The last year has been a busy one for the virtual "cryptocurrency" known as Bitcoin. With Bitcoin in the news once again over the last month or two, we thought it would be interesting to observe Bitcoin activity on eBay over the last year, to get a sense for how Bitcoin has grown and for whether or not sellers ought to treat sales of Bitcoin-related equipment as a key opportunity at present.
One of the world's first currencies built entirely out of digital information, Bitcoins are essentially little bundles of data that meet particular mathematical criteria. There are a limited number of possible bundles of data that fulfill these mathematical requirements, and each bundle has to be discovered since they aren't all known beforehand.
In essence each discovered bundle, once saved to a hard drive, becomes a Bitcoin that its owner can spend anywhere that Bitcoin is accepted. This discovery process is called "mining," and it requires no human intervention—just a lot of calculating by a computer.
Of course, nothing is ever as easy as it seems, and the fact is that it takes a lot of computing power to mine one Bitcoin. Certain common home computer upgrades—those traditionally used by video gamers to improve graphics capabilities—turn out to be reasonably good at this kind of computing, and a number of entrepreneurs have also created dedicated "Bitcoin mining" devices, either as specialized stand-alone computers or as upgrades to regular personal computers.
This general Bitcoin landscape has been around since 2009, but it hasn't always been easy to "spend" a Bitcoin, since early on there was no particular reason for anyone to accept one as payment—a Bitcoin is, after all, just a little bundle of data on a hard drive.
As the magic of the market played out in the years following 2009, however, demand for Bitcoins grew. Exchanges were created to enable holders to exchange their Bitcoins for dollars or other currencies. Bitcoins did, in fact, become something of a frontier form of money after all.
Then, in April 2013, a massive selloff of Bitcoins made headlines because it caused Bitcoin values—then in the hundreds of dollars per coin—to plummet. Paradoxically, the news also brought vastly increased public awareness of Bitcoin—and of the surprising fact that each discovered Bitcoin was potentially valued at the aforementioned hundreds of dollars.
The idea that you could set a computer to work producing a little bundle of data that could be worth hundreds of dollars seemed to capture the imagination of the public (or at the very least, of the press) and a rash of Bitcoin articles followed.
Tracking a Year of Bitcoin Miners
That's where we pick up the story. The last few weeks have seen a lot of negative press for Bitcoin once again as one of the premier Bitcoin exchanges, Mt. Gox, suffered a very large loss of clients' Bitcoins, which appear to have vanished into thin air. Though details are still emerging and the precise picture of what happened remains unclear, we thought that the window between these two events—the April 2013 rise in Bitcoin coverage and the catastrophically negative press surrounding Bitcoin in February 2014 —gives a nice opportunity to survey how the rise and current state of Bitcoin have played out on the eBay marketplace.
Rather than look at Bitcoins themselves, we thought we'd look at something more concrete—Bitcoin mining devices and upgrades. Over the last year many would-be Bitcoin miners have turned to eBay to lay their hands on the kinds of equipment needed to begin mining Bitcoins, giving us a great opportunity to track the Bitcoin market in terms of the demand for Bitcoins overall as a conceptual thing, rather than just the demand for those Bitcoins (those bundles of data) that have already been discovered.
We did this by compiling data for two keyword pairs on eBay, "bitcoin miner" and "bitcoin mining," to capture all of the products related to the pursuit of mining Bitcoins. Here's what we found.
Bitcoin Mining Hardware, Summary Numbers
From April 2013 through mid-March 2014, Bitcoin mining hardware did very well on eBay in absolute terms, posting numbers that are in the same league as some big-name products recently in the news, like Lego toys. Here are the figures:
|Total Dollar Volume||$30.6 million|
That's a very respectable market for an arcane category of computer hardware and accessories designed to help their users to produce a novel kind of purely virtual currency that can (as of yet) actually be spent in very few places. It speaks to the widespread speculation that Bitcoin may be one "currency of the future," and the desires of speculators to get in on Bitcoin's ground floor.
Bitcoin Mining Hardware Over Time
These numbers are interesting, but the picture gets more interesting from here. By charting these metrics over time, rather than considering them in summary, a picture of the rise and possible saturation of the market for Bitcoin mining devices and accessories emerges.
