Don't trade Crypto Currency - Just Mine it

Wednesday, 4th April 2018 10:24 - by Ranjeet Singh

Like anything in life that involves money people will often jump in without thinking. It’s a dangerous game to play but because the pay-off can sometimes be very good, investors usually take the risk. Look at Bitcoin for example.

Yes, lots of people made lots of money in it but I also know just as money people who lost a lot of money as well. We shouldn’t forget that Sir Isaac Newton was a very wise man and it was he who taught us that ‘what goes up must come down’. Perhaps he didn’t use those exact words but if he was here today he’d be chomping on his Granny Smith and nodding his head I’m sure.

So, it got me thinking. I knew that there was money to be made in Bitcoin and the crypto currency market but I also knew that buying it was extremely dangerous. That’s because the pricing has nothing to do with the fundamental valuation of the underlying asset.

It’s not like a company share where I can look at the balance sheet, dissect it and then know with some reasonable accuracy as to whether the share is under or over-valued. With a crypto currency there is no dividend or income flow, there is no balance sheet, there is no board of directors, there is no product and there is no business model or strategy. There’s basically nothing. It’s worse than nothing because the price is so volatile that you can’t even speculate in the same way with shares.

Honestly, it’s worse than gambling.

That said I don’t give up easily and I knew that people were still making money and so I began to do my research. In fact, I researched for many months on the internet, through my network and so on. I made calls, spoke to influential people in the game and what I finally discovered was pretty amazing.

I found that the real money, the smart money was not on the trading of Bitcoin and crypto currencies at all. All the smart money was being made on something called ‘mining’ and that is where the coins are ‘created’ or ‘mined’.

Now I don’t pretend to know everything about crypto, in fact I probably don’t know very much about crypto despite all of my research, but I do know about investing and what makes a good investment and most importantly I do understand risk and return. It’s what I do for a living. And I knew that ‘mining’ a crypto currency would offer me significantly better odds than trading it.

So, instead of trading crypto like 99% of people involved in this game I decided to be part of the 1% that would be involved higher up in the supply chain – I would get involved in the ‘mining’ instead and provide the liquidity to the market like a Central Bank controls the currency reserves.

Imagine that – YOU control the currency supply. I found that concept incredibly exciting, like I was sitting on top of the hill with all the big players whilst watching everyone else scurrying around below. I can’t lie. I found it so exciting that it was bordering erotic but that’s another story for another time. Whatever the case I finally landed on something which I could understand.

A ‘miner’ is basically a very powerful computer that runs these very complex formulae and algorithms to solve mathematical problems. It’s like when you were a kid at school and you had to guess how many sweets there were in the jar. The difference is that you can have as many guesses as you want and so the winner is the kid who can just keep guessing as quick as they can until they get the right answer.

that goes with it. That’s far too technical for my small brain and so I like to just think of the basics and it becomes clear.

Now for me, that made more sense plus I could now understand the business model. I have a fixed cost, which is the PC, I have a variable cost which I can control which is the cost of the electricity to run the PC, and the rest is pure profit. Nice.

I liked it. I really liked it so after months of research and analysis I made my first play and invested.

So, last year I bought my first miner which cost me around £1,700 and I had it shipped over from Hong Kong. Within 6 months I had recovered my entire investment; that’s not bad! And now anything that I mine I keep as pure profit (less my electricity bill). It’s a brilliant scheme for as long as it lasts because of course there are risks (say my PC blows up for example) but it’s not like trading where the risks can’t be measured. Like I say I know the return and now I know the risk. So, it’s a simple return to risk trade off calculation which I can work out.

In fact, I was so happy with the first deal I have now purchased my second miner and if it works then I can scale up. I could buy 5, 10, 20 – why not? The only thing is that they do make a bit of a racket and so I would suggest storing them out of the way (I keep mine in the garage) and putting them in a sound proof case just to keep the neighbours happy.  Other than it’s a beautiful thing and plus you don’t need to be technically minded.

Now as always, I am not advising that you do the same; I’m just sharing my experience with you. For a start, you need to know where to buy the miner from because there are a lot of sharks out there and secondly you need to how to set it all up and get paid for the coins that it mines. But if you like the idea and want to know more I am happy to help you – I won’t charge you either.

And if you don’t think it’s sensible then you should do the research for yourself. As a result of my research I made contact with several high-hitters in Romania of all places but apparently this is all over Eastern Europe. There are now big factories with many mining computers and each one is churning out coins making their owners tens of thousands of pounds a month, some probably even more than that.

So, if you really want to buy into the crypto craze then be smart and don’t just sign up to a dodgy course from a so-called ‘expert’ that probably knows no more than you, and then lose all your money. Forget the trading and start mining.

Treat it like a business and become the supplier of the coins to the marketplace. Maybe it’s not where most of the money is made but I’m not greedy and I don’t want to make the most money, I just want to make consistent money and safe money. That will do for me.

Here’s todays video https://youtu.be/kQCZbXeT-VE

and as always you can contact me at rsingh@londonstonesecurities.co.uk if you want help finding you a miner.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.