Mining Vs Investing in CryptoCurrencies – Part 1

In the ethereum mining rig followup after mining for 90 days, I broke down what sort of profit I had made, what return on investment, and started to look into what would be more profitable – buying more of the best mining GPUs for ethereum mining rigs, or simply investing in the coin.

Here’s what our return on investment looked like after mining for 90 days – from July 21 to October 20, accounting for electricity costs:

Mining
Investing GPU only cost
Investing Full Mining Rig Cost
Investment  $1186  $636 $1186
Profit  $263.23  $238.20  $448.05
Return on Investment 22.2% 37%  37%

As you can see, investing would have been more profitable during the past 90 days then mining was…. assuming you had just started mining 90 days ago. If you had already been mining for some time, you may have already paid off your GPUs, and then anything you mined was 100% profit (minus electricity).

However, the purpose of these articles is to investigate the pros and cons of investing today – either by purchasing coins directly, or buying mining equipment for the coins.

The last 90 days also saw the Ethereum price go up. This is what it looked like:

Mining Rig
Investing in Ethereum
Investment $1186 $1186
Ethereum Price at beginning $225 * 0 ether $225 * 5.27 ether
Ethereum Price at end of 90 days $310 * .849 mined ether = $263 $310 * 5.27 = $1634
Profit $263 $448
Return on Investment 22.2% 37%

What gets even more interesting, and more important to consider, is what your profits would look like if the price of Ethereum was flat, or if the price of Ethereum decreased during that same time period.

If the price of Ethereum was at $225 when we first invested, and the price was still $225 per ether after our 90 day mining period, the profits change slightly for the mining rig, and drastically for the investment column of the comparison table.

Mining Rig
Investing in Ethereum
Investment $1186 $1186
Ethereum Price at beginning $225 * 0 ether $225 * 5.27 ether
Ethereum Price at end of 90 days $225 * .849 mined ether = $191 $225 * 5.27 = $1186
Profit $191 $0
Return on Investment 16.1% 0%

And, if the price of Ethereum had decreased at all, the results are even more disappointing for the investment column.

Mining Rig
Investing in Ethereum
Investment $1186 $1186
Ethereum Price at beginning $225 * 0 ether $225 * 5.27 ether
Ethereum Price at end of 90 days $175 * .849 mined ether = $149 $175 * 5.27 = $922
Profit $149 ($264)
Return on Investment 16.1% 28% loss

When purely investing, there is no ongoing generation of money. You are simply banking on the price of the investment increasing in order to sell at a higher price and see some profits.

With a GPU mining rig build, even if the coin drops significantly in price, you will still be generating coin and generating some revenue.

Other considerations we’ll cover in part 2 of the Mining vs Investing series

  • What is the risk difference between investing and mining?
  • Are you 100% sure that your chosen coin will increase in value?
  • If the coin decreases in value, what are your options if you are mining versus if you are invested?
  • What is your exit strategy, or what happens when/if you need to exit the coin or mining rig investment?

Comments