Miners are about to get squeezed big time unless the price of BTC jumps soon

[kendog77]

Miners are going to get hit with a ~17% difficulty increase in around 1 day on August 19th, and the price of BTC has fallen from ~$580 to ~$470 over the past two weeks.

These two factors combined are going to put a lot of pressure on miners. I expect to see us reach mining equilibrium (the point at which the difficulty stays roughly the same or even goes down) before the end of the year unless the price of BTC spikes soon.

The rest of 2014 will be very interesting as inefficient hardware and miners with high electricity costs get pushed off the network.

It will also be interesting to see how mining hardware manufacturers deal with this issue and if they can continue to sell new hardware at a profit.

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[iglasses]

It's crazy to see that people just blindly continue to add power to the network regardless of what the price/difficulty are doing.  I think part of this is yet another negative of the pre-order disease BTC suffers from.  If you ordered from Company XYZ three+ months ago and the box shows up on your doorstep today what are you going to do, not plug it in?  But would you order that same piece of hardware for the same price today even if it would be delivered tomorrow?  Too often I think the answer to that question is a big fat NO.
Until people truly keep their hands in their pockets and stop financing the development for h/w Co's. two, three quarters away I don't think it will change.

Even Bitmain who had one of the best reps out there have really left a bad taste in people's mouths with the S3, now they want you to wait until September 20th for the next round to ship and pay .66BTC for it TODAY.

[bozo333]

Same stuff I have posted elsewhere. According to my calculations, even with a sub 10 cent/kwh electric rate you are not making money at these difficulties if BTC is below 650, 650 being about break even after 3-4 months. And thats assuming (big assumption) that you did not overpay for the hardware (another set of calculations).

PS Forget most online 'profit calculators'. Pie in the sky, not real world earnings by any means. But better than nothing.

[Nagle]

It's crazy to see that people just blindly continue to add power to the network regardless of what the price/difficulty are doing.  I think part of this is yet another negative of the pre-order disease BTC suffers from.  If you ordered from Company XYZ three+ months ago and the box shows up on your doorstep today what are you going to do, not plug it in?  But would you order that same piece of hardware for the same price today even if it would be delivered tomorrow?  Too often I think the answer to that question is a big fat NO.

Right. Because of all those pre-orders and extended delivery times, a lot of mining gear is coming online that's will have a negative lifetime ROI. That creates an overshoot situation - lots of miners losing money, but losing less than if they never powered up the preordered equipment. It's quite possible for this to persist until all miners are losing money.

[jonnybravo0311]

It's crazy to see that people just blindly continue to add power to the network regardless of what the price/difficulty are doing.  I think part of this is yet another negative of the pre-order disease BTC suffers from.  If you ordered from Company XYZ three+ months ago and the box shows up on your doorstep today what are you going to do, not plug it in?  But would you order that same piece of hardware for the same price today even if it would be delivered tomorrow?  Too often I think the answer to that question is a big fat NO.
Until people truly keep their hands in their pockets and stop financing the development for h/w Co's. two, three quarters away I don't think it will change.

Even Bitmain who had one of the best reps out there have really left a bad taste in people's mouths with the S3, now they want you to wait until September 20th for the next round to ship and pay .66BTC for it TODAY.

It's 0.58BTC... but I'm just nitpicking there.  I agree with your post.  Try to tell somebody they can purchase a 600GH/s miner for $4000 and they'll tell you to go pound sand.

Same stuff I have posted elsewhere. According to my calculations, even with a sub 10 cent/kwh electric rate you are not making money at these difficulties if BTC is below 650, 650 being about break even after 3-4 months. And thats assuming (big assumption) that you did not overpay for the hardware (another set of calculations).

PS Forget most online 'profit calculators'. Pie in the sky, not real world earnings by any means. But better than nothing.

You need to stop thinking in terms of fiat here.  You need to consider whether or not the miner you purchase will ever make back the BTC it cost to purchase it.  If you are going to invest fiat in the hardware, instead of BTC, you need to look at how much BTC that fiat can buy you at the same time you are going to purchase the hardware.  For example, if BTC is $100 a coin and your miner costs $3000, you can either buy 30BTC or the hardware.  If you choose the hardware, you need to determine whether or not that hardware will ever get you back the 30BTC during its useful lifespan.  Same applies if the cost of a coin is $10,000.  You can buy 0.3BTC or that miner.  If the miner will earn you back more than 0.3BTC, then pick up the miner.

