If you’ve been considering mining but have been hesitant about investing, now could be a good time to take a second look.
Near the peak of the bull market in 2021 we covered what someone should consider before investing to become a cryptocurrency miner. Everything in the previous article, “Should I Start Mining Cryptocurrency?”, is still completely relevant today, but we decided to delve deeper into the current situation. In part two, we add a few less common scenarios and give a little more perspective now that we are in a bear market.
Some Quiet ASIC Miners Exist
The vast majority of ASIC miners are loud enough to give you hearing damage, but a handful of miners have been produced over the years that are quiet enough to be run in a household. Below is a list of the quiet miners from asicminervalue.com that were produced between 2020-2022. At a maximum of 40 decibels, these miners are all suitable for home-usage.
|iPollo G1 Mini||Jan 2021||40db|
|Goldshell KD-BOX Pro||Mar 2022||35db|
|Goldshell KD-BOX||May 2021||35db|
|Goldshell ST-BOX||Aug 2021||35db|
|Goldshell SC-BOX||Apr 2022||35db|
|Goldshell HS-BOX||May 2021||35db|
|Goldshell CK-BOX||Jul 2021||35db|
|Goldshell Mini-DOGE Pro||Apr 2022||35db|
|Goldshell Mini-DOGE||Jul 2021||35db|
|Goldshell LB-BOX||Aug 2021||35db|
|Goldshell HS1-PLUS||Oct 2020||34db|
YouTube creator and miner 6FigStockTrader runs several Goldshell ASICs to mine Nervos CKB, Handshake, and Siacoin. His experience is described as being very positive in regards to noise, “the miners make no more noise than a whisper in a library. In fact, I don’t even turn them off while recording video content. It’s hard to believe that just two meters away from my microphone, seven crypto miners operate 24/7.”
Of course, simply being quiet is one factor to consider. Keep in mind that quiet miners are not the equivalent of extremely loud miners. Their hashrate is typically a small fraction of the loud miners aimed at the professional market. Fortunately, their energy efficiency seems to be about the same, and the cost is also appropriate for the amount of profit generated.
You Can Use the Heat for Another Purpose
All mining rigs produce a lot of heat. Most mining facilities have to install elaborate ventilation systems to keep equipment from overheating. This excess heat is blown out into the open air where it isn’t utilized for any other purpose. This may be necessary for larger mining operations since there is a tremendous amount of heat generated, but there isn’t a good way to capture it with today’s technology. However, this is changing.
Smaller operations in certain areas of the world may have a distinct advantage in benefiting from the heat generated. In North Vancouver, Canada, Bitcoin miners are being used to heat buildings city-wide. This is a unique case where a pre-existing city-wide central heating system was able to be easily converted. The money spent on electricity to power the miners would have been spent on heating anyway, so they are now earning Bitcoin rewards and profiting without any additional cost.
Small-scale home miners may be able to take advantage of this in a similar way. Here are a few examples of how the heat from miners could be reused by home miners:
- Providing heating for your home.
- Keeping pipes from freezing.
- Keeping a greenhouse warm.
- Pre-heating water before going into a boiler.
- Heating an outdoor shelter for pets or livestock.
6FigStockTrader lives on the northern border of the United States in Minnesota and recycles all of the heat from his mining farm to keep his studio warm:
“In recent years we have seen temperatures dip as low as -55 degrees Fahrenheit (-48C). In the winter months, I heat my recording studio exclusively with heat generated by crypto miners.
To give you some context on the recording studio’s dimensions, picture a 600 sqft rectangular room with five windows in a basement. This is a fairly large space, and in winter it becomes far too cold to work in without some kind of heating.
I ran an experiment in the middle of winter to figure out how much of a difference the miners could make. I turned off all heat sources to get a baseline measurement and found that temperatures in the studio quickly dropped to 45-50 degrees (Fahrenheit). After plugging in the miners, the studio temps raised slowly over a 24-hour period and stabilized between 68-71 degrees.”
When planning a mining farm of any size, it is important to factor in both the cold months and the warm months. Mining requires full-time operation and mining equipment typically has a limited lifespan of about two to four years before becoming obsolete. If you can only run your equipment for half the year during the cold months, this needs to be taken into consideration before you invest in mining equipment.
Buying Equipment Cheap After a Crash
We have just entered a bear market, and the price of all cryptocurrencies has crashed dramatically. Miner prices have also dropped significantly. Many miners with higher electricity rates are now finding out the hard way that they are losing money by mining. This is why we recommended in our previous article that anyone considering mining calculate out and create a plan for a scenario where profitability takes a sharp decline.
Just like every other previous bear market, the drop in profitability for mining causes an exodus of miners. A rush to sell equipment causes a dramatic surplus in the secondary markets, which pushes down prices to fire-sale levels.
6FigStockTrader gives us some insight into his hardware investment:
“Currently I am mining Nervos CKB, and have a relatively small investment of around $6,250 into my crypto mine. This total includes the miners, power supply units, ethernet cables, WiFi powerline, fire extinguisher, smoke detectors, and surge protection power strips.
On average, I paid $715 per CK-BOX miner. During the peak of the bull market, Goldshell was selling these miners at a price between $599-$699. Because of the high demand and limited supply, prices of miners soared on secondary marketplaces such as eBay. It wasn’t uncommon to see the same exact CK-BOX miners going for $1200-$1500 per unit.
