Discussion Speculation: Mining market will collapse soon - By May card prices will appear at MSRP & a little bit of stock market lessons

[digitalgriffin]

One of "my hobbies" as of last few years is monitoring the stock market as I try to carefully plan my retirement. I also listen to a number of the investment channels about the current state of the stock market. This includes Crypto pricing (What Brett from Hot Hardware calls "Crypto-stonks")

Unless you have free electricity, the only profitable use of GPU's for mining is Etherium. While other coins do exist that are profitable (ie: Dogecoin) they have a much much longer return on investment period (break even point) Thus making their attractiveness less effective.

From everything I can surmise the crypto market (Etherium especially) is highly leveraged in one of two ways:

1. Capital investment to buy hardware. (People go into debt to buy hardware to make money)
2. People investing in crypto on the expectation the price will continue to rise, so they borrow money to invest in said coin.

Leveraging is a form of borrowing money to make money. But there has to be some sort of asset to back it up. For example, a mortgage is a legal instrument to pay back a loan against your house.

With trading exchanges like the NYSE, NASDAQ leveraging happens all the time. It means they are borrowing money from an institution based on the fact they have XYZ in other assets (real estate/stocks/bonds) to back it up. There's also called margin positions and options and shorts. I'm not going to get into the nitty gritty of these. With the exception of shorting a stock, IF the general market heads south, you are FORCED to sell assets to cover your leveraging. This becomes one of the terms of the contract when you borrow money. You can only be leveraged by a certain % before you have to sell off.

THUS, when the market crashes, those who leveraged (And I believe that will be many for various reasons, including people who mine at home), they will be forced to sell their assets to lower their overall debt load.

The vast vast majority of indicators show the market is currently WAY overbought and heading for an immanent HARD crash. The bond real estate market in China is likely the impetus for this to happen due to trickle down effect. (Similar to how the 2007 US housing crisis sent China into deep recession) We are seeing instability and head and shoulder indicators of sharp rises and falls.

To show you have convinced I am of this I have converted over 90% of my funds to paper money (Money market). And only a small percentage of those in t-bills. Because when people flock to t-bills for security the yield will drop making them lose value. People are also forced to sell their t-bills to cover their positions. So it causes a dual end effect of selling at a reduced price while people wanting to buy cause a lower yield from the fed. Thus any new purchases from an index fund will have a lower yield overall.

When the general market crashes, it is generally tied to the crypto market. Thus the crypto market will crash as people are forced to sell to cover their positions or leveraging agreements. I have seen various rumors that a number of crypto exchanges that back crypto like tether are highly leveraged.

Even every day people who mine from home, have borrowed heavily to pay for these cards. $2000 for a graphics card? What happens when you lose your job and you see Crypto starting to lose value at a steady pace similar to the stock market.

Also the demand from graphics cards of this is starting to show as China's crackdowns and the increased availability is evident. We also have the upcoming difficulty bomb which makes Ethereum mining less profitable.

DO NOT TAKE ANYTHING IN THIS POST AS INVESTMENT ADVICE OR FACT. IT'S JUST MY TAKE ON WHAT WILL HAPPEN AND OPINION ONLY. ANY INVESTMENT OPTIONS YOU MAKE YOU DO SO AT YOUR OWN RISK.

 

[Quanticriver]

One of "my hobbies" as of last few years is monitoring the stock market as I try to carefully plan my retirement. I also listen to a number of the investment channels about the current state of the stock market. This includes Crypto pricing (What Brett from Hot Hardware calls "Crypto-stonks")

Unless you have free electricity, the only profitable use of GPU's for mining is Etherium. While other coins do exist that are profitable (ie: Dogecoin) they have a much much longer return on investment period (break even point) Thus making their attractiveness less effective.

From everything I can surmise the crypto market (Etherium especially) is highly leveraged in one of two ways:

1. Capital investment to buy hardware. (People go into debt to buy hardware to make money)
2. People investing in crypto on the expectation the price will continue to rise, so they borrow money to invest in said coin.

Leveraging is a form of borrowing money to make money. But there has to be some sort of asset to back it up. For example, a mortgage is a legal instrument to pay back a loan against your house.

With trading exchanges like the NYSE, NASDAQ leveraging happens all the time. It means they are borrowing money from an institution based on the fact they have XYZ in other assets (real estate/stocks/bonds) to back it up. There's also called margin positions and options and shorts. I'm not going to get into the nitty gritty of these. With the exception of shorting a stock, IF the general market heads south, you are FORCED to sell assets to cover your leveraging. This becomes one of the terms of the contract when you borrow money. You can only be leveraged by a certain % before you have to sell off.

THUS, when the market crashes, those who leveraged (And I believe that will be many for various reasons, including people who mine at home), they will be forced to sell their assets to lower their overall debt load.

