Cryptocurrency mining is a novel topic which interests almost anybody who first hears about it. If you are reading this article then you are most likely familiar with Bitcoin mining, if not, checkout this tutorial on how to become a bitcoin miner. In this article we will discuss a few strategies you can use to make money by mining altcoins, and whether or not the endeavor is worth it.
WHAT IS ALTCOIN MINING?
In order to discuss altcoin mining we need to first understand the difference between regular Bitcoin mining. As you may know, altcoi is a term referred to any cryptocurrency which isn’t Bitcoin. Some examples of altcoins include: Ethereum, Litecoin, Dash, and much much more. When we say “altcoin mining” we mean a way of mining where you constantly switch the coin you are mining on a daily or weekly basis, unlike Bitcoin mining where you would continuously mine the same cryptocurrency.
As a result, there is more data to analyze when trying to mine altcoins as you have to take the account the difficulty and price of multiple candidates. There are quite a few tools that can help you decide which coin is worth mining and there are also quite a few different strategies to maximize profits.
STRATEGY #1: DAY MINING ALTCOINS
You might have heard of the term “day trading”, that is when a trader will close and open new positions multiple times within a few days, day mining is the same. Using websites like Coinwarz you can see an overview of the most profitable cryptocurrencies you can mine today. The calculations are based on a mix between mining difficulty and the coin’s price. Keep in mind that the coins’ positions constantly change on the profitability scale. One day a cryptocurrency can be the most profitable to mine, and the next day it can drop down to the bottom of the list.
After selecting a few good candidates and doing some research into what the coins are all about and whether it’s worth mining them, your best bet is to visit a cloud mining site in order to start mining. A great site is NiceHash, you simply deposit some bitcoins, choose your mining algorithm, and select the rig you want to mine for you. This way you don’t have to worry about setting up numerous mining rigs at home only to find them useless a few months later.
If all goes well, you will achieve ROI within the first few days. The easiest way to keep track of profits is to deposit a set amount of Bitcoins for leasing rigs, after mining the altcoins and selling them on the exchange see what the total Bitcoin amount adds up to. Hopefully you end up with more than you started. A great exchange you can use that supports most coins that are worth mining is Bittrex, they are very reputable in the community and have a great trading platform.
STRATEGY #2: MINING AT LAUNCH
Another, more risky strategy for an all or nothing type investors is to mine cryptocurrencies when they are first launched. Remember how we mentioned that if you mined Bitcoin when it first came out, even if for only a few minutes, you would have been a millionaire by now. The reason is because when Bitcoin was first launched there were maybe 5 or 6 people mining it, the mining difficulty was ridiculously low and a home computer could mine hundreds of coins.
The same principle applies to mining cryptocurrencies at launch, you would find an announcement on the bitcointalk.org forum under the Altcoin Announcement section, and vet the project of the developer. Many times the altcoin’s launch will be set some date in the future, other times there will be an immediate launch where the developer will post the announcement and start mining right away.
Keep in mind that most projects / announcements posted there are worthless and are simply trying to create hype for no reason. If you didn’t know, you can create an altcoin in under an hour, so the projects that are worth mining must include some new feature or anything you feel is worth investing in. This mining strategy is extremely risky, however if you do end up mining a coin that later gains hype you can make big money on the bag.
IS IT WORTH MINING ALTCOINS?
Unlike in traditional Bitcoin mining, where electricity costs, funds availability, and mining hardware are all factors in determining if Bitcoin mining is worth it, altcoin mining simply requires funds and research. After discussing a few strategies for this endeavor the final question remains, is altcoin mining worth it? The answer depends on your risk / reward threshold. Are you a low risk investor willing to do the research into multiple cryptocurrenies, keep track of the mining difficulty and price of each one, and to day trade them on a constant basis? Cloud mining altcoins may be the strategy for you, as losses are minimal because even if you don’t make the right decisions on what coins to mine you are only going to loose a few %. Even if some coins’ price might go down you will still have other cryptocurrencies to balance the losses.
On the other hand, if you are looking for fast money at all cost, mining altcoins on launch might be a solution for you. I can’t stress enough the importance of research into the project as you may end up with a hoard of coins that is worthless if the cryptocurrency never makes it onto an exchange, gains traction, or something goes wrong with the code. On the upside, if the project you invest in does succeed you can reap all the benefits of the bag.