When we look at total sales volume by month, we see that in April 2013, Bitcoin mining equipment was a sizable market, but not large enough to cause anyone to project sales of over $30 million during the following year. Sales volume increased slowly until the fall of 2013, when it appears to have taken off in time for the holiday season (presumably some saw Bitcoin miners under their Christmas trees), dropping off again in the new year and leveling out beginning in February. This chart, however, only tells a part of the picture.
The chart showing how many units were shipped tells us more. Here we see not just an increase in the fall of 2013, but in fact strong growth throughout much year, starting from very few items in April 2013 but peaking at well over 18,000 items monthly by January 2014. In combination with the volume chart above, this tells us that Bitcoin mining hardware has been getting cheaper over time as economies of scale and the expansion of consumer choice kicked in.
The average price chart confirms our suspicions. Our year-long average price of just over $600 masks the fact that early on, specialized Bitcoin mining hardware was hard to come by and very expensive—well over $3,000 per item—but that prices dropped very quickly and have remained low. Much of this has to do with the influx of new kinds of mining devices, particularly tiny USB-stick sized miners that can be plugged into computer systems by the dozen, given large enough numbers of USB ports (USB hubs with dozens of ports are also commonly sold as mining equipment).
This is perhaps the most interesting of the charts so far, plotting the availability of Bitcoin mining hardware (or of products keyworded this way) over time. We see steady increases from virtually none in April 2013 to around 50,000 per month by February 2014—and then a sudden spike following the most recent round of press to astronomical levels, a projected 200,000 or more items in March 2014 (actual data through March 20th indicates that over 135,000 items had already been offered by that time).
This last chart shows all of the above charts overlaid atop one another as percentages of their period maximums. What we see is that unit sales steadily rose until the most recent negative Bitcoin press—about the compromise of Mt. Gox—hit the airwaves, at which point we begin to see hints of a decline.
Even as this has occurred, however, sellers of Bitcoin mining devices have drastically increased their offerings. Sell-through rates have generally held steady over the past year in the 50-60 percent range; it's not that there are more sellers or more listings so much as it is that there's much more product availability for each listing.
Caveats and Analysis
The numbers given in these charts for March 2014 are projected numbers based on the data available through March 20th. Even without such projections, based only on the data available through the 20th, it's clear that sellers of Bitcoin mining hardware are guessing that the ongoing press surrounding Bitcoin will continue to drive demand for mining hardware and are listing accordingly. What's not so certain is that consumers are ready to follow suit.
Furthermore, the percentage of non-new mining hardware sales—in essence, purchases of mining hardware from others that are getting out of the business—has continued to increase, from 16 percent of units in December to 39 percent of units in January to 46 percent of units for March 2014 through the 20th. This is likely to continue to drive prices down even further.
One obvious question about the data here is the degree to which it captures sales that might not be related to Bitcoin mining. After all, even though USB hubs with dozens of ports are commonly listed as Bitcoin mining hardware, there's no reason why someone not interested in mining might not have other uses for such hubs—though it's not easy to imagine such uses.
To get a general idea for the degree to which it's possible that products being listed as Bitcoin mining products are actually being purchased for non-mining purposes, we ran specialized searches that included the term "ASIC," which stands for "application-specific integrated circuit," a keyword used for dedicated devices that have no purpose other than to mine Bitcoins.
In March 2014, more than half of all Bitcoin-keyworded units shipped were Bitcoin mining ASIC devices. Since most of these will also require accessories like the aforementioned many-port USB hubs in order to be functional, it's safe to assume that the vast majority of products being keyworded for Bitcoin mining are indeed being used for mining purposes.
Has the Time Passed?
Though Bitcoin remains a new and exciting phenomenon and the market likely a sizable one, it's also clear that prices and margins have fallen drastically and continue to fall—even as product availability continues to increase and the percentage of new-item (versus non-new item) sales appears to be decreasing.
For sellers, this likely means that a wait-and-see approach is called for. The explosion of interest in Bitcoin and in dedicated Bitcoin mining equipment may already have peaked. Time—and the ability of the Bitcoin ecosystem to stave off further negative news that might reduce the value of Bitcoins themselves—will tell.