Difficulty or price. Which one is gonna give?

molecular

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Quote from: steamboat on November 29, 2012, 12:43:43 PM

Mining for me has always been one question: Will the price of bitcoins increase enough to mitigate the effects of rising difficulty?

The answer is simple: doesn't matter, because difficulty follows price difficulty and price cancel out in the mining equation. Mining will generally be moderately profitable because of this. The only way to make big ROI in mining is (and always has been) to be an early adopter of new technology.

byronbb

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HODL OR DIE

Been wondering this the last few days. Look at the hashrate vs linear market price. The price has obviously stalled and broken from the dashed line it seemed to be naturally following.

Bitcoin is a self-regulating system. It could be that the mining power that is coming online and about to come on line, is too much of a increase. The outcome being a price/hash-rate drop. The market players are always trying to squeeze out money where they can. Be it in bitcoin or in hashing power. Way back when ASIC was first reported I thought that the capital outlay was a nice chunk of money just sitting looking pretty to the wise-guys. If the market could be played to drop, stressed ASIC owners might be spooked into selling their hardware, and the smart money would be waiting to buy up the hashing power, because trading to profits on an exchange, or getting hashing power for cheap is the same thing in the end.

steamboat

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Quote from: trogdorjw73 on November 29, 2012, 12:45:24 PM

Quote from: steamboat on November 29, 2012, 12:19:18 PM

Quote from: proudhon on November 29, 2012, 12:09:29 PM

Quote from: Crypt_Current on November 29, 2012, 11:14:26 AM

Probably price. (especially after ASICs arrive)

ASICs are still a few months off. In the meantime, GPU miners are earning half as much as they were a day ago, and for many that's going to push them into mining at a loss. Many of those miners are going to abandon BTC mining, and that's going to be evident soon. It's inevitable, and it will lower the difficulty. The price could go up while this is happening, but I don't see any reason to expect the price to go up enough to keep it from happening (double?).

mhm. This is why I couldn't understand when ppl claimed the reward halving was already priced in. There aren't that many miners out there willing to operate at a 28% loss to support the network. Methinks miners operating at a loss and hoarding coins combined with the reward drop and the eventuality of ASICs = btc price greatly increasing or completely failing. I'm leaning towards the former.

I wouldn't be surprised if btc were 75% more than they are now by this time next month.

I agree with some of that, but operating at a 28% loss? Let's just say you have five 5870 cards each doing around 400Mhash/s, for a total hashing power of 2000Mhash/s and a power draw of around 1250W. You'd generate about 0.25 BTC per day at the current difficulty, so $3.12 per day. Your power use would be around 30kWh, which means to mine at a 28% loss you'd need to be paying $0.133 per kWh, which would be higher than average. If you were running 7950 instead, you'd be using about 20% less power and generating 10% more BTC, or 7970 would use the same power but generate around 50% more BTC. Five 7970 cards would easily do 3000Mhash/s (probably closer to 3100 or 3200 Mhash/s), or about 0.40 BTC per day. That works out to $5.00 per day, so with the same 30kWh you need to be paying $0.167 per kWh to break even, or $0.213 to be at a 28% loss. My thoughts: anyone paying more than $0.10 per kWh probably should have skipped the idea of GPU mining a long time ago.

the 28% number comes from the chart I posted. I believe it's based on fairly antiquated numbers. My ODMR (original dirty mining rig) is still chuggin away. I've managed to get ~2.7 mh/w out of her over the year(s) but currently i'm spending 77% of gross on electric @ 11.5c/w. She's still profitable, and paid off long ago, so I continue to run it. My FPGA rig only costs 10% of gross, which is pretty good, but I've only recouped ~40% of what I spent so far. Those numbers are just a snapshot of what's happening right now, they don't take into consideration profitability decline due to difficulty, or rig depreciation, which i believe the chart does.

steamboat

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Quote from: bracek on November 29, 2012, 12:41:11 PM

how come nobody talks about possible hostile legislation ?
focused on gox, that could kill the price

I am not spreading fud, but there is too little talk about that imo.

that is the only thing, the only one, that keeps me from going all in,
it actually stopped me buying any more, but I am still a bull
and advertize it to people I interact with

Shadowlife has a couple posts about that. http://shadowlife.cc/2012/11/necessary-conditions-for-the-long-term-success-of-bitcoin/

Basically they suggest OTC trading.

I don't know what system would develop to ascertain market price if we didn't have mtgox. Perhaps a trading site and everyone posted what they were willing to buy/sell at? There are similar systems in place in other areas where the market price is set by those with reputation (a more secure transaction) and those with less rep (riskier) undercut to get a slice of the pie. I imagine that would have to go underground as well though to avoid focused attacks from those that wish to control btc.

