The stories about mining bitcoin on your home PC feel like a folktale. 99% of us now kick ourselves for not taking the technology seriously. It’s even made cute storylines for sitcoms like The Big Bang Theory. Dusting off old laptops where a fortune may be hiding.
For the average sitcom watching human, mining any cryptocurrency has serious barriers from equipment cost to sufficient electricity supply. Hint, you need a TON of power to run a profitable (and unprofitable) cryptocurrency mining operation. In fact, Iran recently shut down two bitcoin mining farms after noticing a 7% spike in the national power consumption.
It would be pleasing to give a straight yes or no answer to the cloud mining profitability conundrum. So far in 2019, you’re certainly going to be having a better cloud mining experience than a year ago.
As with much of the cryptocurrency industry, there is no certainty.
Many cloud mining operations are complete scams and pyramid schemes. Please take your time to research and evaluate any companies thoroughly. Two well known (not necessarily reputable) are Genesis Mining and Hashflare.
What is cloud mining?
Cloud mining is effectively renting computer power in a large mining farm, a warehouse full of mining hardware. Usually, these farms are based in areas with lower electricity costs helping to reduce everyone’s overheads.
There is no need to buy any special hardware or software. You don’t even need any real technical knowledge. The customer simply invests money in a mining contract and the rest is taken care of. You’re paying someone else to do the mining and get paid a share of the rewards minus a maintenance fee.
It’s easier than opening an investment savings account, several hundred times more risky though. But with risk comes reward right, how much money can you make cloud mining?
Current coin profitability in 2019
Profit across all cryptocurrency mining is constantly being squeezed. As more big players enter the field the competition grows and difficulty to gain rewards increases.
The 2019 upward market trend is certainly positive with many mining operations reporting substantial gains. While crypto reward amounts stay set for long periods of time, Bitcoin, Ethereum, Litecoin and others are commanding increasing fiat values. A positive market trend as we’ve seen in 2019 brings back profitable cloud mining after 2018’s bust.
It’s hard to put exact profit margins in place as the fluctuating coin price and increasing hash difficulty have major effects.
During a bull market, you will often find that cloud mining is a profitable exercise. Conversely, during a bear market, it can be devastating. As cryptocurrency prices crashed in 2018 many cloud miners struggled to generate profits. A year later and things are a little more rosy for those who we able to ride out the storm.
Cloud mining costs
Cloud mining is a cost-effective way for people to enter the game. Often you can get started with as little as $50 or you can invest tens of thousands. You don’t need to worry about electricity bills or surprise hardware costs.
After your initial investment, the only thing to pay is the maintenance fee. This should be a fixed fee. Genesis, the most well-known cloud mining company, charges 0.00028 per GH/s per day. That equates to somewhere around $5 per day on a $1000 contract.
This fee is simply deducted from your daily profits. Are you guaranteed to make at least the maintenance fee every day? NO.
As customers found out in 2018 if you can’t turn enough profit to at least pay the fees you’re in trouble. For Genesis, if a contract is unprofitable for 60 days then the contract is terminated. You better have made your money before this happens.
“In the event of a contract becoming unprofitable (i.e. the payout can’t cover the maintenance fee), the resulting daily payout will be zero. After that, the contract will continue to mine for 60 days….If the contract does not return to profitability in this period it will be terminated….” – Genesis Mining
How to make money cloud mining?
There are two schools of thought here:
- Minimal effort – When times are good, you pretty much just sit back and make bank.
- Minimal control – When times are bad, you have no control over your investment
If you are looking for contracts with popular companies such as Genesis or Hashflare you can be mining in minutes. Just sign up and pay your money. They take care of the rest.
During strong cryptocurrency markets, you can see attractive returns. Many users report making their initial investment back in under a year. After that point, every coin you mine is pure profit.
As mentioned above there is always a caveat. Constant increasing competition, known as difficulty, will always lead to squeezed profits no matter the price of bitcoin and others. A higher coin prince leads to more miners thereby reducing the number of rewards you win.
When the market prices dip, cryptos hold less fiat value. Be aware that mining rewards accumulate in crypto while you are expected to pay fees in fiat. This is when profitability takes a dive.
Over 1 year, is it better to buy crypto or cloud mine?
In most cases, it is probably better to buy cryptocurrency over cloud mining. If you aim to accumulate, buying coins over a period of time is going to be more rewarding. At least, no matter the fiat value of 1 bitcoin, it will always be 1 bitcoin. Cloud mining could land you with an unprofitable expensive contract, you could end up with zero bitcoin and zero FIAT. During bad times, you lose more with cloud mining.
During good times, you’re going to find big profits in buying cryptocurrency directly. But for the mining industry, high prices will increase the difficulty and cut profits. The high percentage returns from mining can be very attractive on paper, but simply buying and hodling on to your cryptocurrencies is far from unprofitable. At the time of writing, Bitcoin is plus 64% for the month. That’s a solid $640 gain on a $1000 investment.
To put it simply, with cloud mining you lose more when cryptocurrency prices are low and gain less when they are high.