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Mining Crypto Currency: A Safe Strategy to Protect Against Huge Fluctuations

Updated on March 28, 2018

The Crypto Currency Craze

Unless you've been hiding under a rock, everyone has heard about the crypto currency craze that is taking over the world. People are probably most familiar with the top crypto currency called Bitcoin. Just to rehash the journey of Bitcoin over the past 8 months, the price of Bitcoin had gone from $952 per coin in April of 2017, to $19, 200 per coin in December of 2017, and most recently, in March of 2018, has dropped back down to the $8000 - $9000 range per coin.

As you can see, investing in Bitcoin is not for the weak of heart. The $1000 per day price swings are enough to drive any investor crazy. Bitcoin, and crypto currency in general, is not backed or supported by any central organization or government and is a very risky investment. That's why I say, only invest money in crypto currency if you can afford to lose the amount you invest. Nobody can predict what the future holds for Crypto Currency. A lot of experts believe that Crypto Currency is the safe and secure way that all financial transactions will use in the future.

All this being said, where does Crypto Mining come into the picture? Well there are two ways to earn crypto currency. One, you can buy it on one of several exchanges similar to the way you buy shares of stock (I'd recommend Coinbase if you want to take this route). The second way to acquire Crypto Currency is by mining it yourself, using your own computer hardware.

What Does It Mean to Mine Crypto Currency?

I don't intend to go into details here about mining crypto currency. In the simplest definition, mining crypto currency is the act of acquiring crypto currency without investing dollars directly to buy shares/coins. Instead, you use your existing computers or purchase new computers to provide computing power that is used to run complex algorithms to verify crypto transactions. That may sound a little complicated but let me try in simpler terms.

The technology behind crypto currency is called block chain. There is no central ownership of blockchain but instead, everyone has access to every transaction taking place. To validate these transactions and assure nobody is trying to make illegal claims, the technology depends on the user base to verify each transaction and after doing so, let the blockchain know that the transaction is valid.

Once your computer(s) have verified an transaction in the blockchain, and let the blockchain know that the transaction is valid, you get rewarded with a small amount of the crypto currency. The more computing power you provide to your mining exercise, the more crypto currency you will be rewarded.

My Family's Decision to Start a Family Mining Pool

My four kids (three of which are grown and out of the house) each had interest in crypto currency. We have all dabbled a little with direct investments in crypto currency to the point where we made a separate chat group for the 5 of us to talk about crypto currency. We all agreed these were very risky investments and that any money invested should be money that we could all afford to lose. Since nobody can predict the future of these crypto currencies, the worst case scenario is that the value goes to $0 and you lose everything you invested.

At the same time, watching so many people making so much money in crypto currency, we were all hit with the fear of missing out (FOMO).

Given all this, we decided the best way to participate is if we all pooled together and purchased a computer along with the needed hardware to start mining crypto currency. Such mining computers are known as "rigs". The key hardware required for mining is what's called a Graphical Processing Unit or GPU. These GPU's are individual cards that go into your rig. All the processing power required for mining is offloaded to the GPU cards.The GPU cards are not cheap. A typical GPU card can cost you in the $300 range per card. You can spend up to a few thousand dollars on the most advanced GPU cards. A typical rig can run 2 GPU cards but configurations exist where you can go up to 6, 8 or even more cards. Obviously the more processing power you acquire, the more money you need to invest.

We decided to start out with a simple rig and 2 GPU cards. We put together a configuration that cost roughly $1000. The majority of that expense was in the GPU cards as each cost alittle over $300. We each pitched in $250, we purchased the needed hardware, downloaded the mining software (we chose Nicehash) and our mining operation was up and running.

Our Investment Pooling Strategy

What we decided was that the only financial investment we would all make would be the initial $250. We stated we would mine until we raised enough money to purchase our next piece of hardware, either a third GPU card or an entire new rig. Initially, the first milestone would take awhile. This is all passive income so there is nothing to do but let the computer run 24x7, mining crypto and accumulating coins. Once we've accumulated enough to buy the next GPU card, we'd cash out, purchase the next card, and continue mining with our now more powerful rig. The third GPU card will increase our profitability from alittle over $2.00/day to alittle over $3.00/day.

The goal is to keep this going until eventually, we're making in the range of $20-$30/day. Of course, the value of crypto currency helps with the timeframes. The more crypto increases in value, the quicker we get to our cash out date where we can buy the next piece of hardware.

The only other cost involved is the electricity you use to power up your rigs. Web sites exist where you can plug in the type of cards you're using, and they will let you know how much electricity you can expect to use and what your daily profitability will be.

Why This Is Such a Great Strategy!!

The beauty of this strategy is that the investment that each of us makes into this endeavor is capped at $250. Everything from that point on is simply re-investing our earnings.

You may ask, why not simply take the $1000 and purchase bitcoin directly. That was definitely discussed and debated prior to us going the mining route. Using the strategy mentioned above, we shield ourselves from the catastrophic scenario where Crypto currency totally bombs out and goes to $0. Using the direct investment strategy, we'd be left with nothing. In our mining scenario, we have purchased some pretty powerful computing platforms which we still have as an assett and can sell to get our money back. The GPU cards mentioned above are key components for gaming PC's. They are used used for rendering graphics which totally enhances the computer gaming experience. These cards are in high demand and could easily be sold at a profit. That being said, we are already ahead of the game in terms of our initial investment.

On top of all this financial potential that I'm talking about, our family is in constant contact with each other via texting and phone calls related to crypto currency. It's simply another area where we each remain in contact and continue to bond even though geographically we are spread out along the east coast (Boston, New York, New Jersey, and Philadelphia). As a father, this return on investment in terms of bonding is worth more than any return crypto currency can provide.

Don't get me wrong, I'm looking forward to big returns in crypto, but that's just icing on the cake.

Our Current Status

At the time of this writing, we've been mining for approximately 1 month and have accumulated roughly $60 in crypto currency (in this case, Bitcoin). Keep in mind, during this time, Bitcoin has dropped significantly in value so the $60 takes into account the drop in price. Bitcoin is currently back on the rise so as the price of Bitcoin increases, so will the value of our mined coins.

We've already started scoping out our next rig, a 6 GPU configuration and will start buying the components as soon as our mined value will allow.

At some point, something to be decided by agreement of all of us, we will start leaving some portion of crypto currency in our portfolio to start growing that. This means we will not only continue mining more currency, but at the same time, benefit from what will hopefully be a continued rise in the value of crypto currency.

We're in the game with a minor investment and are all brought together on a daily basis to discuss the latest activity in the crypto currency market. Hopefully, in a year from now, I'll be writing a follow-up article on how much hardware we've accumulated, what our daily profitability is, and what our crypto currency portfolio looks like.

I know I talked a lot about the bonding experience this has created within our family, but this same strategy is a valid strategy for any individual considering getting into crypto currencies.

Below you will find a list of links to a few other articles I've published on crypto currency. You may find some additional valuable information to help you in your pursuit of crypto currency investment.

I have to admit, this family mining activity has really gotten me hooked on crypto currency. I find myself on a regular basis going to the Nicehash website to see what our current total of accumulated crypto is. It's exciting to watch it grow, little by little. I look forward to seeing it grow even quicker as we add more hardware to our mining operation. I would strongly recommend this approach to others. Pooling together with friends or family members allows for a very inexpensive entry point with nothing but upward potential in the future.

Do you think this strategy is a good one for Investing in Crypto Currency? (if not, please leave a comment)

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