How to avoid Bitcoin mining investment risks?

How to avoid Bitcoin mining investment risks?

Is Bitcoin mining profitable? I think that's for sure. The most effective way to get bitcoin is through mining. But we should not be blindly confident, let alone gamble. The reason we invest in a project can never be: when others make money, we will follow suit. So we need to see clearly what the risks are in this project.

Risk 1: Engineering risk

Before starting a mining project, building a factory, buying miners, distributing water, electricity, ventilation, and engineers are necessary. During the construction of the mining farm, we must ensure that the cable trenches are buried, the ventilation fans are placed in place, and the miners are working correctly.

To set up a mining farm, you need to understand engineering-related maintenance and operation knowledge. The risks that need to be dealt with in engineering mainly include the following categories:

1. Control procurement costs. 

This is the cost of purchasing miners and shelves, cables, transformers, routers, power supplies, trunking, various profiles, and more. Don't underestimate these little things. The lack of any part of purchasing more than one component will increase your cost and even delay your miner's launch time. Also, don't think that buying a miner is enough.

2. Control the construction cost. 

Miners are not intelligent machines. If you want miners to help you mine Bitcoin, you need to run it with your heart. You need to build a workshop, which should be well protected from dust, rain, ventilation, and high temperature; you need to arrange the miners neatly, put the cables in order, connect the wires, the control wires, and the Network cables; you also need to consider overhauls, etc. If you can't do it yourself, you'd better ask an engineer to assist you.

3. Control environmental risks. 

You also have to consider the environment; miners are not the zero-emission equipment, which creates a lot of noise and heat. In this way, you have to consider the physical and mental health of the operating workers, and you also have to consider the relationship between the surrounding residents.

4. Control technical risks. 

Building a Bitcoin mining farm is mainly a technical issue of engineering, and the professional technology of Bitcoin itself is not the point. You need project management talents, electricians, engineers engaged in construction, and talents who understand computer room construction. Although this knowledge is not complicated, someone with experience can help you reduce costs and control risks.

Risk 2: Operational risk

When we have built the mining farm, for your mining farm to create higher returns for you, we also need to avoid the following risks.

1. Reduce operating costs. 

The highest cost of operating a mining farm is electricity bills, and efforts should be made to find sustainable low-cost electricity. You can also buy miners with lower power consumption to reduce operating costs. This involves the measurement between procurement costs and operating costs. The other major components of operating costs are rent and labor and a small number of consumables. If your mining farm is set up in a remote location, you must even factor in your travel expenses.

2. Reduce the depreciation of miners. 

Miners will be scrapped, and the scrapping of miners currently mainly depends on the growth of the hash rate of the entire network, but the market controls the growth of the hash rate. So you can only focus on protecting your miners. From the source, it is necessary to purchase miners with lower power consumption and better quality and configure better quality power cables and auxiliary equipment. From an operational point of view, you need to ensure the stability of the power supply, control the temperature of the mining farm not to be too high, and reduce the dust in the mining farm. Once the miner is protected, its lifespan will be longer, and the output will be more stable.

3. Avoid unexpected risks. 

Mining farms should pay special attention to fire prevention and flood prevention and install lightning protection equipment. Unfortunately, it happens from time to time that these public relations accidents lead to the loss of mining farms, so don’t take it lightly; you need to regard such incidents as a risk factor for your project investment.

Risk 3: Bitcoin's system affects returns

The operation of the Bitcoin system itself will also significantly affect the profit of the mining business. There are mainly the following two risks.

1. Risks caused by currency prices falling. 

The price of Bitcoin itself is highly volatile, so miners' profitability is directly affected by the fluctuation of the price of the currency. Some mining farm owners do not consider the price of the currency and sell the coins directly after digging them, never stockpiling coins; some mining farm owners will choose to sell on rallies, and if the price is too low, they will suffer book losses; and other mining farm owner raises the mining farm with a mining farm, and only sells bitcoins when operating costs are required, and other coins are stockpiled. However, no matter which method can avoid the impact of price fluctuations on income, no one can control the rise and fall of the currency price. To avoid selling the mining income when the currency price is too low, you need to establish a capital budget, such as planning electricity bills, not having money to pay the electricity bill, and being reluctant to sell coins.

2. Risks arising from rising Bitcoin hash rate. 

The mining output of the entire Bitcoin network is fixed, 1800BTC per day. The more hash rate is mined, the less the average hash rate is mined. The miners you buy will depreciate if the hash rate rises. If the hash rate rises sharply, your miners will even face a situation where the output cannot cover the operating expenses, which will directly lead to shutdown and shutdown.

From the historical data, the hash rate has risen unilaterally, and Bitcoin has rarely pulled back in the past 7 years, or the pullback can be ignored. The currency price has risen and fallen, but the hash rate has risen unilaterally. This also shows that Bitcoin mining is an attractive business. Therefore, please estimate a depreciation rate for the miner you purchased to cover the decrease in the miner's output caused by the increase in the hash rate.