Photon939

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Quote from: bracek on November 29, 2012, 12:41:11 PM

how come nobody talks about possible hostile legislation ?
focused on gox, that could kill the price

I am not spreading fud, but there is too little talk about that imo.

that is the only thing, the only one, that keeps me from going all in,
it actually stopped me buying any more, but I am still a bull
and advertize it to people I interact with

That has always been a possibility but it's not really something someone can predict. All it would take is one politician to get his panties in a wad, but until then all focus is on events within the bitcoin circle

trogdorjw73

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Quote from: steamboat on November 29, 2012, 12:19:18 PM

Quote from: proudhon on November 29, 2012, 12:09:29 PM

Quote from: Crypt_Current on November 29, 2012, 11:14:26 AM

Probably price. (especially after ASICs arrive)

ASICs are still a few months off. In the meantime, GPU miners are earning half as much as they were a day ago, and for many that's going to push them into mining at a loss. Many of those miners are going to abandon BTC mining, and that's going to be evident soon. It's inevitable, and it will lower the difficulty. The price could go up while this is happening, but I don't see any reason to expect the price to go up enough to keep it from happening (double?).

mhm. This is why I couldn't understand when ppl claimed the reward halving was already priced in. There aren't that many miners out there willing to operate at a 28% loss to support the network. Methinks miners operating at a loss and hoarding coins combined with the reward drop and the eventuality of ASICs = btc price greatly increasing or completely failing. I'm leaning towards the former.

I wouldn't be surprised if btc were 75% more than they are now by this time next month.

I agree with some of that, but operating at a 28% loss? Let's just say you have five 5870 cards each doing around 400Mhash/s, for a total hashing power of 2000Mhash/s and a power draw of around 1250W. You'd generate about 0.25 BTC per day at the current difficulty, so $3.12 per day. Your power use would be around 30kWh, which means to mine at a 28% loss you'd need to be paying $0.133 per kWh, which would be higher than average. If you were running 7950 instead, you'd be using about 20% less power and generating 10% more BTC, or 7970 would use the same power but generate around 50% more BTC. Five 7970 cards would easily do 3000Mhash/s (probably closer to 3100 or 3200 Mhash/s), or about 0.40 BTC per day. That works out to $5.00 per day, so with the same 30kWh you need to be paying $0.167 per kWh to break even, or $0.213 to be at a 28% loss. My thoughts: anyone paying more than $0.10 per kWh probably should have skipped the idea of GPU mining a long time ago.

steamboat

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Quote from: smoothie on November 29, 2012, 12:29:44 PM

I can see many ASIC buyers cashing out immediately as they mine in order to recoup hardware cost and to also try to buy more ASICs to get a larger market share of hash power.

Selling pressure will mount.

Initially I can see some miners doing that. Assuming the current GPU miners all quit (much like the CPU miners) the net effect of ASICs will be to add a couple 0's to the difficulty, and increase the initial investment of those that wanted to stay in the game and purchased new equipment. Those that remain will still be fighting over the same (halved) pie, and I think we would have a spread of hoarders to sellers similar to what we have now. It would be interesting to see a chart based on the projected efficiency of ASICs, taking into consideration network adoption. I've seen charts saying "zomg I can make 2500% a year if I buy ASIC", but I saw those same charts when we switched to GPUs.

Mining for me has always been one question: Will the price of bitcoins increase enough to mitigate the effects of rising difficulty? This is a very bullish stance obviously, and I could have made significantly more money by simply buying coins outright, but I prefer to contribute to making the community stronger. As it stands now, I "may" break even next year, depending on how long it takes the ASIC trolls to get product to market.

bracek

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how come nobody talks about possible hostile legislation ?
focused on gox, that could kill the price

I am not spreading fud, but there is too little talk about that imo.

that is the only thing, the only one, that keeps me from going all in,
it actually stopped me buying any more, but I am still a bull
and advertize it to people I interact with

smoothie

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LEALANA Bitcoin Grim Reaper

I can see many ASIC buyers cashing out immediately as they mine in order to recoup hardware cost and to also try to buy more ASICs to get a larger market share of hash power.

Selling pressure will mount.

steamboat

hero member

Activity: 648

Merit: 500

Quote from: proudhon on November 29, 2012, 12:09:29 PM

Quote from: Crypt_Current on November 29, 2012, 11:14:26 AM

Probably price. (especially after ASICs arrive)

ASICs are still a few months off. In the meantime, GPU miners are earning half as much as they were a day ago, and for many that's going to push them into mining at a loss. Many of those miners are going to abandon BTC mining, and that's going to be evident soon. It's inevitable, and it will lower the difficulty. The price could go up while this is happening, but I don't see any reason to expect the price to go up enough to keep it from happening (double?).

mhm. This is why I couldn't understand when ppl claimed the reward halving was already priced in. There aren't that many miners out there willing to operate at a 28% loss to support the network. Methinks miners operating at a loss and hoarding coins combined with the reward drop and the eventuality of ASICs = btc price greatly increasing or completely failing. I'm leaning towards the former.

I wouldn't be surprised if btc were 75% more than they are now by this time next month.

proudhon

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Quote from: Crypt_Current on November 29, 2012, 11:14:26 AM

Probably price. (especially after ASICs arrive)

ASICs are still a few months off. In the meantime, GPU miners are earning half as much as they were a day ago, and for many that's going to push them into mining at a loss. Many of those miners are going to abandon BTC mining, and that's going to be evident soon. It's inevitable, and it will lower the difficulty. The price could go up while this is happening, but I don't see any reason to expect the price to go up enough to keep it from happening (double?).

CoinDiver