined though. If you had $25million in cash, or in bank, and wanted to "cash out", you could only do it quickly to instruments with very similar attributes, such as bonds, or funds. If you wanted unencumbered RE for instance, a quick cash out would "crash the market" for dollars and you would pay much more than the midrate for your RE.

Similarly if I would need to "cash out" my castle in a week, it would be a horrible loss. But if someone would need to buy a castle with same attributes in a week - well then it ain't no cheap

The case for a person holding bitcoins and needing $25M in cash does not exist. That sort of sum is always needed for some further purpose. And the explanation goes on and on...

[oda.krell]

Agree with OP on this one. The 'cashing out a huge lump sum' scenario isn't really worth following. To few plausible cases where it would make sense, and the effect is overshadowed by the phenomenon below anyway...

What is quite possibly going on right now is a more natural, stretched out over time "cashing out" by large mining farms selling most (if not all) of their coins (by my argument that professionalization of the mining industry leads to short-term opportunism, i.e. "if I don't sell my new coins now for a low-ish price, some other other miner will, and I will lose even that low-ish profit opportunity").

That's not a real problem longer-term though: once buying pressure is sufficiently high again (for any external reason, like block reward halving, or market internal reason, like change of perception of price), miners will adapt their strategy, and presumably increase their amount of longer-term held coins, thus further fueling the price increase.

The tricky part is realizing when this change in sentiment and market dynamics takes place. I do believe it is possible to trade the periods before it happens, and act accordingly, but I also appreciate the recommendation to sit the in between period out with a full BTC position, to avoid the risk of taking a big hit to your position once the dynamics change.

[inca]

Agree with OP on this one. The 'cashing out a huge lump sum' scenario isn't really worth following. To few plausible cases where it would make sense, and the effect is overshadowed by the phenomenon below anyway...

What is quite possibly going on right now is a more natural, stretched out over time "cashing out" by large mining farms selling most (if not all) of their coins (by my argument that professionalization of the mining industry leads to short-term opportunism, i.e. "if I don't sell my new coins now for a low-ish price, some other other miner will, and I will lose even that low-ish profit opportunity").

That's not a real problem longer-term though: once buying pressure is sufficiently high again (for any external reason, like block reward halving, or market internal reason, like change of perception of price), miners will adapt their strategy, and presumably increase their amount of longer-term held coins, thus further fueling the price increase.

The tricky part is realizing when this change in sentiment and market dynamics takes place. I do believe it is possible to trade the periods before it happens, and act accordingly, but I also appreciate the recommendation to sit the in between period out with a full BTC position, to avoid the risk of taking a big hit to your position once the dynamics change.

That is an interesting point. Miners have some control over supply of coins coming to the market. If they acted in concert presumably they could engineer a bubble by constraining or starving supply to the market very easily. Or during a rapid price rise they could magnify a bubble by exerting the same effect.

The moment where the equilibrium changes from miners as a group selling on the market, to hoarding in expectation of price rises is interesting. Inside information could be key here?

[CMMPro]

I don't believe they have to work together to manipulate the market at all.

The mechanism that will do this is difficulty vs price.

All we need to do is figure out at what difficulty point even the "manufacturer miners" are no longer profitable.

I believe that right now all publicly available mining equipment is underwater. (Correct me if I'm wrong.)
If you take into consideration:

Maximum 6 month depreciation of the equipment costs (I'd guess based on my experience designing hardware perhaps <=20% of retail cost or ~$160/TH)

Energy costs per kw/hr (for both running the mining equip and cooling the building)

Rent

Labor to run the mine(1-3 people 24/7?)

Internet bandwidth (commercial service)

Other utility costs(LAN/networking, phone etc.)


If we can estimate the COGS for a block or a single bitcoin it is easy to know if they are profitable based on the market price and the off-exchange price. Many of these variables we cannot know precisely but we can apply an uncertainty statistic to them and determine a median price with a bandwidth of uncertainty. When the calculation is complete we can see a low/median/high band for the mining cost of a single bitcoin.

This band should give us something to work with in terms of knowing what percentage of miners are holding/selling/selling at a loss/selling at a premium to the exchange price.







 

[CMMPro]

RE: My above post.


So I quickly ran the numbers for supposedly the most efficient advertised hardware available (Spondoolies SP20 and the SP31).

