Topic: ASICMINER Speculation Thread - page 112. (Read 808757 times)

I've been thinking this for a while... Do you think FC is selling off blades as he makes room for gen2 blades?

oh, I see.  Still, that makes current blade pricing highly profitable and explains why he's not adding any more Gen1 to the mining farm.

There's a lot of room for him to decrease those prices to match competition.  I wonder if his costs go down with volume, I would assume they do.  That would give him a slight advantage against some of the new competitors that are currently ordering considerably less (like <100 TH) than AM

$1.50/GH is for the blades only. USBs would be different (possibly cheaper on a per-hash basis).

50% profit margin is under my projections and I am comfortable being bearish.

You can't see why ASIC mining is going to be a low-margin industry? Exceptionally low startup cost and startup time, fast breakeven, little regulatory difficulty in many jurisdictions.

You're incorrect, BTW. Walmart's profit margin is 3.67%. Royal Dutch Shell, 5.2%. Exxon Mobil, 8.98%.

http://en.m.wikipedia.org/wiki/List_of_largest_companies_by_revenue

Let's look at the USB miners.  if cost is $1.5 /GH, and they have .33 GH, then their cost is $.5. At .1 btc per USB, the revenue is ($12.5-.5= $12). $12 is 96% of $12.5.

Is my math right?  96% profit margin (ignoring shipping) on the USBs at .1 btc?

How many did they sell at 2 btc and 1 btc?

And if the blades are $15 to make, and sell for 4 btc ($500), then they have a profit margin of 97%.

I think my math must be wrong somewhere...

If all of this is true (I am doubting it myself), then even if they match Cointerra's vaporware prices of $3/GH, then they are still 50% profit margin.  The cost for Gen 2 might be less, as well.

No wonder FC is selling hardware instead of mining with it.  Mining isn't profitable enough!

20% profit margin is very generous? The largest company in the world has a 22% net profit margin and gross margins in the high 30s, which is common knowledge among investors with a 'pedigree' in value investing.

In my humble opinion, determining the "fair value" of a non-earning asset is not possible.

First I'd probably want a definition of "fair value". What does it mean? What does "fair" mean in this context?

What is the fair value of water, glass or a rock?

Maybe I'm just talking out of my ass here, but the best estimate of the fair value of a non-earning asset is its market price, because it's the price most people agree on.

A summarize of the most recent franchising payments is below. It is about 711 Bitcoin in the last diff periods, which equivalent 11.3T hashing rate's output. As the franchising model is just at the beginning of the test, franchisee needs time and learning curve before they can handle large farms, so we can expect the fast expansion of the franchising revenue.

https://blockchain.info/tx/15140b1da466764950e059ee2e7e17cca7e045f32645124aceefe69f53c0dea8

185


https://blockchain.info/tx/1cde47ad212a69ba891a8c368054c7c2d247bd7208a9f20eb8c5dae837c3aaa4

248


https://blockchain.info/tx/d5f87cdd3651ed988dc673408fababaf32bba011d756f36118c46f0781fc18bf

35

https://blockchain.info/tx/5aab0b06331ccde10c45b8bdb4bac3d6a001ab0c89667d03c6fb374b51057ac2

48

https://blockchain.info/tx/c1eaaa2608a5ffc9dfc8905e647e2bf3e46c883d812f92976d555db29036d90d

42


https://blockchain.info/tx/312456452d65828326ce1825e28aef4b45f12ca0bc3f0e830bec47860f6b0980

153

interesting to see at what amount of hash will we need the entire electricity of a nuclear powerplant or will we ever reach that point.

I'm just amused we have hit 1 PH and the example they used was how many 10/GH ASICMINER Blades it would take to overheat the building
I mean fill the area

http://blog.standardcrypto.com/2013/09/15/what-does-one-petahash-look-like/

The bitcoin mining network run on Gen 1 hardware consists of about one One Wilshire-sized data center filled with Blades. Somewhat confirmatory of our ballpark estimate, One Wilshire sold for 437.5 million dollars last month.

(And yes Friedcat must be hot in the server room lol)

Hmmm, interesting

We need a tally of these to see what franchise revenue is producing

Gresham's law would seem to make a velocity-of-money estimate a low estimate, which is something I would expect in the first place since a lot of BTC trading is speculative.

If I could see a velocity-of-money valuation above $30 or $40/BTC, I would feel much more comfortable maintaining more of my money in bitcoin at prices like $125/BTC.

I'm also curious about a link between gold and bitcoin. Shouldn't their store-of-value properties track against each other in some tangible way - and would relationship allow the store-of-value effect on value to be separated from the medium-of-exchange value?


I'm not a money theory guy. I wish I had better methods - I'm pretty much in the dark about bitcoin valuation.

I had been thinking about a one-year period, but I suppose the velocity of money for bitcoin has varied enormously over the past year.


Ah, well, the zero-information assumption would change everything. Mining is truly an unusual sector because it is dominated by block rewards (completely predictable revenue), and overrun by competition that is the natural product of such low barriers to entry (broad competition makes trends more predictable).

But, assuming a total lack of information, I think that there is little or no need to hedge with mining. Your existing bitcoins won't become devalued if mining succeeds, and that's the argument for owning bitcoins to hedge your dollars.
 
