Disclaimer: As always, do not take any financial advice from anyone without proper due diligence. Also not that link to CEX.IO in this article are affiliate links. If you prefer not to use the affiliate link, check the bottom of the article for a direct link. Oh, and please read the caveats and possible dangers before making any investment decisions.
With the rapid increase in Bitcoin mining power during the previous few months, most Bitcoin mining investments are not profitable. Investors seem to be gambling that somehow, mining will be less popular and thus more profitable for those that stick around.
Of course, this is an impossible dream; mining investments are driven by profitability, and once profitability is high enough, mining investments will increase, thus reducing profitability. In fact, the whole system is beautifully designed to create a balance where mining is barely profitable.
A big problem with investing in traditional mining equipment is that once you’ve placed your final order, you’re stuck with the equipment until you either sell it or take it offline. There are no partial refunds and it is complicated to sell parts of your equipment.
This is one of the reasons why group buys are popular. A group buy is essentially a person or entity that buys the mining equipment and then sells parts of that equipment to others. Shares of a group buys are easier to move around by selling or buying more to or from others.
Group buys are cheap and easy ways to get into mining, but has some serious drawbacks. First, the equipment must be bought, and when time is money, waiting for the group buy to fill up so the equipment can be bought can cost a lot of money. Then there is the question of trust; do you really trust the operator to pay diligently? Finally, you’ll always run the risk of hardware failure or operator death, especially when the group buy is run by a single person.
Similar to group buys are mining bonds. With a mining bond or contract, you get the output of a certain hashrate paid at regular intervals. Although most asset exchanges are now closed down, reselling outside of an exchange is certainly an option if you can find buyers. The operator does not necessarily have a certain piece of equipment but may fund the bonds or contracts through any means available, including other assets or multiple pieces of equipment.
Sadly, due to the rapid increase in network hash rate, most mining bonds and contracts have also turned out to be unprofitable, including my own BFMines (at least when bought at the IPO price).
However, a new option is now available for investing in Bitcoin mining without these drawbacks. CEX.IO allows investors to buy Bitcoin mining power by the GH/s.
CEX.IO appeals to me for several reasons.
Rather than wait for hardware to arrive, CEX.IO offers immediate mining start because the equipment is already in place. The operators have built, installed, and operate a huge mining farm so there’s no wait. I’ve bought capacity on CEX.IO and seen returns within hours of purchase.
There are no long-term commitments either, you can sell your hashrate back to the market whenever you want. This is quite unique as it allows you to enter and leave the market at a moment’s notice. You can even trade at fractions of a GH/s if you just like to get involved in a smaller scale.
In fact, this market is a very appealing feature. The hashrate available at CEX.IO is driven by traders just like yourself. That means that when the market thinks the hashrate price is going down, prices will go down, and when the market thinks rates will remain high, prices go up. I’m a proponent of market driven trading like this because it allows a larger group of people to decide what is a fair price.
Beyond just hashrate, however, CEX.IO also allows trading in Bitfury chip prices. This is like a traditional commodities market like oil or gold where you speculate in what prices the market is willing to pay for that commodity.
A great addition to the pro side for CEX.IO is that you also get merged mining alt-coins as part of your mining reward. Right now, you get Namecoin, IXCoin, and Devcoins as part of your profit, so effectively you are mining several coins at a time.
Finally, if you wish to operate your own equipment, you can actually redeem your owned hashrate into a physical miner sent to your home. When you own a certain minimum, you contact CEX.IO support and discuss shipping and handling costs, but you can thus turn your virtual asset into a physical Bitcoin miner.
Are there any drawbacks? Well, there are several risk factors.
First and foremost is determining whether your mining investment will make money at all. It is difficult to predict this and I’ve certainly failed in the past when I thought BFMines would turn a profit at IPO prices. Using a calculator like the mining.thegenesisblock.com may provide you with better insights. Keep in mind, though, that calculators such as these are available to everyone so their usefulness as a secret weapon are limited.
Second is the risk that the operators of CEX.IO may not be legitimate. The Bitcoin world continues to see large amounts of fraud and scams, even from the most seemingly trustworthy entities. We don’t know whether CEX.IO is a giant scam or legitimate, and it is very difficulty to prove either.
Finally, prices are driven by the market, and the market tends to be very well informed and wishing to make money. If you’re looking to beat the market, you need to beat the entire knowledge of the market, and that can be very difficult.
All in all, however, assuming CEX.IO is a legitimate operation, I think this platform is an excellent way to get involved in mining.
If you’d like to sign up and try, you can use my affiliate link, which will give me a small benefit from your investment too. If you’d like to do so, click this link.
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