Even if they are able to produce these for $100 per unit, by the time you take into consideration $485/BTC, pay for shipping and a power supply they are not profitable to run at the lowest energy costs in the country ($0.05/KW hr)  Not for one week....not for 6 months. It doesn't help to scale up, my calculation does not take into consideration commercial datacenter costs...so 1000 of these doesn't help, it makes the losses much worse.

I seriously doubt that ANY company producing hardware is able to produce 1.7 TH for $100.
(ASICMiner for example has a chip only cost higher than that.)

I would say with some certainty that there are no miners that are able to profit at today's difficulty vs equipment efficiency vs equipment cost. If you think you can mine for profit you are fooling yourself or not taking into consideration all the hidden costs.

[zimmah]

September was not half-way. Price was about $120 then.

If it now rises to $660, many are tempted to sell.

DON'T.

Obvious pump here.  Do people take this guy seriously?  Obvious that he was a bag that he want to dump so he needs greater fools to drive the price up so he can have profit

I see this game in penny stock land all the time

Sure, please sell all you bitcoins at $660, bug don't cry when we reach $5000 a few months later.

[yokosan]

People need to remember that following the death of Gox volume is much lower and most of what remains is now in China. The rules of the game have changed.

[painlord2k]

I see the hashing power of the network continue to grow and this reflect on the inflation rate.
Last number was a 30%  increase compared to the previous week.
These are serious numbers and a part a single point this summer, all inflation data was between 10-30% than design, so the hash rate grow 30-50% every two weeks.
So, there is some serious money investing in mining and they are professionals sure to get their investment back plus profits.

This could be explained in two ways:
First
1) Large professional miners (LPMs) are able to get HW at a large discount compared to private end users (large as >50%) so they are able to pay back the HW very fast (less than a month).
2) LPMs are able to secure very energy efficient HW (because they can afford professional HW and not retail stuff), so they can continue profit
3) LPM can get fiscal and accountability advantages private users can not exploit, so their costs are pretty different compared to a private miner.

Second
1) They are mining at a loss (today) because they believe (or know) there will be a large increase in the exchange rate in the "near" future and are keeping a share of the mined coins and using mining as a way to "buy" bitcoins without buying them directly on the market (and affecting the prices). They could compensate the coins they don't sell on the market with some subsides to large vendors to sell goods at a discount and exchange immediately the coins on the markets for fiat. This would, also, explain the "BUY THE DIPS" we see when the price go down enough and become more convenient to buy than mine.

[painlord2k]

My opinion is we saw a saucer shaped downturn after the top in November and we are seeing a saucer shaped upturn from May until now and will not see large increases before November.
Obviously there was a number of spikes up and down on saucer.

[JorgeStolfi]

1) Large professional miners (LPMs) are able to get HW at a large discount compared to private end users (large as >50%) so they are able to pay back the HW very fast (less than a month).

One way to get harware at a 100% discount:

* Advertise high-performance, low-consumption mining rig to be built and delivered in 2-3 months.
* Collect thousands of pre-orders at >5000 USD unit price.
* Build or buy those machines in record time.
* Move those machines to a massive "testing facility"
* "Test" the machines for months, and keep all the bitcoins that they mine.
* When the machines become uneconomical, ship them to the customers.

One can repeat this with several generations of mining equipment.

This method has been tested, and works!

[BitCoinNutJob]

People need to remember that following the death of Gox volume is much lower and most of what remains is now in China. The rules of the game have changed.

Actually gox were losing their business a few months before it closed. Bitstamp & BTC-e had caught up.  If gox were still alive they wouldnt be way ahead vs stamp finex & btc-e volume imo even if they sorted out their banking.

[oda.krell]

RE: My above post.


So I quickly ran the numbers for supposedly the most efficient advertised hardware available (Spondoolies SP20 and the SP31).

Even if they are able to produce these for $100 per unit, by the time you take into consideration $485/BTC, pay for shipping and a power supply they are not profitable to run at the lowest energy costs in the country ($0.05/KW hr)  Not for one week....not for 6 months. It doesn't help to scale up, my calculation does not take into consideration commercial datacenter costs...so 1000 of these doesn't help, it makes the losses much worse.

I seriously doubt that ANY company producing hardware is able to produce 1.7 TH for $100.
(ASICMiner for example has a chip only cost higher than that.)