Now that the peak market excitement is over, the price of miners has crashed. You can order a CK-BOX miner directly from the manufacturer for $299.
These price swings occur every cycle for mining equipment. Manufacturers often price their equipment higher during a bull market because mining profitability is higher and demand far outpaces supply. This is one of the riskiest times to enter into mining because you end up paying a hefty premium that may never be earned back if you have not prepared for the bear market scenario.
Just like with any investment, it makes no sense to buy high and sell low. Plan your entry during periods when the hardware is cheap, and always pay close attention to product cycles. Just because it’s cheap doesn’t mean it’s a good deal. New improved miners come out every year. Most mining equipment has a lifetime of approximately two years before becoming obsolete and permanently unprofitable.
You Operate a Business
Business owners may be able to make mining more profitable in some ways that pure hobbyist home miners are not. Even though both a business miner and a hobbyist miner both have to pay taxes on mining income, business owners may have distinct advantages that can be the difference between a successful and unsuccessful long-term operation.
One of the biggest advantages is being able to write off costs for electricity and equipment. There isn’t a magic loophole that eliminates a loss, but this ability to control capital cash flow can help reduce risks associated with investing in an operation since the costs are covered using pre-tax money.
Industrial electricity rates are often half that of residential rates, but you can’t take advantage of this unless you are a business in an industrial zone. Some areas have dual zonings, such as residential/commercial properties and farmland, which can make it very convenient for small mining operations.
Certain businesses which deal with money transfers may be able to act as a fiat on-ramp to take advantage of premiums paid in OTC markets. There is a market of people who want to buy cryptocurrency using cash and are willing to pay a few points above the spot price to acquire it directly rather than through an exchange. Freshly mined cryptocurrency can also carry a slight premium for those who insist that the coins they hold have no chance of ever passing through the hands of a criminal due to the risk of association. However, acting as a fiat on-ramp is subject to your local laws. Make sure you are completely informed before considering such a venture.
Mining is the Only Way You Can Get Cryptocurrency
Not all regions of the world can get cryptocurrency as easily as those in most industrialized nations. In some regions, it may be difficult to impossible to buy cryptocurrency even if the local laws do not forbid it. For those who still want to invest, mining may be the best option.
Currently, 31 percent of the adults in the world are considered to be “unbanked”. These are individuals that do not have access to many traditional financial services, which can include basic banking services. They may not be able to utilize the fiat on-ramps from the well-known exchanges because they don’t have banks available to move their money through. However, many of these regions do have electricity and internet connections, which is all you need to start mining.
In several regions of the world, cryptocurrency is legal, but financial institutions are reluctant or forbidden from dealing with cryptocurrency. Similar to the unbanked, these individuals are in a situation where investing in cryptocurrency is difficult because of the friction between the currency they use and the cryptocurrency they are trying to acquire. However, it may still be legal to purchase mining equipment and mine cryptocurrency.
There may also be other scenarios not listed here where mining is advantageous especially since laws surrounding cryptocurrency change very frequently. In a growing number of countries around the world, the laws are changing favorably in ways that benefit cryptocurrency adoption. Take this into consideration before investing in a plan contingent on laws that could be subject to change.
Mining can be very profitable, but just like with any other venture there is risk involved. Buying mining equipment on a whim is gambling. A large percentage of those who leap in without understanding those risks will lose money. Understanding all of the factors involved and executing a solid well-thought-out plan is how a smart investor turns a gamble into an investment.
There are no guarantees. It is impossible to predict all the possible outcomes in markets that swing wildly and react to the news that changes daily. It may seem simple on the surface, but there is a lot more work involved in creating a successful plan.
For most people, investing in cryptocurrency is the end goal, not the activity of mining in particular. It’s a lot easier and less time-consuming to buy physical gold coins than it is to build a gold mine, and the same is true of cryptocurrency. Fortunately, cryptocurrency is becoming more available and accessible to everyone around the world every day. Those who want to invest without having to mine usually have options available.
Mining can be fun for some, but for others, it’s a burden. Circumstance plays a very critical role here. Understanding your own situation and true motivations is important to set goals and will help you to develop the best plan for success for a farm of any size in any market situation.
6FigStockTrader gives us his final words on mining in a bear market:
“During a bull market, everyone is happy. Let’s talk about the disappointment of mining in a bear market when a miner becomes unprofitable. After costs, I can mine 1 CKB for .009 cents. Currently, Nervos Network’s CKB is trading around .0045 cents. I still have a positive net profit overall because of past mining which was much more profitable, but at this moment it is currently unprofitable. My mining profitability on Handshake and Siacoin is similar.
Speculation mining is a real thing. When miners become unprofitable, most people simply turn them off. When this happens, competition decreases, and rewards increase for miners that kept them on. In my case, I have seen rewards increase of over 88%, from 450 to 850 CKB per day! I have no plans to sell any of my mined crypto anytime soon and I am speculating that the price will continue to rise as the years go by.
If you are thinking about crypto mining, I would advise establishing a budget that you can afford to lose entirely. Numerous things can happen that are completely unexpected. Networks can change algorithms or switch to proof of stake. Equipment breakdowns can happen at any time, and finding someone to repair miners can be costly.
I hold strong convictions about the direction of Nervos Network and the team behind the project and I am heavily invested in the community. This is the reason I choose to leave my miners turned on. Their success is my success. I believe in the future of the project and I want to remain a contributing member of the community.”
By: Jordan Mack and 6FigStockTrader