[Syke]

Even Bitmain who had one of the best reps out there have really left a bad taste in people's mouths with the S3, now they want you to wait until September 20th for the next round to ship and pay .66BTC for it TODAY.

.58BTC is only $266, or $.6/ghps. That is by far the best price in the market.

[DrG]

Even Bitmain who had one of the best reps out there have really left a bad taste in people's mouths with the S3, now they want you to wait until September 20th for the next round to ship and pay .66BTC for it TODAY.

.58BTC is only $266, or $.6/ghps. That is by far the best price in the market.

Without a doubt Bitmain's S3s are nice hardware that are relatively problem free (compared to competition) and have pretty much the best pricing for end users.  The problem is if Bitmain wants to mine on their own it doesn't cost them 0.66BTC but probanly something less than 0.25BTC to make one so they can keep making them and mining as can many other ASIC manufacturers. 

[Syke]

Without a doubt Bitmain's S3s are nice hardware that are relatively problem free (compared to competition) and have pretty much the best pricing for end users.  The problem is if Bitmain wants to mine on their own it doesn't cost them 0.66BTC but probanly something less than 0.25BTC to make one so they can keep making them and mining as can many other ASIC manufacturers. 

Yup. Small-time/home miners are finished. The big guys have their startup costs paid for, and now they just crank out the chips at far cheaper cost than they will sell them for. There's no way to compete with that.

[Korbman]

Same stuff I have posted elsewhere. According to my calculations, even with a sub 10 cent/kwh electric rate you are not making money at these difficulties if BTC is below 650, 650 being about break even after 3-4 months. And thats assuming (big assumption) that you did not overpay for the hardware (another set of calculations).

And what calculations did you do to come up with that?

Even with inefficient hardware (2W per GH/s) and an energy cost of $0.15 per kWh, each GH/s would cost $0.0072 per day. At the current difficulty (19.7B), each GH/s would generate somewhere around BTC0.000025, or $0.01175 at the current exchange rate of ~$470. A gross profit of $0.00455 per GH/s.

At what point will revenue and expenses cancel each other out? Around $288 per Bitcoin, or a difficulty of ~32-33B.

Either way, I agree with what's been said...small time mining is mostly dying, and instead being left up to the big manufacturers / wholesalers with deep pockets, vast swathes of chips, and industrial grade (cheap) energy. When thinking long term, there's no way we can compete.

[SMB-2525]

At what point will revenue and expenses cancel each other out? Around $288 per Bitcoin, or a difficulty of ~32-33B.

Mid October is crunch time. Between now and then, it looks like the amount of BTC generated by a miner will halve.
Stated differently, a miner in production today will produce half of the BTC it will ever produce (going forward from today) in the next 60 days. Unless difficulty increases start averaging under 16%

[SMB-2525]

Either way, I agree with what's been said...small time mining is mostly dying, and instead being left up to the big manufacturers / wholesalers with deep pockets, vast swathes of chips, and industrial grade (cheap) energy. When thinking long term, there's no way we can compete.

On the other hand, if BTC exchange value keeps dropping and miners have to sell to buy power to keep mining, this could become a death spiral.

I wonder if that is a bad thing?

[philipma1957]

It's crazy to see that people just blindly continue to add power to the network regardless of what the price/difficulty are doing.  I think part of this is yet another negative of the pre-order disease BTC suffers from.  If you ordered from Company XYZ three+ months ago and the box shows up on your doorstep today what are you going to do, not plug it in?  But would you order that same piece of hardware for the same price today even if it would be delivered tomorrow?  Too often I think the answer to that question is a big fat NO.
Until people truly keep their hands in their pockets and stop financing the development for h/w Co's. two, three quarters away I don't think it will change.

Even Bitmain who had one of the best reps out there have really left a bad taste in people's mouths with the S3, now they want you to wait until September 20th for the next round to ship and pay .66BTC for it TODAY.

It's 0.58BTC... but I'm just nitpicking there.  I agree with your post.  Try to tell somebody they can purchase a 600GH/s miner for $4000 and they'll tell you to go pound sand.

