Digital Currencies

Leading Indicator? Price of Bitcoin Mining Rigs Going Down

cleaner btc logo Leading Indicator? Price of Bitcoin Mining Rigs Going Down

Bitcoin logo by HandsomeCode.com

The price of the Bitcoin has stayed strong despite a high-profile security leak and flash crash at the then-leading Bitcoin exchange Mt. Gox. But there’s some indication that demand may not be keeping up with the minting of Bitcoins by enterprising programmers in basements, bedrooms and data centers. For months, Bitcoin enthusiasts were buying up graphics cards, which can be used in mining, on sites like eBay and Newegg. But the price of these components may be going down, an indication that demand for mining rigs is decreasing as the market gets flooded with Bitcoins.

One Bitcoin miner, posting on the Bitcoin Board forum, is bearish on the business of mining. “I looked at eBay — the COMPLETED LISTINGS — and it looks like the going rate at eBay is coming down. Selling for $140 with free shipping — and you can’t ship a 5830 for less than $8,” he said of one of the cards. 

Hundreds of other miners will be unloading cards at fire sale prices in a month or two, he said:

You know what scares me the most about Bitcoin?

The fact that every 2016 blocks (about 11 days), 100,800 new BTC are minted. That means that, to maintain the CURRENT price of $13.50, we’d need $1,360,000 of NEW MONEY entering the system every 11 days. Considering that Bitcoin isn’t *that* convenient, popular, or necessary for day-to-day life yet — and the Mainstream Media seems to have declared war on it — I see the market correcting even further until it hits an equilibrium — which unfortunately we be lower.

What does that mean for my rigs? Well, I’ll be making less from them. Hopefully something will happen to increase BTC demand — because that’s the ONLY thing that’s going to raise BTC prices long-term. BTC can’t rise in price from a bunch of speculators buying & selling — if anything, the price would go down from attrition (as Mt. Gox & Tradehill — “the house” if you will — take their cuts)

Just my .02 BTC.

We all know what happens when supply exceeds demand. This also means the BTC market is getting increasingly liquid, as the percentage of BTC being hoarded is decreasing. But as the number of goods that can be bought with BTC continues to increase and the number of apps available for it make it more accessible to the mainstream, demand for the currency as an actual unit of exchange may go up–especially since the price has been pretty stable of late.

The macro trend is that word about Bitcoin continues to spread–the “What Is Bitcoin” video has been translated to the German–and it’s hard to see how that won’t lead to increased demand. It’s just a matter of pacing.

Follow Adrianne Jeffries on Twitter or via RSS. ajeffries@observer.com

Comments

  1. This article has a flawed premise… “But the price of these components may be going down, an indication that demand for mining rigs is decreasing as the market gets flooded with Bitcoins.”

    Mining rigs are becoming less attractive because the difficulty of mining coins increases over time. Thus one must mine longer, or with more equipment, to yield the same number of Bitcoins. 

    Nobody should be suprised that many miners will give up at some point… nothing strange about that. However, this article seems to suggest miners are selling because the market is being flooded with Bitcoins, and that is silly. Bitcoins are created at a set rate – the same number were created today as were created 5 months ago before anyone heard of Bitcoin. 

  2. sweet article thanks for posting, iw as starting to get concerned about  the decreease in price, but this makes allot of sense. 

    i was wondering if you could talk about something on a future article, if that’s a way for you to pick your topics. and well my question or thought is. how will bitcoin prices be affected if the US dollar crashes, into default which seems to be whats happening, or even worse if it goes onto, hyper printing … thingy magigger. 

    anyways pls me know if u can talk about this, i think its a fascinating topic and it is pretty much the reason that i am involved in bitcoin right now. cuz i think its gonna drive the prices up, by default as so many people are going to want to get rid of their paper money asap as the dollar starts to plummet. and who knows what will happen after that.. so. :) yah!! thanks for posting!