Here's a glimpse inside the new frontier of Bitcoin mining. Unfortunately, significant profitability is no longer achievable for those hobbyist miners and you can now see the birth of large scale industrial Bitcoin mining operations.

this particular documentary is provided by Motherboard and it covers one (of 6) location within a re purposed factory in the Liaoning Province in rural northeast China. 

Based on the video: 

• Qty 3000 hardware mining devices in use
• Qty 900 dead mining hardware devices
• Mining is generating 25 Bitcoins per day ($5700 USD). 
• Electricity costs $2700 USD per day ($80,000 per month).

Let's do some additional calculations....With back of the napkin accuracy

Initial Mining Setup Costs

• Intial setup of Qty 3000 KNC Neptune miners at $10,000 USD per miner calculates to $30 Million in hardware purchase. 
• Electicity setup is approx $300,000 per site.
• Qty 900 broken mining machines = approx $4 Million in hardware purchase
• Total of $34.3 Million per site * 6 Sites 
• Total of $205 Million in hardware and site setup fees.
  

Net Income

• Therefore, still a very profitable venture indeed....Gross profit of $3000 per day; not including rent, employee salary and other misc charges. 
• Estimating salary of $10 per hour ($240 per 24 hour day or $87,600 USD yearly) per employee (2 per site - 24 hours a day).
• Net profit calculation of around $2500 USD per day 
• Net profit of $912,500 USD per year per site.
• With 6 sites...Approx $5.5M in net (tax free) income per year. 
  

Quick Breakeven Analysis

• However, when you add the initial hardware costs...Looks like a break even of 37 years...Hopefully there is an error in the quick math above...or they will be waiting for a return on investment for a long long time.

As Marc Andreesen once said, 

It would appear that's exactly what is happening with Bitcoin. Currently, Bitcoin pricing appears to be relatively unchanged from Oct 2014 despite the 4 month time-frame in between. However, if we look into the details of these past 4 months, the picture changes very dramatically.

Where are We Today - Bitcoin Pricing??
It appears that the price of Bitcoin has finally regained some strength to $250 USD after being beaten down to around $177.00 USD...A huge loss compared to $1100.00 USD just 12 months earlier. 

However, between Jan 15 and Jan 25, the price has increased 140% to levels of approx $248.00 or nearing the steady range territory of $300-400 per BTC.

It also appears that the market capitalization of Bitcoin has fallen from very high levels of $8B to approx $3.4B right now.

So why did the price of Bitcoin fall so dramatically in the past 4 months?

Based on information collected around the internet...Here are a few theories: Confidence in digital currency is waning, Bitcoin is still waiting for it's "killer-app", the popularity of mining is being aggregated to large companies and squeezing the enthusiast out of the market.

Any of those theories are entirely plausible and for many of these reasons, it appear the interest in Bitcoin is waning. 

Therefore we will reiterate our unfortunate mantra....What does the future hold for Bitcoin pricing...It appears that Bitcoin continues to find stable pricing.

Bitcoin Network Capacity
The Bitcoin network capacity is 299 PH/s and was 282.5 PH/s four months ago. Over the past four months, this a major indication of significant slow down and close down of mining hardware investment. 

So how has this mining investment impacted the difficulty? The Bitcoin difficulty has stabilized around 40 B difficulty as the economic cost to bring on new mining hardware appears to be much higher than previous points in Bitcoin history. 

However, from a brief analysis it appears the average difficulty increase is slowing from 120% previously to very stable single digit updates.  


Will this encourage more mining and banking investment? Time will tell.

After a lengthy absence, I am back to update the current status of Bitcoin and provide my opinion of where Bitcoin is possibly heading. 

Let's go back the the current status of Bitcoin. Where are we today?

Where are We Today - Bitcoin Pricing??
It appears that the price of Bitcoin rose between Oct 6-15 and has fallen for the past few days last week to around $300-350 range. While we have seen stability around $400.00 range for some time, falling below that threshold has caused some concerns. What does the future hold for Bitcoin pricing...It appears that Bitcoin continues to find stable pricing.

Bitcoin Network Capacity
The Bitcoin network capacity is 282.5PH/s this week and was approx 146.0PH/s just two months ago. Over the past two months, this a major indication of significant growth again in mining hardware  investment. 

