Mining as a working business strategy: Profitability calculation comparing the income from investment and deposits.
Before you start investing in a mining company, you should definitely understand the nature of the mining industry and the risk level related with the industry. Experiences in the industry regularly highs and lows.
High interest in cryptocurrencies has streamed since 2015. That time bitcoin has shown its value rise from 300 usd per coin to a top of about 20000 usd per coin in December 2017, then it has dropped to 8000$ per coin in 2019. Many other cryptocurrencies have seen almost the same dips in value. As a concrete investor of course, you can make some capital in case the company operates its mine or if it is accomplished by another company. It much depends on economic conditions and how the whole project develops, always there is a danger that you can lose some or all of your assets. The research and activities to be achieved between opening a deposit and starting up mining processing. They really involve lots of real resources as time and cash.
Even if the initial samples (the mineral occurrences) seem promising, a mining company has to conduct extensive assessment work to determine whether mining operations will be profitable. Several new deposits that are founded, just a minority of them would be actually mined. As a fairly simple buying on an exchange like Coinbase – it lets you to buy fractions of cryptocurrencies, some people who prefer to mine their coins. Of course, much depends on individual circumstances.
In some cases where profitability is shown, more than 10 years can pass between the initial discovery and the real start of mining operations.
The real structure of the Bitcoin mining game seems to prevent the emergence of a monopolistic mining activity. By the way, if the rate of return, for one of the players, were to become lower than the market interest rate, then a miner may find it convenient to stop mining and invest resources in alternative activities. In the end, it is worth to specify that when only two miners remain active, while their marginal costs are not alike. That`s it - one of them will certainly have more than 50% of the computational power. Bitcoin mining is the process of earning bitcoin in exchange for running the verification process to confirm its transactions, to provide security for the network, the price of it outruns the cost to mine.
Comparing mining branch with the other instruments of investing
Investing is an eternally relevant issue for those who want to increase their capital and secure a passive income. In the modern market there are many financial instruments that allow you to earn passively in the long run. Each of them has its own advantages and disadvantages.
Mining experts will talk about the pros and cons of the main financial instruments available to any investor, as well as the advantages of mining over them.
Bank deposits and savings accounts
The current inflation is not paid off by the interest rates of bank deposits and savings accounts. The maximum that the depositor will receive is a small amount of money, which will have practically no effect on the total income. You can open a deposit both in more reliable state banks and in commercial ones. At the same time, the interest rate in reliable financial institutions is usually lower, but the risks there are minimal. With commercial organizations, the situation is the opposite.
Advantages of bank deposits:
• Risks are minimal;
• Liquidity;
• Small entry
• Constant informing the contributor.
Cons of bank deposits:
• Profitability - 7.67% per annum (according to data for 2019).
• Low profitability, which practically does not pay off inflation;
•% exception for early withdrawal of funds.
The property
One of the most reliable, but at the same time expensive ways to invest money is real estate. However, not every investor can afford to buy a house / apartment / land. Among the reasons why it is real estate that is considered to be the most profitable investment are the tendency to rise in price of objects, good liquidity, and passive income from renting out. This method of investment may be suitable only for those investors who have sufficient starting capital.
Advantages of real estate investment:
• Profitable investment in almost any economic period;
• rental income;
• Reduced cost when acquiring an object at the construction stage.
Cons of real estate investment:
• Profitability of 5-8% per annum when renting out as residential premises;
• Profitability of 10-13% per annum upon delivery for commercial use;
• Very high entry (requires a large starting amount);
• There is a risk of stopping construction, which means delaying and lack of profit;
• The abundance of scammers in the market.
Business and Manufacturing
Today, even an inexperienced investor can invest in business and production. However, in order for this type of investment to really bring you significant profit, you need to understand in detail the selected investment field.
If an investor is an expert who is aware of all the risks, calculates them, and also knows the market thoroughly, then a business or production may well become optimal areas for investment. However, otherwise, a novice investor should not risk so much, because 90% of businesses, according to statistics, are closed in the first year. Investing in business and production in modern realities has become much easier than before
Advantages of investing in a business:
• Projects for every taste;
• Participation without significant investments is possible;
• Profitability varies greatly - on average 15-35% per annum.
Cons of business investment:
• High risks of bankruptcy of the companies in which the funds were invested (especially for startups);
• An investor needs to possess special knowledge, analytical thinking and instinct for a reasonable choice of a project for investment;
• A large number of “bubbles” and dishonest partners.
Stocks
Not so long ago, investment in the stock market was available only to wealthy investors. However, today they have become the prerogative of medium-sized investors. The investor can choose any industry for investment: from healthcare and IT to the consumer market.
Benefits of investing in stocks:
• Average accessibility;
• A lot of reference and supporting materials;
• A tax deduction is provided;
• Moderate risks;
• Average profitability - 20-25% per annum (with the right investment).
