Monday, October 6, 2014

Bitcoin Price "Crash" ROI Analysis

Bitcoin's downward slide has continued this week, and we are now hovering around $300. If you thought the ROI analysis for some ASICs and Hashlets was something of a risk before, things are really getting sketchy right now. I'm still bullish long-term, and many companies have invested a lot of money into the Bitcoin block chain this past year, but until buyers decide "now is the time" we're going to continue the current trend. What does that mean for miners? Simply put: it's not good.

When Bitcoin was up around $500, the Zen Hashlet was earning about $0.22 per day after maintenance, which meant it would hit ROI in about 95 days (maybe a bit longer, depending on daily returns from Zen Pool). When the price of Bitcoin dropped to $400, the ROI target naturally moved out: around 131 days at the current rates. Now that we're down to $300, ROI is being pushed out even farther, to 210 days. Seven months to break even on the purchase of a Zen Hashlet? Yeah, that's a bit rough.

And as bad as things are with Zen Hashlet, it's even worse with Hashlet Prime. Even assuming you remember to Double Dip every day (which basically increases your payouts by 50%), the best-case for Prime at $500 per BTC was 135 days to break even ROI. At $400, the target time for ROI gets pushed out to 178 days, and now that we're at $300 per BTC it's way out at 263 days. And that's assuming the 0.0006 BTC per MH per day (plus 50% for Double Dipping) holds, which is more than a little optimistic. Almost nine months to break even with Hashlet Prime makes me wonder who on earth would buy one of these right now.

However, there's an interesting effect due to free Double Dipping on Primes. Let's say things go even farther south and Bitcoin hits $200 again. Zen Hashlet's ROI at that point is 524 days, but Hashlet Prime would actually be better with a target of 500 days. And if you're wondering, the point where Zen Hashlet isn't earning enough to be worth running is a Bitcoin price of around $133.50, whereas Hashlet Prime's halt point would be around $89 -- assuming of course that you always remember to Double Dip, which is unlikely.

Of course GAW's CEO Josh Garza has gone on record many times saying that Hashlets will "always" be profitable -- "Buy it once, own it forever!" If he wants to have ROI for Zen Hashlets stay at less than six months (which is probably a good starting point, since anything longer than that will scare potential customers away considering the risk factor), we're going to have to see either an upturn in Bitcoin prices or a big reduction in maintenance costs for Hashlets.

$0.08 per MH isn't too bad if you're running a Zeusminer X6 that uses about 25W per MH, but even the "failed" Alpha Technologies Viper is looking to be around 8W per MH. If GAW can get enough power efficient ASICs in their data centers to help with mining, they could potentially cut maintenance fees in half -- and in fact, I'd bet they're already averaging more like 10W per MH -- but anything more than that would be dangerous territory. If maintenance fees were to drop to $0.04 per MH, ROI would still be about five months on Zen Hashlet and over seven months on Hashlet Prime.

Not surprisingly, the ROI on other mining options isn't really looking much better. KnC's Titan batch #2 at $7000 for 400 MH would hit ROI in about 160 days (if you could start mining right now). However, if Bitcoin prices dropped to $200 (and Scrypt mining stayed steady at 0.0004 BTC per MH), you could still hit ROI in 250 days. That's about the best-case scenario for next generation Scrypt ASICs, however, so basically if Bitcoin prices don't rebound soon there are going to be a lot of companies and miners going belly up. If that happens, I suspect we'll see even more consolidation of coins and hash rate into the hands of a few major companies that manage to weather the storm.

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