Many people booking for our upcoming Cryptocurrency investing, trading & mining seminar have asked if we also cover "alt-coins" and Ethereum.
"Altcoin" is a combination of two words: "alt" and "coin" - alt is short for alternative and coin signifies currency. Thus, together they imply a category of cryptocurrency that is alternative to the digital currency Bitcoin.
The answer is yes, we have extensive mining operations for Litecoin and Ethereum which we will be covering and demonstrating in detail in the full day seminar.
Our focus is on Bitcoin, Ethereum and Litecoin as these are the largest cryptocurrencies by market cap and volume traded.
The investing and mining of "altcoins" can be highly profitable. Below is a day-by-day forensic analysis of one of our Litecoin mining operations which we will be demonstrating. The Litecoin mining operation is a junior 10% stake in our overall cryptocurrency portfolio, but is currently the best performer so far. Below you can see that the "Mining Fund", which consists of Litecoin mining hardware (we don’t have to import it, we merely buy the mining power "in the cloud" on an open market where we can liquidate it at any time) and the Litecoin generated by the miners, has grown from an R11,000 investment to just over R26,000, a gain of 139%. This compares to merely buying and holding Litecoin itself which would have returned 71%
One of the startling revelations of our research is just how efficient Litecoin mining is - only 4% of proceeds went to pay for electricity whereas most of our Bitcoin mining operations give up 20-30% to pay for electricity. The portfolio now consists of 28% Litecoin derived from the mining of the coin itself and 72% in "hashpower" which is the mining hardware itself. We can attach a Net Asset Value (NAV) to the mining hardware as it is bought and sold on a liquid trading market and the entire operation or portions of it can be sold (liquidated) at a moment’s notice.
We have been particularly fortunate in that the price for Litecoin mining power on the open Litecoin hash market has risen higher than what we bought it for, since Litecoin has become very popular since the Segregated Witness (Segwit) scaling solution was activated on the Litecoin network last month. This means that 50.8% of the profits on the portfolio were derived from appreciation in the mining assets and 49% was derived from the new coins we mined. Over time though, as we continue to mine for new coin, the gains will be heavily weighted toward the reserves of coin derived from the mining operation itself.
Speaking of coin generation from mining, the below chart shows how our initial R11,000 investment in mining hash power is getting "paid down" by the coins we generate from the mining. Currently we have about another R3,500 to go and the total initial investment of R11,000 would have been paid off in under 3 months. The red line shows the return on initial investment (ROI) currently sitting at 64% after 7 weeks of mining. We fully expect this operation to be paid for by mid July. After that, we can elect to continue mining or liquidate the entire operation and sell the mining power back into the market for more than we paid for it.
Here is an interesting view on things. If we take the amount of Litecoin mined daily, multiply by 30 to get a monthly projection and then divide it by the initial investment in mining hashpower we are currently seeing 30-35% per month yield. So, the R11,000 initial investment is yielding R3,300 to R3,850 per month. This compares to 20% yields available on Bitcoin mining operations at the moment.
So, there you have it, alt-coin mining can be fun, and highly rewarding, but of course is subject to more risks than the much larger Bitcoin. Of course, even Bitcoin itself is subject to many risks which we cover in detail in our previous VIEWS article.
From our perspective, we treat this Litecoin mining operation like any other junior mid-cap share position in our portfolio. By no means should you abandon equity investing and trading, but you can add an operation (or several) like this to your overall portfolio. This is just my opinion, but I think we are witnessing the cusp of a fintech revolution (which can and will go through bubbles in its evolution), so sometimes one must ask oneself if you are "wrong" about cryptocurrencies and they do take off in ways more unimaginable than we are witnessing now, can you afford NOT to have some exposure?
Bitcoin and the other digital currencies all see a lot of benefit in times of political and economic instability, of which there is an abundance right now. When citizens lose faith in their local currencies which are being mismanaged by their governments and suffering depreciation, they start gravitating to alternatives, and digital ones like bitcoin become more compelling in such circumstances.
As an aside, it looks like Bitcoin is suddenly in the process of being legalized in India. When Japan, the world’s third largest economy, legalized Bitcoin it took Bitcoin from $1200 to $2400. India is far more populous and its citizenry far more subject to a cash crunch and depreciating currency and given their low 10% volumes of global Bitcoin trading market, there could be lots more upside for demand from their shores. Who knows what that could do to the whole crypto market, because Bitcoin and the alt-coins seem to be moving in tandem at the moment.
See our previous Bitcoin Lab articles:
1 June 2017 - Bitcoin Mining: An SA Perspective
10 May 2017 - Bitcoin Up 265% - Upside Potential To $2,500 In 2017
Dwaine van Vuuren
RecessionAlert, PowerStocks Research
Dwaine van Vuuren is a full-time trader, global investor and stock-market researcher. His passion for numbers and keen research & analytic ability has helped grow RecessionALERT.com (US based) and PowerStocks Research into companies used by hundreds of hedge funds, brokerage firms, financial advisers and private investors around the world. An enthusiastic educator, he will have you trading and investing with confidence & discipline.