Same stuff I have posted elsewhere. According to my calculations, even with a sub 10 cent/kwh electric rate you are not making money at these difficulties if BTC is below 650, 650 being about break even after 3-4 months. And thats assuming (big assumption) that you did not overpay for the hardware (another set of calculations).

PS Forget most online 'profit calculators'. Pie in the sky, not real world earnings by any means. But better than nothing.

You need to stop thinking in terms of fiat here.  You need to consider whether or not the miner you purchase will ever make back the BTC it cost to purchase it.  If you are going to invest fiat in the hardware, instead of BTC, you need to look at how much BTC that fiat can buy you at the same time you are going to purchase the hardware.  For example, if BTC is $100 a coin and your miner costs $3000, you can either buy 30BTC or the hardware.  If you choose the hardware, you need to determine whether or not that hardware will ever get you back the 30BTC during its useful lifespan.  Same applies if the cost of a coin is $10,000.  You can buy 0.3BTC or that miner.  If the miner will earn you back more than 0.3BTC, then pick up the miner.

 

Not true for any USA miner that is declaring the btc on his tax return. 

[wasserman99]

Either way, I agree with what's been said...small time mining is mostly dying, and instead being left up to the big manufacturers / wholesalers with deep pockets, vast swathes of chips, and industrial grade (cheap) energy. When thinking long term, there's no way we can compete.

On the other hand, if BTC exchange value keeps dropping and miners have to sell to buy power to keep mining, this could become a death spiral.

I wonder if that is a bad thing?

What will happen is that more miners will take their machines offline and less people will bring new machines online as it will not be cost efficient to run their miners. I would doubt that we would see a significant rise in the percentage of newly mined coins being sold in the market.

[taipo]

Might break 20% in this round.

Mining [will be] over as a money making exercise for anyone other than data centres at a difficulty of about 80⁹..

One way of moving on from that then is for as many home miners as possible to rather than just quit altogether, is to put together an affordable rig, one that is small and won't matter on the power bill, and go back to solo mining or mine on pools that allow the winner to take all.

I have still got a couple of IceFury's laying about somewhere, will dig those out and blow off the dust.

[FeodoroAndy]

For many of us it is just a hobby, so it is not a big deal to mine some time frame at loss. If you really believe in BTC feature, you can not quit.

[jonnybravo0311]

It's crazy to see that people just blindly continue to add power to the network regardless of what the price/difficulty are doing.  I think part of this is yet another negative of the pre-order disease BTC suffers from.  If you ordered from Company XYZ three+ months ago and the box shows up on your doorstep today what are you going to do, not plug it in?  But would you order that same piece of hardware for the same price today even if it would be delivered tomorrow?  Too often I think the answer to that question is a big fat NO.
Until people truly keep their hands in their pockets and stop financing the development for h/w Co's. two, three quarters away I don't think it will change.

Even Bitmain who had one of the best reps out there have really left a bad taste in people's mouths with the S3, now they want you to wait until September 20th for the next round to ship and pay .66BTC for it TODAY.

It's 0.58BTC... but I'm just nitpicking there.  I agree with your post.  Try to tell somebody they can purchase a 600GH/s miner for $4000 and they'll tell you to go pound sand.

Same stuff I have posted elsewhere. According to my calculations, even with a sub 10 cent/kwh electric rate you are not making money at these difficulties if BTC is below 650, 650 being about break even after 3-4 months. And thats assuming (big assumption) that you did not overpay for the hardware (another set of calculations).

PS Forget most online 'profit calculators'. Pie in the sky, not real world earnings by any means. But better than nothing.

You need to stop thinking in terms of fiat here.  You need to consider whether or not the miner you purchase will ever make back the BTC it cost to purchase it.  If you are going to invest fiat in the hardware, instead of BTC, you need to look at how much BTC that fiat can buy you at the same time you are going to purchase the hardware.  For example, if BTC is $100 a coin and your miner costs $3000, you can either buy 30BTC or the hardware.  If you choose the hardware, you need to determine whether or not that hardware will ever get you back the 30BTC during its useful lifespan.  Same applies if the cost of a coin is $10,000.  You can buy 0.3BTC or that miner.  If the miner will earn you back more than 0.3BTC, then pick up the miner.

 

Not true for any USA miner that is declaring the btc on his tax return. 

