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How to invest in cloud mining without losing your sh!tJan. 20, 2018, 11:30 a.m. GMT
Crypto-currency investing is going decidedly mainstream in India – do not be surprised if you find your aunt from Kanpur has an opinion on it! While many investors are well aware of the different bitcoin exchanges in the country and some savvy investors are also into other coins, investing in cloud mining is still not so popular. Cloud mining offers an exciting avenue that some investors might want to try out.
What is cloud mining?
Cloud mining contracts essentially buy you ‘hashing power’ as part of a mining pool. This mining pool then mines coins and you accrue a proportionate share. Those not familiar with the mechanics of mining can think of it like this – let’s say there is a factory which has 99 machines each of which produces an article A; you now give them money to buy the 100th machine, and now you get a proportionate share of the factory’s profits. What is this proportionate share? It’s 1/100 or 1%.
Why cloud mining?
If you have heard a lot about mining and do not want to go through the hassles of setting up a hardware rig or an expensive mining computer, this is how you can dip your toes into the water. It may also yield profits if you run your spreadsheets smartly and invest in mining the right coins. Apart from the fact that cloud mining may offer handsome profits (if your bets pay off), it is also a somewhat passive investing.
You do not need to keep on tracking the prices of volatile coins and take positions – you invest for once and then enjoy a stream of income. It also offers a degree of diversification to your crypto-currency investing portfolio– you can invest in different types of hashrates yielding different coins.
But, but, but….
If you do a simple Google search on cloud mining, you might reasonably end up being scared. You will read all sorts of stuff regarding cloud mining scams, ponzi schemes and what not. You will also find lots of scared comments from those who have invested in some of the ‘more reliable’ schemes about their money getting stuck and not receiving funds. So, what to do?
Step 1: Find the good schemes
There are a lot of cloud mining companies and many of them might be fraud or ponzi schemes. You need to search online forums, Quora etc. to identify a few which seem legitimate. When you find online comments verifying that people have received coins after investing in schemes and those companies have been there for a while, you can be reasonably certain. Names like Genesis and Hashflare seem to have enough positive reviews behind them.
Step 2: Start small
Cloud mining investing will come up with a lot of surprises as discussed in step 4 below, so do not immediately start with a huge amount. I believe investing is all about being aware of and managing your own psychology – and especially the unavoidable ‘loss aversion’ bias hardwired into all of us. By starting small with cloud mining, you are telling yourself “It’s a new thing, let me start small. Even if it blows up, I will only lose a little.”
Step 3: Get the first payout to build confidence
As you accrue coins, you reach a threshold when you can withdraw. You can also reinvest. I suggest you should take out the first possible withdrawal and possibly some more till you have recovered your original investment (this should happen within 3-4 months if all is going fine). Now, you can start reinvesting and also probably buying more hashrates. You have passed the loss barrier – it is only profiting from now onwards. You can breathe easy.
Step 4: Be prepared for roadblocks and patiently wait
Cloud mining throws up a lot of surprises. One fine day, you might find that your withdrawals are blocked because you used a credit card to buy credits. Another day, they have temporarily blocked withdrawals as the transfer gateway is slow and they are shifting to another. Do not sweat – these are normal, as, after all, this is a very nascent field. You should just carefully track if the company is adhering to the promised deadlines. I was told my withdrawals are blocked due to credit card usage for fourteen days – I waited for these fourteen days and then the block was lifted – I now had the confidence to invest one more tranche.
Step 5: Enjoy the fun of putting your mind to it
In cloud mining, you can do a lot of tuning – by adjusting allocation among mining pools and choosing different kinds of hashrates. Do indulge in the research to identify best configurations and try them out – there is a certain satisfaction in tweaking things and seeing profits improve- hopefully, they do!
I hope that all this makes cloud mining less daunting for you. Do remember that this is a nascent field and you should try this only if you have some degree of adventurism and risk tolerance. I have enjoyed my experience of investing in cloud mining and so can you.
PS: This is not investment advice. Please do your own research before you put your hard-earned money anywhere.