Quote from: stripykitteh on August 05, 2013, 03:32:00 AM

Quote from: gramma on August 05, 2013, 03:03:48 AM

USD$200 million is some serious fiat cashola. I'd be interested in AM's thoughts about the news of the Avalon investment, and meeting that challenge.

http://online.wsj.com/article/SB10001424127887323997004578644491403250124.html

Given that the market cap of Bitcoin is currently around $1-$1.5 billion I think pumping $200 million into a chip designer only makes sense if you think the value of Bitcoin is truly about to skyrocket and you think Avalon will end up being top-dog in chips forever and a day. I mean, it sounds like a hell of a risk. You'd only be doing this expecting to get a 10-bagger or more, and if the price doesn't move you won't get much of a return even if you become 50% of the market (which they wouldn't even try).

Or are they moving in a different direction than mining?

It's not impossible that Joe Lewis wants $200M worth of bitcoins but realizes he cannot simply buy that many without blowing up the price. Someone has already been privately buying up all of Avalon's bitcoins, so it fits.

It's genius, really: trying to buy $200M of coins directly would spike the price before you actually gained ownership of the assets, so you'd get stuck buying in at a high price. Instead, they're going to keep all of the coins they're mining, which indirectly raises the price on assets they essentially have already paid for - those coins aren't being released into the wild like they would by a company like AM, so Joe Lewis is relieving the inflationary pressure of mining, which will manifest as an increase in value on his newly minted coins.

Anyone who says "well, he can't pull that off, he can't exceed 30-40% of the hashrate without destroying trust in BTC!" need only look at AM's own plans (leasing hardware for BTC, etc) to understand how it is possible to generate in excess of $200M worth of BTC over a couple of years.

As far as I am concerned, this is the vindication of my bearish sentiment on AM. If this story gets confirmed - and I rate the odds of that at far higher than zero, since this is published in the Wall Street Journal - AM stock is set to absolutely crater. The insane notion that AM will continue to return ~25% APR indefinitely is getting a reality check.