TH1BTC Speculation Thread - Bitfinex Cloud Mining Contract

[nrd525]

This thread is for the discussion of the value of TH1BTC mining contract on Bitfinex that lets you buy 1 THs of mining power that expires on Dec 15, 2014.  They launched the contract on Sept 15, 2014 with 100 contracts and have since added shares.

Description of the Asset:
https://www.bitfinex.com/pages/mining_stats

Current number of shares: 600.

Order Book:
http://bfxdata.com/orderbooks/th1btc.php

BitcoinWisdom Difficulty tracker and prediction:
https://bitcoinwisdom.com/bitcoin/difficulty

BitcoinWisdom Mining Calculator:
https://bitcoinwisdom.com/bitcoin/calculator

Coinplorer difficult prediction:
https://coinplorer.com/Charts/Difficulty/BTC

Another Bitcoin Difficulty graph set:
http://bitcoin.sipa.be

CryptAnalysis Bitcoin Difficulty Predictor:
https://cryptanalys.is/difficulty/bitcoin_btc.php

BitBet "Difficulty over 41 billion by November":
http://bitbet.us/bet/1050/btc-difficulty-over-41bn-before-november/

Another Bitcoin Mining Profit/Loss Calculator:
http://aleks1k.github.io/bitcoin-calculator/

Havelock Bitcoin Difficulty Derivative:
https://bitcointalk.org/index.php?topic=430137.0
https://www.havelockinvestments.com/fund.php?symbol=B.MINE

Similar Mining Contracts
-Cex.io -GHS: https://bitcoinwisdom.com/markets/cexio/ghsbtc - very expensive
-Cointerra - http://mining.cointerra.com/shop/ - as low as $999/THs - but delivery in Q1 2015
-Hashnet - https://hashnest.com - very high maintenance fees
Note: there are a lot of mining contracts and companies that claim to be producing miners which aren't trustworthy or will fail to deliver on schedule.

List of TH1BTC trades (only includes recent trades)
https://api.bitfinex.com/v1/trades/th1btc

BFXData
Order Book: http://www.bfxdata.com/orderbooks/th1btc.php
Swaps: http://bfxdata.com/swapstats/th1.php
Self-moderated: I will delete off-topic posts.

[nrd525]

My previous thread about how the TH1 contract gains value from the ability to short it:
https://bitcointalk.org/index.php?topic=794060.0


I'm shorting this asset. I think it is grossly overpriced and will only mine around 0.85-0.95 BTC.  It does get extra value from your ability to lend it out, however I think that value will decline as the contract value declines and as Bitfinex issues more shares.  Though Bitfinex hasn't issued more shares in several days - so it is possible that they have changed their policy.

It is very puzzling that the value of TH1 has increased over the past seven days as during that time it should have mined and lost 10% of its value.

The TH1 mining contract has been mining "lucky". It has mined more shares than it would be expected to do so given its hash rate and the difficulty.  This combined with the decline in the BTC price (which will cause some miners to shutdown) may explain part of the increase in TH1 value.  But I would think that it would slow the decline in value, rather than actually increase the TH1 price.

It looks like GHS at Cex.io has also increased in price over the past seven days. Over the past seven days Cex.io had 2200 (BTC) volume for GHS, whereas Bitfinex had 470 TH  (or around 600 BTC) volume.  So the GHS contract might be dominating the market. That said, it is a permanent contract (assuming they don't increase the fees to the point of killing it off) whereas TH1 loses all of its value in 77 days.

[twentyseventy]

Very interesting, thanks for the post; I'll have to look into it.

Though CEX isn't short-able, my main issue with doing so would be that (like you said), CEX a permanent contract - if buyers keep the pricing high despite dwindling payouts, you could be right and still see a loss.

[deebosch]

Well, Im shorting aswell

It does get extra value from your ability to lend it out, however I think that value will decline as the contract value declines and as Bitfinex issues more shares.

Agree, but there is a risk that contract value will decline sharply before expiration and will be somewhat inflated up to that point, thus driving up the swap rates and swap costs for shorters. Also Bitfinex issuing more shares at will is not how such things should be done, because it affects greatly the demand/supply ratio and therefore price. Its very unprofessional of them.

The TH1 mining contract has been mining "lucky".

Another "shady" part of this contract (in addition to sporadical increase in number of shares) is how these mining profits are calculated. If you will lookup these mined blocks you will see that they are mined by a far greater pool than it is stated, and for the TH1 contract only some blocks are selected, again we dont know the mechanism of such selection.

Im short at the moment, but dont expect the price to decrease any time soon.

[nrd525]

That's true. The TH1 mining should  get a 1/3500th of the reward for mining the larger number of blocks that are mined by the larger pool (of 3500 THs), but instead they're getting a 1/400th share of each block that is mined by the Bitfinex sub-pool (400 Ths).

It is shady and increases variation.

[deebosch]

Not really, let me explain:

Last payout ATM:
September 29, 2014 - 09:00:11 AM CEST    323050    3,544.34    400    25.023    2.82404547
Pool of 3500 THs recieved 25.023, TH1 share of it is 2.82404547 (as in 400/3500). So it is pretty fair.