I would say with some certainty that there are no miners that are able to profit at today's difficulty vs equipment efficiency vs equipment cost. If you think you can mine for profit you are fooling yourself or not taking into consideration all the hidden costs.

Here's my response (and calculation) in the other thread.

[molecular]

September was not half-way. Price was about $120 then.

If it now rises to $660, many are tempted to sell.

DON'T.

Obvious pump here.  Do people take this guy seriously?  Obvious that he was a bag that he want to dump so he needs greater fools to drive the price up so he can have profit

I see this game in penny stock land all the time

Bitcoin is not some penny stock.

What (I think) rpietila is saying: yes, we've been agonized for 10 or so months now and it's tempting to sell when we reach that dreded $680 level again. But: there's another possible 10-bagger waiting. If we pass $680 it's quite possible we'll see those crazy times again when people (fresh blood) will be falling over each other, scrambling to get some Bitcoin: "What?!? Bitcoin has survived again? I thought the CEO was in jail?!? That's some tough honey badger right there, anti-fragile shit mofo. choochooo!".

Even if it's just a 50% chance it's another 10-bagger, it makes sense to hold at 660 (unless one desperately needs fiat, in which case one might want to consider selling now instead of putting it off, to be honest)

Selling at $660 is like selliing at $120 last year. Rpietila has experienced the consequences of doing that. This is why I think is advice is sincere. Sure, he's talking his portfolio (but ones honest opinion should match ones portfolio anyways), but I highly doubt he'll sell at $660.

[molecular]

RE: My above post.


So I quickly ran the numbers for supposedly the most efficient advertised hardware available (Spondoolies SP20 and the SP31).

Even if they are able to produce these for $100 per unit, by the time you take into consideration $485/BTC, pay for shipping and a power supply they are not profitable to run at the lowest energy costs in the country ($0.05/KW hr)  Not for one week....not for 6 months. It doesn't help to scale up, my calculation does not take into consideration commercial datacenter costs...so 1000 of these doesn't help, it makes the losses much worse.

I seriously doubt that ANY company producing hardware is able to produce 1.7 TH for $100.
(ASICMiner for example has a chip only cost higher than that.)

I would say with some certainty that there are no miners that are able to profit at today's difficulty vs equipment efficiency vs equipment cost. If you think you can mine for profit you are fooling yourself or not taking into consideration all the hidden costs.

Then what's the explanation for the continuation of the hashrates exponential growth? Inertia?

[ensurance982]

People need to remember that following the death of Gox volume is much lower and most of what remains is now in China. The rules of the game have changed.

Not true! The volume across all exchanges is still strong and continuing to even go up slightly: http://data.bitcoinity.org/markets/volume/2y?c=e&r=week&t=a&volume_unit=btc

[yokosan]

September was not half-way. Price was about $120 then.

If it now rises to $660, many are tempted to sell.

DON'T.

Obvious pump here.  Do people take this guy seriously?  Obvious that he was a bag that he want to dump so he needs greater fools to drive the price up so he can have profit

I see this game in penny stock land all the time

Bitcoin is not some penny stock.

What (I think) rpietila is saying: yes, we've been agonized for 10 or so months now and it's tempting to sell when we reach that dreded $680 level again. But: there's another possible 10-bagger waiting. If we pass $680 it's quite possible we'll see those crazy times again when people (fresh blood) will be falling over each other, scrambling to get some Bitcoin: "What?!? Bitcoin has survived again? I thought the CEO was in jail?!? That's some tough honey badger right there, anti-fragile shit mofo. choochooo!".

Even if it's just a 50% chance it's another 10-bagger, it makes sense to hold at 660 (unless one desperately needs fiat, in which case one might want to consider selling now instead of putting it off, to be honest)

Selling at $660 is like selliing at $120 last year. Rpietila has experienced the consequences of doing that. This is why I think is advice is sincere. Sure, he's talking his portfolio (but ones honest opinion should match ones portfolio anyways), but I highly doubt he'll sell at $660.

Agree 100%. Anybody that's been around BTC for at least a couple of years has likely been there.

[minerpumpkin]

Agree 100%. Anybody that's been around BTC for at least a couple of years has likely been there.

We're simply in an especially rough patch right now. There's no bubble which people have been promised and a lot of people who got into Bitcoin back in November 2013 are now panicking. They're the so-called lambs in this case. They need to work on their perseverance!