So I have been bitcoin cloud mining now for 3 months, a quarter of the way into my 12 month contract. Initial results in the first couple of weeks were so good, I doubled down at a higher price to get twice as much hashrate. After a nice run-up to almost $20,000 the price of bitcoin has faded away now sitting around 10k, 50% from that price.
What hasn’t faded away is the increased of difficulty. Contrary to whatever makes sense, people keep adding insane amounts of processing (hashrate) into the pools, which in turn is increasing the difficulty to complete a block and gain the reward. That has the effect of rendering each Terrahash less productive, and thus the return on investment shrinks. My mining now generates about half as much as it did just 4 months ago net. Remember, the fees I pay are a fixed rate in $US and not a percentage, so as the results drop, that fee becomes a bigger part.
For reference, the bitoin difficult is 5 times what it was 12 months ago, and is likely to be 5 times that in 12 months.
My calculations are pretty simple at this point. Over 3 months, I have made just about enough to pay for half of my investment, but that includes the very good times at the start. Now it’s almost unlikely that I will ever make a profit directly from mining, it’s going to be about break even when I get there (I may even have to ask them to stop mining 1 or 2 month early just to stop paying fees, otherwise I will likely run in the negatives at some point). I will only be profitable if bitcoin goes back up significantly.
Another twist in the process is that Hashflare has set the minimum requires for a withdrawl at 0.0500xxx bitcoins. Which is about $530 dollars at today’s rate. As I said, it’a unlikely at this point that I get much more than my initial investment back, so it’s quite unlikely that I will make enough coin to actually withdraw at the end of the contracts. It’s an interesting problem I will have to face in Decemeber when these things expire. Right now if I multiple times 4 (for the year) I will make it, but the diminished returns and increasing costs to mine means that it’s harder and harder to get to that goal.
Overall, bitcoin (and all cryptos, lets be fair) seems to have lost a bit of it’s luster. The fast money guys have left the building, and there really isn’t barely enough buyers to keep the game going. I think the price right now is supported mostly be people either avoiding selling or being like me, locked into a situation where I can’t even cash out the small amounts I have mined. It also seems likely that a bigger percentage of the new coins being brought into circulation are being held by a smaller and smaller number of people, who are very unlikely to do anything to disturb the market, until they can liquidate over time.
So for the moment, I am pretty quiet on all of this. Nothing exiting happens. The same group of people keep prattling on about applications for block chain that nobody wants to use, fewer merchants want to accept the stuff, and generally things have just ground down to a stand still on all sides. It’s interesting in a way to see how this plays out. The pumpers haven’t been able to find anything to really leverage to create a price bump, the sellers aren’t selling for fear of crashing the bitcoin market and losing their remaining value, and the money people who would pay for the different are staying out of it all big time.