Tuesday, July 12, 2011

Deflation, not so much.

My "Deflation" post predicted certain numbers which are not even close to what actually occurred.  I am not too concerned- those numbers were sort of a dream best-case scenario.  I do still believe that BTC value will increase in time on a longer scale, but I have come to realize an error in my previous assumptions.

Currently, bitcoins are not truly deflationary.  The simple fact that 50 new bitcoins are generated every 10 minutes or so causes some inflationary pressure.  The influx of new blood into the BTC market provides deflationary pressure.  For a time, the new blood overwhelmed the mining of coins and we had deflation, but in the last few weeks things have been mostly in equilibrium- value has hovered around $14-$15 for the last week.

I still hold my opinion that BTC are deflationary, but that aspect depends on future production reduction of BTC.  For now, there may be no deflation.

Monday, June 20, 2011

Withdrawn

I originally planned to leave all my BTC as BTC until at least the end of the year, however I decided to limit my risk by making a purchase with them.  Approximately 34 BTC later, I have a $540 newegg.com gift card.

Since I am unsure about mining long-term, I purchased a 990FX motherboard which will serve a second purpose later, as host to an AMD bulldozer CPU :)  I also bought a high-end power supply, some RAM, and a cheap CPU for mining.  Along with some 5830s I previously rescued from a newegg.com sale, I will make a triple 5830 based mining rig.

In other news, mtgox.com suffered from a bit of an incident yesterday.  A hacker dumped over 250k BTC on the market, tanking the price down to $0.01 per BTC briefly, and attempted to steal as much as he could given the $1000/day limit.  Mtgox has since shut down to clean up the mess and revert all trades from the big sale on.  Mtgox is reportedly still working on fixing things, so tradehill.com has become the exchange of choice.  However, tradehill has been nearly unusable due to lag, it seems that they were not completely ready for the load of the entire bitcoin community.

Friday, June 10, 2011

Corrections

"It could reverse, the market could crash, or it could increase at exactly the rate I previously predicted- it's beyond my powers to predict fully."


Amazingly, it seems as though my post from 1 week ago might be right on the money.  After hitting a high at the $30+ mark, the BTC seemingly crashed Thursday night through Friday, and is now at $22.00.  Incredibly, this is right around my predicted value:


On May 27th, 1 week ago, 1 BTC was worth $8.65. Today 1 BTC is worth $13.80. With inflation, your money buys less now than it did in the past. With the BTC economy, we see the opposite- BTC today will buy more than it did in the past. This is deflation.

62% growth in one week leads to some absurd numbers in a relatively short time frame:

6/10- $22.35 (1 week)



The day isn't over yet, but wouldn't it be interesting if it did end with 1 BTC = $22.35?

Tuesday, June 7, 2011

An Estimate Too Conservative

My estimate:
6/10- $22.35 (1 week)


Today:
6/7- $24.4


Apparently my estimate for the rate of increase was too low.  I've noticed something else too.  The BTC value seemed to be "stuck" around $18.5 - $19.5 for a day before breaking through $20 and almost instantly reaching $24.  Now it seems to be stuck again at $23.5-$24.5.  I predict that it will remain stuck here for a bit, maybe a day or two, and then jump up to $29~.


Why?


The early speculators are human.  I imagine they are looking at the rising value and thinking "if the value reaches X, I will sell half of my bitcoins".  As humans, we tend to pick nice round numbers when we can.  I suspect a lot of these people saw $20 as a big milestone, and now see $25 the same way.  So when the value gets close to these numbers, they sell.  These sales (briefly) halt the upward trend of BTC value, until the speculators have spent their reserves.


How high can it go?  And how fast can it get there?  I have no idea.  My last estimate was too conservative, but there is no guarantee that the rate of increase will remain as it is.  It could reverse, the market could crash, or it could increase at exactly the rate I previously predicted- it's beyond my powers to predict fully.


My current strategy is to stick with hardware investment and mining.  The returns are lower than directly buying BTC, but the risks are smaller as well.  I figure if BTC really go insane and reach 4 digit values I'll make plenty of money, and if they do not my losses will be minimal.


On an unrelated note, parts arrived for my first real dedicated mining rig.  However, my desk area lacks the power to run the new rig and my existing computer without tripping the circuit breaker.  My plan is to run headless in another room after setup, but I'm going to delay the setup and do it tomorrow at work where I have adequate power.


BTC mined as of tonight: 18.28 BTC, total value: $444.20

Sunday, June 5, 2011

A Small Update

Over the weekend, the value of 1 BTC jumped to $18, collapsed back down to $16~, and is now touching $19 again.  It's fluctuating up and down a bit, but overall seems to be going up up up.  I wonder if it will exceed the growth of last week by Friday.

Current BTC mined up to 14.9, still waiting for parts to arrive to build my next rig.

Friday, June 3, 2011

Deflation

On May 27th, 1 week ago, 1 BTC was worth $8.65.  Today 1 BTC is worth $13.80.  With inflation, your money buys less now than it did in the past.  With the BTC economy, we see the opposite- BTC today will buy more than it did in the past.  This is deflation.

62% growth in one week leads to some absurd numbers in a relatively short time frame:

6/10- $22.35 (1 week)
6/17- $36.21 (2 weeks)
7/1- $95.04 (4 weeks)
7/29- $654.63 (8 weeks)
8/26- $4,508.78 (12 weeks)
10/21- $213,884.53 (20 weeks)

I like to dream as much as anyone, but I doubt my bitcoins will be worth over $200k USD in a mere 4.5 months.  Still, it's interesting to look at it as a best-case scenario.

On a side note, currently have 1 5850, 1 6970, and 1 5770 hard at work mining.  Earned about 10 coins total so far.  Two Radeon 5830's are coming to join in the mining fun, along with power supply and motherboard/cpu to drive them.  I have enough old hard drives and memory sitting around to handle those needs.

Friday, May 27, 2011

Zero

Hi, I have a wide variety of interests and hobbies but the topic of this blog is Bitcoins, and the "art" of mining them.

Bitcoins (BCN) are a new currency which is completely autonomous from any central authority and electronic in nature.  Currently, 1 BCN is worth $8.65, but this value is somewhat volatile and could change rapidly.

Mining bitcoins is a process in which an individual or group can run a software program which calculates hashes for the bitcoin community and occasionally creates new bitcoins.  This might seem like an easy way to make money for nothing, and in a way it is- but the hash computations are so complex and difficult that you need a very powerful video card to do so efficiently.  Additionally, the computations become more difficult on a weekly basis, so it can be hard to predict long term returns on invested hardware.

More details will follow.