I'm confused by your reply.  In both cases I have a choice to make: buy BTC or buy hardware I then use to make BTC.  I'm declaring the BTC on taxes in both cases.  The US treats BTC as property and it is subject to capital gains tax just like a stock.  I suppose you could argue that you're able to defer the tax by purchasing hardware but eventually you're gonna have to pay the man.

[seriouscoin]

It's crazy to see that people just blindly continue to add power to the network regardless of what the price/difficulty are doing.  I think part of this is yet another negative of the pre-order disease BTC suffers from.  If you ordered from Company XYZ three+ months ago and the box shows up on your doorstep today what are you going to do, not plug it in?  But would you order that same piece of hardware for the same price today even if it would be delivered tomorrow?  Too often I think the answer to that question is a big fat NO.
Until people truly keep their hands in their pockets and stop financing the development for h/w Co's. two, three quarters away I don't think it will change.

Even Bitmain who had one of the best reps out there have really left a bad taste in people's mouths with the S3, now they want you to wait until September 20th for the next round to ship and pay .66BTC for it TODAY.

It's 0.58BTC... but I'm just nitpicking there.  I agree with your post.  Try to tell somebody they can purchase a 600GH/s miner for $4000 and they'll tell you to go pound sand.

Same stuff I have posted elsewhere. According to my calculations, even with a sub 10 cent/kwh electric rate you are not making money at these difficulties if BTC is below 650, 650 being about break even after 3-4 months. And thats assuming (big assumption) that you did not overpay for the hardware (another set of calculations).

PS Forget most online 'profit calculators'. Pie in the sky, not real world earnings by any means. But better than nothing.

You need to stop thinking in terms of fiat here.  You need to consider whether or not the miner you purchase will ever make back the BTC it cost to purchase it.  If you are going to invest fiat in the hardware, instead of BTC, you need to look at how much BTC that fiat can buy you at the same time you are going to purchase the hardware.  For example, if BTC is $100 a coin and your miner costs $3000, you can either buy 30BTC or the hardware.  If you choose the hardware, you need to determine whether or not that hardware will ever get you back the 30BTC during its useful lifespan.  Same applies if the cost of a coin is $10,000.  You can buy 0.3BTC or that miner.  If the miner will earn you back more than 0.3BTC, then pick up the miner.

 

Not true for any USA miner that is declaring the btc on his tax return. 

I'm confused by your reply.  In both cases I have a choice to make: buy BTC or buy hardware I then use to make BTC.  I'm declaring the BTC on taxes in both cases.  The US treats BTC as property and it is subject to capital gains tax just like a stock.  I suppose you could argue that you're able to defer the tax by purchasing hardware but eventually you're gonna have to pay the man.

dumbass he means buy/selling is capital gain tax. mining is INCOME tax, and calculated AT the time you receive your coins.

[Korbman]

At what point will revenue and expenses cancel each other out? Around $288 per Bitcoin, or a difficulty of ~32-33B.

Mid October is crunch time. Between now and then, it looks like the amount of BTC generated by a miner will halve.
Stated differently, a miner in production today will produce half of the BTC it will ever produce (going forward from today) in the next 60 days. Unless difficulty increases start averaging under 16%

Quite right, though probably even sooner than that. The jump today will bring us to almost 24B, and seeing what's been shipping from KnC (and Spondoolies eventually) I bet we'll hit the aforementioned 33B in the first couple weeks of September.

Mining [will be] over as a money making exercise for anyone other than data centres at a difficulty of about 80⁹..

Not quite sure on the math behind this one...I presume you mean 80E9 (80B) and not 134,217,728,000,000,000

And even a difficulty of 80B isn't so bad. 1GH/s (at 2W per GH/s, $0.15 per kWh) would generate about BTC0.000006 ($0.0028) per day. So long as the price per Bitcoin is greater than $1209, you'll be making a profit

[CounterStrike]

Already shut down my rig, now I am buying BTC directly with the electricity I save..

[bozo333]

Most here do not do the math properly. Difficulty increase is about every 12 days and has been an average of 14% over the last year.
It's the power of compounding which lets you mine only a fraction of what you are making today in 6 months time...in BTC. Of course, anything
can be presented in a way which fits your belief system. Some just say I don't care what the exchange rate to fiat is. OK, now go pay your
electricity bill in BTC. It's like living in Paris but getting paid in USD. Unless you live in a fully BTC based economy (not happening anytime soon) thinking the exchange rate does not matter is foolish.