Is mining suitable for blockchain investment novices?

"I take my trading principles seriously and do not act according to my own preferences." - Jesse Livermore, "Reminiscences of a Stock Operator"

The market of digital currencies has been rising in the past few months. Among the mainstream currencies, those based on POW (Proof of Work) such as BTC, BCH, Litecoin, etc. have all seen quite good growth.

The direct effect of the rise in coin prices is that miners are busy again and it has become popular again. Recently, many readers have asked whether we can invest in mining now.

In my opinion, as long as mainstream currencies such as Bitcoin, BCH, and Litecoin continue to exist, and their consensus mechanisms remain unchanged and always use POW, then mining will definitely be a rigid demand. But this rigid demand market is definitely not as colorful as it looks from the outside.

What is the process for ordinary investors to participate in mining?

If you have the opportunity to visit Huaqiangbei in Shenzhen, you will see a wide variety of major mining machine dealers. Almost all of these dealers are directly connected with the mining farms.

For ordinary investors, investing in mining machines now generally does not mean taking the mining machines to their own homes to mine, but buying mining machines directly from sellers, and then entrusting the sellers to operate the mines. Some sellers are large mine owners themselves. Investors pay a fixed electricity fee and operation and maintenance fee to the mines every month, and then the mined coins are regularly sent to the investor's wallet.

At the same time, there are some barriers to buying mining machines. For example, for Bitcoin mining machines, most merchants start with a minimum of 10 units, so the transaction amount is at least tens of thousands or hundreds of thousands. In addition, if investors no longer want the mining machine and want to resell it, if there is a bear market, it will be difficult to resell the mining machine at a discount.

From the bear market to the present, the price of mining machines has fluctuated greatly. The news that mining machines were sold by pound and no one wanted them during the bear market at the end of 2018 is still fresh in our memory. Now they have become very popular, with prices changing every day. A second-hand Antminer on the market was sold for 1,000 yuan last year and no one wanted it, but now it can’t be bought for 4,000 yuan.

Even if investors buy mining machines, they will only make a profit when the price of the currency rises to a certain extent. Therefore, the mining industry is greatly affected by the bull and bear markets. We say that the securities industry relies on the stock market, and the mining machine industry relies on the digital currency market. And who knows how far this round of market will go, and when will the next bear market come?

Some traditional industry operators hold large sums of money and want to quickly enter the mining industry and operate their own mines. There are more barriers to entry, not only the capital investment, but also the mine management, operation and maintenance, site selection, etc. There are too many objective factors and policy factors that will affect the income. If you are not careful, it will be difficult to gain a foothold, not to mention long-term operation and profitability.

For ordinary retail investors like us with such a large amount of capital, it is even less suitable for us to invest in purchasing mining machines.

In fact, there are many other pitfalls in mining machine investment in the market. I remember a few months ago, a friend who invested in mining machines consulted me and said that he bought ten mining machines and now all lost money. Later, I learned that the so-called mining machine manufacturer promised that the coins mined by the mining machine could be recycled to the manufacturer before selling the mining machine to you, and the profit could reach 30% monthly interest. However, the manufacturer ran away not long after the purchase. In fact, the routine is to use the mining machine as a cover.

For many friends who have just come into contact with blockchain, the threshold for mining is higher than that for buying coins. Therefore, the reliable way is to buy coins, buy mainstream coins, and do not do short-term operations.