Cryptocurrency Investing Part 1 – My Mining Experience
Today I’m started Part 1 of a new multipart crytocurrency blog series. How many parts there will be is to be decided, but it will be at least two parts since I’m already almost done with Part 2.
I remember back in 2009 hearing about this new crytocurrency called Bitcoin. I think I read about on Slashdot, which coined the phrase, “News for nerds. Stuff that matters.” Bitcoin, especially then, with the discussion of cryptography and the blockchain, was the perfect topic for a technology forum. I still check out their site but not daily like I used too when I was in college and medical school. Reddit has sort of taken over now-a-days.
Back then Bitcoin was trading for less than a dollar, even a few cents. I remember thinking that it was a cool concept but that it likely wouldn’t have caught on. Boy was I wrong! I wish I had “invested” everything I owned into it back then and I would be incredibly wealthy. Heck, even with a cheap standard home computer you could have mined a couple bitcoins a day. Now the cost of mining (in terms of time and electricity) is so high that only large operations with low electricity costs can do it efficiently.
At the behest of one of my best friends who has been getting paid partly in bitcoin for a couple of years, suggested that I buy a small amount. (This friend is actually the Johnny that is the co-creator of this site! It would be great to get an update from him about the crytocurrencies that he is investing in.) That small amount was around $800 and I sold when it was worth around $2600, which I thought was at a crazy valuation back then. I wish I had held on to the $19,000 level!
Fortunately, I hadn’t sold everything and still had about 0.08 btc remaining in my account. After reading about how some other dividend bloggers were purchasing computing power to mine bitcoin, I decided to do the same and set up an account at Hashflare. At the time, 0.08 btc was worth about $1600(!) so I was able to purchase 11 TH/s of mining power. This amounts to a little over 0.2 BTC per year. At the time, the breakeven point was a little under 6 months, meaning that I would generate about $1600 in 6 months. Anything after 6 months was profit.
Currently I have 0.09460104 BTC in my Hashflare account that I can withdraw at any time. I am still generating 0.2020129 BTC per year. At current prices this is worth about $1540 per year. Hashflare does offer the ability to reinvest mined bitcoin to continually increase your hashing power. That was very tempting to do (sort of the equivalent of dollar cost averaging or reinvesting dividends), but ultimately I decided not too. I know some of the dividend bloggers using this mining service have and I am interested in learning how their results have been.
I chose not to reinvest because the Hashflare contracts expire at the end of a year. It wasn’t always the case that contracts expire at a year. In fact, there was a controversy when Hashflare retrospectively changed old accounts to expire at a year. The fact that they changed the terms of the contract this way really bothers me and, had I known this when I was creating an account, I would have avoided them and gone with a competitor. I’m not sure what ended up happening to the accounts that Hashflare changed without telling its owners.
Hashflare has limits at the levels that you can withdraw your bitcoin. The worry that I had was that once my year expired, I would only have very tiny amounts of bitcoin working for me and it would be near impossible to transfer them out. This would have been less of an issue had bitcoin prices stayed near the $19,000 range or gone higher since the mined bitcoins would have purchased more hashing power as the prices went up. Since the bitcoin price went down, the problem would have been just accentuated.
As it stands right now, I’ll continue to mine bitcoin at Hashflare until my year expires and then transfer it out.
What are your thoughts on bitcoin? Are you mining it and have you been happy with your results now that bitcoin mania has calmed down?
Part 2 of multipart cryptocurrency blog series will be available soon.