So how has this mining investment impacted the difficulty? The Bitcoin difficulty has grown as follows 11.7B, 13.4B , 16.8B, 17.3B, 18.7B,19.7B, 23.8B, 27.4B, 29.8B, 34.6B, 35B ...Overall some modest gains in difficulty. 

However, from a brief analysis it appears the average difficulty increase is slowing from 120% to 110% per update.  Does this reduction in difficulty bode well for Bitcoin mining...As a result, this brings more predictable income for miners.

Bitcoin Market Capitalization
The Bitcoin market capitalization was roughly stable at $7,8-8.1B, for the past few months but has fallen to $4.7B recently. It is unclear what has triggered this reduction in market capitalization due to subsequent price decreases.

2014 YTD Bitcoin Price - BTC-e

What Happens Tomorrow - Bitcoin Pricing??
Will Bitcoin survive or thrive into 2015? That is a great question, one not possible to answer in this short posting. There is a shift from a large number of small players in the Bitcoin market to a small number of large players in the Bitcoin market. There is a concern that the decentralized nature of the Bitcoin market has now shifted to a more centralized nature of large players in the Bitcoin market.

For a great documentary overview of how Bitcoin developed and where it's going, please watch The Rise and Rise of Bitcoin documentary. 


See IMDB here - http://www.imdb.com/title/tt2821314/

Editors Note: Sorry for the delay in updating, summer holiday has taken over for most of August.

Bitcoin continues to find its way in the digital currency and business marketplace. Currently there are some people asking for their salaries to be paid in this currency (See article here), while others are down on the currency itself. Whatever happens, it is clear that Bitcoin has certainly changed the outlook of the business world by acknowledging that digital currencies are viable. 

Currently, there is a trend to change the denomination of the Bitcoin into 1/1,000,000 pieces to allow them to be more accessible to everyone. 

"The price of bitcoin has increased tremendously since bitcoin was introduced five years ago, and as such, early adopters of the digital currency have had to express its values in much smaller units – millibits, microbits or satoshis, for example. 1 BTC is the equivalent of 1,000,000 bits."


Based on the latest news, it appears the newly aquired gaming channel Twitch.tv also accepts Bitcoin.

So, with this news, what has happened to the price of Bitcoin over the past few weeks. Unfortunately, we appear to be heading in a downward trend on the unit pricing of Bitcoin. 

It would appear that the momentum surrounding Bitcoin and digital currencies continues to grow in popularity. It has been reported by CoinDesk that hip-hop artist Nas has taken a significant interest in Bitcoin and digital currencies. By significant interest, we mean he has both invested in the digital currency itself and with businesses serving the Bitcoin infrastructure.

Additionally, money distribution service PayPal has also upped their interest in the digital currency realm by hosting a Bitcoin related presentation called PayPal TechXploration on 31st July. This news story was also reported by Coindesk. This marks a significant change in the mindset of both PayPal and Ebay. When Bitcoin was announced they were truly opposed to the introduction of digital currency as it was potentially poised to overtake PayPal as medium of transferring funds. A partnership or technology venture between Bitcoin and PayPal would certainly shake up the world of finance as we know it.

So, how has this affected the Bitcoin network?

Bitcoin Pricing
It appears that the price of Bitcoin has fallen for the past few days last week. It also appears that the price is starting to rebound overnight. While we have seen stability around $600.00 range for some time, falling below that threshold has caused some concerns. It appears that renewed interest in Bitcoin is driving the price up again.

Bitcoin Network Capacity
The Bitcoin network capacity is 142.5PH/s this week and was approx 146PH/s just last week. Over a week, this is minimal impact, however significant growth again in mining hardware  investment over the past month (See our prior posts). How has this impacted the difficulty? The Bitcoin difficulty has grown as follows 11.7B, 13.4B, 16.8B, 17.3B to 18.3B...Overall some modest gains.

Bitcoin Market Capitalization
The Bitcoin market capitalization continues to remain roughly stable at $7,8-8.1B, for the past month. This continues to encourage investment from large investment firms looking for stability and upside potential growth.

Well, another turn of events in the Bitcoin saga. It appears that Dell computer has accepted Bitcoin as a method of payment. 