Cons investment in stocks:
• There is a risk of losing investments in case of an unsuccessful deposit;
• For significant income capital from 1 million rubles will be required.
Foreign exchange market (Forex)
Forex is a real roulette for sophisticated investors. However, experienced traders can rely on a fairly quick profit from initially large capital. Beginners should carefully study Forex trading strategies before starting to “conquer” this market. The main rule of the game in the Forex market is selectivity in determining the broker or dealer. Newcomers should first of all pay attention to proven companies that have long been in the market and have a positive reputation.
Advantages of investing in the foreign exchange market:
• Low entry threshold (from $ 1);
• Bargaining
Mining of cryptocurrencies
In spite of popular belief, this particular method of earning is one of the most profitable and carries fairly low risks, and entering pass way to this type of passive income is minimal. One of the main advantages of investing in mining is a huge number of investment methods. Several types of mining are available to investors (both classic and cloud), and do not forget about the opportunity to purchase shares of enterprises working in the field of industrial mining.
Advantages of mining investments:
• High profitability - 70% per year and even more;
• The equipment has a residual value, there is always the opportunity to sell it
• Entrance is possible with a small starting capital;
• Passive income;
• Quick payback on initial investments;
• Hedging an exchange rate with options from cryptocurrency mined;
• High profit with minimal risk.
Recently the technology branch has changed a lot and many professional mining centers were created as well as the drifting price of bitcoin itself. Many of individual miners want an answer to the following question:
Would be mining still profitable?
There are several factors that determine whether bitcoin mining is a profitable volunteer. These include the cost of the electricity to power the computer system, the connection and price of the computer power block, and the difficulty in providing the services. Difficulty is explained in the hashes per second of the Bitcoin validation transaction. The hash rate measures the rate of solving the problem—the difficulty changes as more miners enter because the network is designed to produce a certain level of bitcoins every ten minutes. While more miners enter the market, the difficulty raises to make sure that the level is static. And finely, the last factor for determining profitability is the price of bitcoins as compared against standard fiat currency.
Mining Profitability as a separate finance digging strategy
Crypto mining profitability is highly nuanced, it depends on a wide range of variables such as hardware, electricity costs, and the type of cryptocurrency you would like to mine.
Bitcoin is the most profitable coin to mine currently, although not if you’re an individual miner, in most cases. Bitcoin mining is extremely competitive, requires specialized hardware in the form of ASIC (Application Specific Integrated Circuit) rigs, and requires cheap electricity in order to make bigger earnings.
Bitcoin is primarily mined by large companies with millions of dollars invested in thousands of ASIC miners, cooling systems, and operate out of countries with competitive electricity rates. Mining cryptocurrency seems like a no-brainer. Set up a computer to help solve complex math puzzles and you are rewarded with a coin or a fraction of a coin.
By 2019, cryptocurrency mining has become a little more complicated and involved. With bitcoin, the reward is halved every four years, serious miners have built huge parades to mine, making it harder for smaller miners to compete. You can join a bitcoin mining pool to be more effective, but that comes with a fee, reducing your profits.
On top of building your rig, you also need to realize that you are going to be using quite a lot of power. If you have high power rates, you could end up spending quite a lot to mine coins—especially bitcoin. The electricity cost involved in mining a single bitcoin is more than $3,000 in the cheapest states of USA for example.
A less powerful rig mining alternative currencies could save you money. Even so, it can take several weeks, or even more to compensate your original investment and become more productive.
What is actually cloud mining?
Cloud Mining is the process of bitcoin mining utilizing a remote datacenter with shared processing power. Cloud mining implicates purchasing time on someone else’s rig. In the case you purchase a higher hash rate, you are expected to get more coins for what you pay for, but it will cost more.
Depending on the company you choose, you might pay a monthly fee, or you might pay rendering to the hash rate. Many companies also charge a maintenance fee. In general, cloud miners that allow you access to bitcoin come at higher rates.
As it is, depending on what you mine, it can take several months before your cloud mining investment becomes profitable.
However, at least with cloud mining, you don’t have to worry about power consumption costs and other direct costs related to doing all of the mining with your own gear.
What to expect in the nearest 2021 year? Mining will live, with new projects emerging and old ones fading.
As a conclusion we need to tell - there are several different ways that Bitcoin mining can remain profitable after the block reward goes away — the above examples are but a few in a myriad of new chances. Anyway, since the block reward gradually reduces over time, rather than disappearing all at once, miners have the chance to gradually adapt and adjust to relying more on transaction fees than revenue from mined bitcoins. The most likely combination of factors that will keep miners afloat in the future is evolving mining technology and the steady increase in Bitcoin’s purchasing power. However, our visions of the future should not be limited by our imaginations. Being unable to imagine something does not render it impossible; the spontaneous evolving and shifting of the market economy reminds us of this fact every day.