The vast vast majority of indicators show the market is currently WAY overbought and heading for an immanent HARD crash. The bond real estate market in China is likely the impetus for this to happen due to trickle down effect. (Similar to how the 2007 US housing crisis sent China into deep recession) We are seeing instability and head and shoulder indicators of sharp rises and falls.

To show you have convinced I am of this I have converted over 90% of my funds to paper money (Money market). And only a small percentage of those in t-bills. Because when people flock to t-bills for security the yield will drop making them lose value. People are also forced to sell their t-bills to cover their positions. So it causes a dual end effect of selling at a reduced price while people wanting to buy cause a lower yield from the fed. Thus any new purchases from an index fund will have a lower yield overall.

When the general market crashes, it is generally tied to the crypto market. Thus the crypto market will crash as people are forced to sell to cover their positions or leveraging agreements. I have seen various rumors that a number of crypto exchanges that back crypto like tether are highly leveraged.

Even every day people who mine from home, have borrowed heavily to pay for these cards. $2000 for a graphics card? What happens when you lose your job and you see Crypto starting to lose value at a steady pace similar to the stock market.

Also the demand from graphics cards of this is starting to show as China's crackdowns and the increased availability is evident. We also have the upcoming difficulty bomb which makes Ethereum mining less profitable.

DO NOT TAKE ANYTHING IN THIS POST AS INVESTMENT ADVICE OR FACT. IT'S JUST MY TAKE ON WHAT WILL HAPPEN AND OPINION ONLY. ANY INVESTMENT OPTIONS YOU MAKE YOU DO SO AT YOUR OWN RISK.

https://www.express.co.uk/finance/c...ency-markets-china-reverse-bitcoin-mining-ban

 

[alceryes]

One can only hope.
But I don't think this will happen unless 20 or so of the top crypto holders (individuals and conglomerates) all decide that they want to get off this 'rollercoaster,' at the same time. They all know it's volatile as Hell but they'll ignore this fact for as long as it's making them money. The instant the primary coins get low enough that the total investment is deemed 'no longer attractive', they're out and crypto is in freefall. The only fact is that the casual crypto investors are the ones that will be left holding the worthless 1s and 0s. The milti-billionaires/millionaires will be out about a half second after it hits this low level.

 

[digitalgriffin]

One can only hope.
But I don't think this will happen unless 20 or so of the top crypto holders (individuals and conglomerates) all decide that they want to get off this 'rollercoaster,' at the same time. They all know it's volatile as Hell but they'll ignore this fact for as long as it's making them money. The instant the primary coins get low enough that the total investment is deemed 'no longer attractive', they're out and crypto is in freefall. The only fact is that the casual crypto investors are the ones that will be left holding the worthless 1s and 0s. The milti-billionaires/millionaires will be out about a half second after it hits this low level.

Again, if the market falls hard, it doesn't matter if they want to stay invested in crypto or not. If they are leveraged to invest in crypto, and holding that leverage in something that is NOT crypto, they will be forced to sell. No IFs ANDs or BUTs

 

[alceryes]

Again, if the market falls hard...

What is "falls hard" to you? ...40% in 3 days? ...50% in 24 hours?

 

[digitalgriffin]

https://www.express.co.uk/finance/c...ency-markets-china-reverse-bitcoin-mining-ban

The Chinese gov't listen to the pleas of it's people? Tell that to Tibet.

China will never REVERSE the ban on crypto for 2 reasons:

1. There is a HUGE national coal shortage right now. Most of their power is based on coal still.
2. China has a huge air quality pollution problem mainly related to coal fired plants. The gov't has set force strict mandates to curb the use of power. And hence why China has banned coal imports from Australia.
3. Combined with MASSIVE flooding shutting down a number of major mines, China is NOW in a period of rolling blackouts due to lack of coal to generate electricity. This is seasonal, but China's coal production is already below demand. Any further disturbances just makes the situation worse. Thus crackdown on power usage is a necessity.
4. The Chinese Govt HATES AND LOATHES WHAT IT CANNOT CONTROL. They have plans to introduce their own crypto currency which negates many of the benefits of traditional coin, but still under gov't control. This means the central authority can control it's price and track how it's used as it will be a centralized currency.

 

[digitalgriffin]

What is "falls hard" to you? ...40% in 3 days? ...50% in 24 hours?

There's two schools. One predicts massive inflation, while another predicts deflation. But both agree market crash is coming.

Some are predicting another great depression. Up to 80% loss
General consensus through (from what I can garner) is looking like 40% loss which is huge. Typical recessions hover around 20%. But we are long overdue the 10 year recession cycle and we are way overbought. (Buffet indicator) So the fall will be greater this time. The Fed is also out of tools to prop up the economy. One of the dangers of low interest rates is you have no buffer left (lower interest rates) to get money flowing in the economy again. Quantative easing HAS to end. (Repurchasing of assets by the govt to keep stock prices up) The FED has to let the market fail soon or the future fall will be much harder. (Most agree on this.) Presidents are loathe to do this because when the economy is good, no one cares who's in charge. It's a heck of a choice to make. Fail now to promote a healthy market down the road, or fail much harder down the road with less tools to recover. We all saw what happened to Jimmy, early Regan, and George Bush Sr. when the economy tanked under them. Their numbers went down.