Dell has revenues of approximately $57B, this means landing a "whale" like Dell with Bitcoin acceptance is a huge deal.


The next question is, has this impacted the price of Bitcoin?

Let's review the past 10 days of pricing and find out. 

Additionally, what has happened within the Bitcoin network?

Bitcoin Network Capacity
The Bitcoin network capacity is 146.5PH/s this week and was approx 90PH/s just a month ago. This is showing significant growth again in mining hardware  investment. How has this impacted the difficulty? The Bitcoin difficulty has grown as follows 11.7B, 13.4B, 16.8B to 17.3B...Overall some modest gains.

Bitcoin Market Capitalization
The Bitcoin market capitalization continues to remain stable at $8.1B, for over 1 month. This is not encouraging for the speculators on currency inflation. However, this is great news for large investment houses looking for stability.

Has Bitcoin approached the mainstream culture yet...This is the question from the majority of followers of Bitcoin and other digital currencies.

If we try to prove this point, we must review common examples of adoption of digital currency. Currently some bigger names in the online marketplace have adopted Bitcoin as method of payment.

• Overstock.com
• TigerDirect.ca
• Expedia.com
• 1800 Flowers.com
• Newegg.com

So, in the light of these established businesses adopting Bitcoin, how has the digital currency done over the past few weeks?

Unfortunately, the overall price has not shot up "to the moon" as many early digital currency adopters had hoped. However, it has shown remarkable stability and longer term growth over the past few months. 

What will the future hold...Let's find out...

Bitcoin continues it's drive to hit the mainstream media and public consciousness...It it succeeding?  

Now that Dish Network (US satellite) and Afghanistan girls are able to access the digital currency, we are clearly seeing adoption at both ends of the mainstream spectrum. 

The fact that American consumers and Afghanistan children can both access the same decentralized currency is truly amazing....Because they are politically, literally and economically worlds apart. The most satisfying part of this is lack of government cannot hold back access to the Bitcoin ecosystem. 

Bitcoin Network Capacity
The Bitcoin network capacity is 90PH/s this week and was 79PH/s to 82.12PH/s. This is showing limited growth in mining hardware performance due to the immense calculations required to make even a marginal impact in the overall network performance. 

Bitcoin Market Capitalization
The Bitcoin market capitalization has stabilized this week. Currently, at $8.1B, and was at $8.4B last week. 

Overview
What does the future hold for Bitcoin pricing....Let's peer into the crystal ball....$800/BTC by August, 2014. You heard it here first and we just broke the $700/BTC barrier this week. 

Mark Twain, "The rumors of my death have been greatly exaggerated"

Bitcoin, like Twain has been written off for dead many times over the past 4+ years. 

Currently, thanks to Overstock.com, Dish Network and small businesses around the globe, Bitcoin again is making baby steps into the mainstream psyche of the world. However, like a newborn learning to walk, it has fallen a number of times and likewise incurred the bruises to prove it.

Bitcoin Network Capacity
The Bitcoin network capacity is 79PH/s this week and was 82.12PH/s. The past three weeks have seen a slight decline in mining hardware performance.

Bitcoin Market Capitalization
The Bitcoin market capitalization has surged this week. Currently, at $8.1B, and was at $7.3B, $6.4B for the past few weeks. 

Overview
What does the future hold for Bitcoin pricing....Let's peer into the crystal ball....$800/BTC by August, 2014. You heard it here first.

In the past 10 days, Bitcoin has stopped becoming boring!!

It appears that Bitcoin has experienced a resurgence of attention and interest in the last 10 days. To be clear, there is no consensus regarding the actual reason for this bull market.

Bitcoin Network Capacity
The Bitcoin network capacity is 82.12PH/s this week and was 67.7PH/s. The past three weeks have hardly made any increase in mining hardware. However, in the past 10 days, 121% hardware investment into the digital currency.


Bitcoin Market Capitalization
The Bitcoin market capitalization has caught back up well. Currently, at $7.3B, and was at $6.4B for the past few weeks. 

What does all this mean...It means Bitcoin had reached stable, predictable stage and has experienced outside investment as a result.

Let the rocket ride to the moon!!