Unregulated mining stocks are highly risky and highly speculative. So, for someone with low risk appetite, zero percent is fine. For someone with a huge risk appetite and a very bullish outlook on bitcoin, 25% of their bitcoin holdings isn't unreasonable.

The trouble is that the most attractive investment opportunities in mining are not open to the public through the exchanges. For this reason, I've been toying with the idea of opening a bitcoin VC fund operating through the Cayman Islands... it's about time for a legal, publicly traded, BTC-denominated VC fund (which could of course extend far beyond mining, and would serve as a vehicle to advance bitcoin as a whole). The exchanges are a clusterfuck.



I would be happy to. You are obviously an informed investor and I am at least as interested in your perspective as you are in mine.

Apart from all this "intelligent" discussion, anyone looking at AM mining address? Steady steam of revenue from other mining sources... 1HtUGfbDcMzTeHWx2Dbgnhc6kYnj1Hp24i

You're in good company. Many have tried and failed. Even the "fair value" established by the consensus across exchanges likely suffers from severe manipulation and price fixing.

Exactly. So it seems that you in general support the idea of strategic investment allocations. How much is up to each individual.

This assumption falls short since it fails to take into account the symptoms of Gresham's law. In an environment, where bad money is available to conduct economic transactions, the velocity of quality money goes down, since bad money is used as a substitute. Instead quality money is used for savings - thus you have to look at save havens to get a more realistic picture.

Insufficient. This neglects the store-of-value features.

velocity needs a timescale. Money theory when looking at coexisting money systems can be quite a mess, e.g. you'd need to know the average preferences of economic agents to hold liquidity in different forms and how their cash flow looks like.

Maybe it would be better to move this to a different thread.

The excursion into bitcoin valuation was actually more or less a rhetorical pose to explore your valuation method. As you stated above, you have a sense for risk mitigated investments, so I am asking you directly: Price per share of AM aside, what would be the target ratio in your portfolio for holding mining stocks? (5%,10%,20%,...) Assume that you have insufficient information to evaluate the mining sector.

This is an excellent question, and despite approaching it from a number of angles, I have never come up with a satisfactory valuation for bitcoin itself.

My pedigree is value investing, the mantra of which is essentially "don't buy what you don't know".

But Bitcoin is a special case - it is clearly even riskier to own no bitcoins than it is to own some. I think the appropriate portfolio allocation is up to the individual's risk tolerance.

So, tl;dr - I will not provide a specific number for bitcoin's value, since that number would be highly speculative and nearly worthless.

---

That said, I am happy to share my thoughts.

One of my favorite approaches was attempting to price bitcoin based on its velocity of money. I started with this assumption:

(USD fair value money supply * USD velocity of money) / (BTC fair value money supply * BTC velocity of money) = USD money supply / BTC money supply

In other words, the assumption is that the value of money is the degree to which it is used as a unit of exchange.

There are some additional assumptions that must be made. The "money supply" we are interested in here for USD is M2; for Bitcoin it's fairly reasonable to use the number of coins mined so far. We use USD as our reference and its fair value is assumed to stay approximately constant through Bitcoin's move to its fair value (this may be a poor assumption but I don't want this to become a calculus problem). The USD velocity of money is published, so we can look that up. The equation becomes

(USD M2 * USD velocity) / (BTC fair market cap * BTC velocity) = USD M2 / BTC market cap

USD velocity / BTC velocity = BTC fair market cap / BTC market cap

USD velocity / BTC velocity = BTC fair price / BTC current price

1.579 / BTC velocity = BTC fair price / ~$125

That leaves only the BTC velocity of money.

This is the snag - there's too much blockchain spam to know what transactions represent real exchanges of value.

I've played with some numbers and done some acrobatics with Bitcoin Days Destroyed, but ultimately, like I said - I cannot provide a useful number. Besides, this is the fundamental value of bitcoin, and I am ignoring the speculative value. Still, I'd feel more comfortable if I knew what the value would be if all the speculators went away.

If anyone believes they've got an accurate method for finding a velocity of money for bitcoin, please share!

You made me curious. What do you think the fair value of bitcoin is?

The reason I pose this question is that you seem to base your analysis on the known rather than the unknown, which doesn't help with strategic portfolios. I.e. How do you determine "how much" of an asset class you should own at any given time to hedge your wealth creation?

My price target has been 1.5 BTC ever since Avalon failed to ship their chips. I consider that a fairly generous target - it's when I would execute my options.

I wouldn't consider buying AM until below 1.2 BTC.

At the risk of linking this too many times, https://bitcointalksearch.org/topic/m.3134886

The fair value calculated there is 1.224 BTC/share, but it assumes things go well over the next 10 years. AM could get nationalized or taxed or whatever - not to mention FC could just fail to deliver or get tired of running a business - so I'd want a discount on 1.224 BTC before I'd seriously entertain a long position.

What price would you value it right now?

Oh, no, I'm aware it was sarcasm. It was sarcasm because you either didn't understand or refused to consider the very compelling arguments made about AM's fair value.

Your failure to detect even simple sarcasm is really quite impressive.