I was referring to blocks mined by a pool (you can lookup by IP on blockchain) and that there was a much larger pool that mined like 10 blocks and only 3 of them were selected to count towards TH1. As I am writing this pool for TH1 has been changed and now its IP shows only proper TH1 blocks (323050, 322980 and 322955).

[nrd525]

Oops my mistake. Thanks for the clarification.

[nrd525]

Next difficulty increase might be zero.

[TheJuice]

Interesting.

I can definitely see this security making someone money. I just need to figure out how to be that person.

[TheJuice]

My previous thread about how the TH1 contract gains value from the ability to short it:
https://bitcointalk.org/index.php?topic=794060.0


I'm shorting this asset. I think it is grossly overpriced and will only mine around 0.85-0.95 BTC.  It does get extra value from your ability to lend it out, however I think that value will decline as the contract value declines and as Bitfinex issues more shares.  Though Bitfinex hasn't issued more shares in several days - so it is possible that they have changed their policy.

It is very puzzling that the value of TH1 has increased over the past seven days as during that time it should have mined and lost 10% of its value.

The TH1 mining contract has been mining "lucky". It has mined more shares than it would be expected to do so given its hash rate and the difficulty.  This combined with the decline in the BTC price (which will cause some miners to shutdown) may explain part of the increase in TH1 value.  But I would think that it would slow the decline in value, rather than actually increase the TH1 price.

It looks like GHS at Cex.io has also increased in price over the past seven days. Over the past seven days Cex.io had 2200 (BTC) volume for GHS, whereas Bitfinex had 470 TH  (or around 600 BTC) volume.  So the GHS contract might be dominating the market. That said, it is a permanent contract (assuming they don't increase the fees to the point of killing it off) whereas TH1 loses all of its value in 77 days.

I think the increase is simply due to a decrease in the expected rate of rise difficulty.

I'm a bit confused about this swap issue. Right now to short the security you pay 0.3% a day.  0.3% of the borrowed currency, which would be th1 contracts. When do these get compounded.?

[nrd525]

It doesn't get compounded.

Interest is charged around 8pm-10pm EST.  The larger cost is the dividends (currently should average 0.014 BTC/day - but varies).  Shorters pay the dividends to person lending the contract.

Your interest might be charged in BTC or USD. I think this depends on your settings. So my interest in charged in USD if available, and then BTC if not.

[Timetwister]

I'm shorting this asset. I think it is grossly overpriced and will only mine around 0.85-0.95 BTC.  

How are you calculating that? How much are you expecting difficulty to increase?

[nrd525]

I'm expecting a 10% increase.  The next increase might be lower (currently bitcoinwisdom forecasts 4.5% - and it is too early for an accurate forecast), but after that I expect it to return to 10%.

I'm not an expert on mining. I know there are some new miners in production.  Not sure if they are being shipped out at a good rate (or added to cloud or industrial mining operations).

With a 0% increase, followed by 10% increases - you mine 0.91.  Even with a 0% increase followed by 7% increases you still only mine 0.95.  With constant 10% increases you mine 0.84.


Reminder - when calculating how much swap interest you will make you need to 1) deduct the 15% fee and 2) reduce your interest by 1.5-2%/day - as the contract should be losing value at that rate or greater.

[nrd525]

GHS is up 8.7% in the past 24 hours.

https://bitcoinwisdom.com/markets/cexio/ghsbtc

So GHS is Trading at 2.7 BTC / THs which cannot be profitable.

If TH1 tracked that contract, you might expect it to also increase in price. It might be going up a little. There is a strong bid wall (25) at 1.255.

I think the limited available of swap and Bitfinex refusing to issue any more shares is supporting the artificial price.

[nrd525]

They are adding 100 shares after the next block is mined.  Could take as long as 24 hours or as little as 0.

https://www.bitfinex.com/pages/announcements

[NightWatchHK]

What I don't understand with all the negativity on long TH1 is even with a difficulty increase with 10 TH1 contracts will get you  .2btc per day so even if contract price goes to zero ur still gonna make 20% by mid December. This is the facts as I have owned TH1 since day one with an average of 1.2 BTC per TH1. So I plan on holding it to expirery unless it rises to a price that I can't resist selling 

[nycgoat]

You will receive less for a dividend every period where the difficulty increases.

[NightWatchHK]

The difficulty would have to increase a lot more then predicted to cause a loss from claiming the dividend and letting the contract expire, assuming you owed it close to the beginning of the contract.

[nrd525]

NightWatch - how much do you expect difficulty to rise and how much do you expect the TH1 contract to mine between now and Dec 15?

[nrd525]

So far 24 hour TH1 contract volume is 25.  Last time I checked (12 hours ago) it was around 12.

I don't see the 100 new issued shares.  I suspect they are slowly adding them to the market to avoid the fall in price that would come from a market sell order.

...

Edit: Some evidence of the 100 new shares can be found in the increase in TH1 swaps (from 204 to 224) and the swap offers have another 29 available.  So that is an increase of 49 which fits with the previous case where 52% of the swaps were being lent out.

I'm very puzzled as to why 48% of the swaps aren't lent out.  I guess the market has a large number of short term traders?  It's strange that they don't lend it out for the minimal 2 days.

Do stop-loss orders appear on the order books?  If not, it could be that they've got stop losses and want to be able to liquidate their position.