IF inflation keeps at it's current pace, any good Federal Reserve board will be forced to raise rates. This causes market contraction. Less rampant borrowing, less money in the system. Less money = less spending. Less spending = lower prices as demand wanes. This is what caused the massive interest rates (14% on houses) in the early 80's as Regan tried to reign in inflation.

How quick the fall takes place depends on how the market is currently setup in terms of positions and leveraging (and what the Fed does). It could be over a month, it could be over the next year. To get a better understanding watch "The Big Short"

 

[alceryes]

So, what about the 50% drop in bitcoin over ~4 months, recently?
Trial run...?

One of the main issues with Bitcoin is that there is a very low number who hold a very large percentage of all Bitcoin. If enough of these 'whales' decide to 'try another ride' crypto will collapse to dust.

 

[digitalgriffin]

So, what about the 50% drop in bitcoin over ~4 months, recently?
Trial run...?

Could be. Might also might be because of crackdowns. Hard to say. But bitcoin is back up again above $60K. And a massive runup is another sign of imminent crash. This is referred to as the "burn up" stage. Combined with massive instability (head and shoulder patterns) it's always an indicator of immanent crash.

Even traditional safe havens like gold haven't been invested in lately. It's trading really low lately. Gold is used as a hedge against inflation. So people are betting against Michael Burry. Cathy Woods (another giant) is predicting contraction and deflation. China's housing market right now it seeing massively down trending prices. (Similar to how ours did after 2007. It wasn't until early 2009 that we started to come out)

 

[alceryes]

You just reminded me of the movie Margin Call. Good movie!

 

[alceryes]

Funny that this article JUST posted on Tom's - https://www.tomshardware.com/news/study-finds-bitcoin-more-centralized-than-expected

Exhibit A

Course, this is 'mining capacity' not actual Bitcoins but they are somewhat equatable.

 

[Bassman999]

I dont see why the market will fall hard unless the US Govt intervenes because they feel their dollar is threatened.

 

[Blackink]

I dont see why the market will fall hard unless the US Govt intervenes because they feel their dollar is threatened.

I don't think it'll "crash", we will see a correction though. When that happens is anybody's guess.
I feel a correction is long overdue.

 

[avg9956]

In contrast, I think the "mining market" is still here to stay and looks bullish
Bitcoin however, has proven to be extremely resilient. Surviving all the way from the mount gox incident, constant threat from FATF, etc.
Most of BTC's market cap comes from institutional money.

-El salvador's adoption of BTC and the fact that they're using their own volcanos to mine BTC (renewable energy) makes it sustainable
--Miners/Institutional miners are incentivized to use the cheapest form of energy, which leads to renewable energy. Since price of coal or other non-renewable energies have risen, then they've hit 2 birds in one stone (Cheap energy + Clean energy).

--A lot of other proof of work crypto currencies will then follow this trend of using renewable energy in order to comply with "regulation"
-Ethereum purposely withholding EIP-3675 for as long as they can to maximize mining profits.
Here's a good article with regards to the delay of their proof of stake: https://tomerstrolight.medium.com/the-problem-with-ethereum-af9692f4af95

Even one can argue that proof of stake > proof of work simply due to energy concerns, but proof of work also has its strengths.
In theory, to be able to take control of the BTC block chain you need to control all of the developers and miners behind it.

In contrast, Proof of stake is much easier to be controlled because the holder of the token is also the miner when he chooses to stake the token. Institutional investors can then vote which implementations/features/etc. they want on a proof of stake token.

Proof of work makes it inherently difficult for a big player to "acquire" or manipulate the block chain of a token. The need for this will probably be resurrected when crypto has been manipulated by big players/excessively regulated by governments.

There have been some developments going on in the CPU Mining as well. I wouldn't say it can manifest into a future threat of CPU shortage in the future, but I am closely watching it.

The only real threat I see for proof of work or for any crypto for that matter is the dreaded CBDC being pushed by central banks and by the FATF. It is simply draconian at all levels. Then imagine they'll attach a "social credit system" like China did to their Digital Yuan to it and monitor all of your purchases digitally and restrict what you can buy or not buy.

However if it's an energy crisis, everyone's incentivized to transition to renewable energy. Sure coal "does the job" in the short term and easy way out, but eventually renewable energy will be the standard in the long term as it is sustainable. It's just a question of who is able to secure said renewable energy first and for what purpose (like what El Salvador did to their volcanoes, I highly doubt international pressure will force them to stop using their volcanoes to mine BTC).