coin mania!

I've been journeying into the world of cryptocurrencies for the past month. I have to say, the most difficult aspect about getting into these things is the amount of research that must be done on how they work as well as the time you have to spend researching the market along with any new developments. Catching up with the news is absolutely critical, as coin values can fluctuate by over a hundredfold with a single news piece.

In this blog post, I won't talk about how these coins work. Likely the reader would already know - in the case that they don't, there are various well written resources on the underlying mechanics of these coins whose explanations I cannot hope to match. Wikipedia is actually a good start.

Instead, I'll focus on my time on my mining experience and opinions on some of the various currencies that are out there as well as non-mathematically backed predictions on some of them.

I mined Litecoin over the summer with my 6970 that I had purchased off of Craigslist for $150 or so. I remember taking the bus to school for summer classes and checking my mining status over the phone every couple of minutes. Indeed it was exciting. The rate I was collecting them was at roughly 1 every 2 days. Over the period of 2 months, I amassed around 30 coins, which I just sat on for the next couple of months. I retired from mining, as I wasn't noticing a lot of returns. I wasn't aware of the demand for Litecoins nor the services I could use them on.

A few weeks ago, the Litecoin price boosted. Instead of hovering around $4 to $5, it flew to $20, 30. I sold my coins to a cyptocurrency investor (whom I met in person at a Starbucks while discussing coins) 10 at a time as the price was going up. By the time I sold all of them, I had $400 CAD. As nice as that sounds, I was still bummed out that I could've potentially earned $800 by simply waiting an extra week then the prices boosted to $40 a coin. However, if there's anything I learned from this, it's that you must be prepared to accept losses. In any investment field where there's potential to make massive gains, there's also potential to lose just as much.

At this point, I thought about what I should be doing.

1) I want to make money
2) I want to make more money than I'll be earning from just working
3) Cryptocurrencies are still young
4) There is still a lot of potential for making money there

I had been so discouraged from mining due to the ever increasing mining difficulty (of Litecoin, specifically) that I simply stopped checking the news from summer until now. However, now that I am determined to make bucks, I have done my research. What exactly is going on in the crypto world? How can I take part in it, and most importantly, how can I get $$$ out of it along the way?

(above) One of my two mining rigs, holding a 280x. This computer is one I have borrowed from my friend for 8 months while he is in Japan.

Making Money

To put it simply, there are 2 ways to make money with cryptocurrencies.

1) Mining
2) Trading

Of course, you can work on both, but that would requite a significant time investment, and may not be realistic for a student studying full time or an employee. Both are very stressful in their own regard.

The mistake I see a lot of people making when mining (in my opinion) is that they chase after the top coins with their expensive mining gear. A 7970/280x costs $350 at retail stores in Canada including our ever-high tax. They sell out fast in Craigslist, but if you can find one, chances are they'll be no lower than $280. A miner's first goal should be to pay it off, but at current difficulties, they would earn $0.60 worth of Bitcoins per day per card. Is anyone willing to sit on their butts for 600 days hoping to pay off a video card?

Thanks to the massive boost in value, one can earn about $10-$13 of Litecoin per day per card. That definitely appears to be more appealing that 60 freakin' cents, but why stop there? Why are you so afraid of the smaller currencies that haven't received a whole not of mainstream media attention?

http://www.coinwarz.com/cryptocurrency

If one looks at current profitability charts, they'll notice all sorts of alternative currencies at the top of the list. Their positions fluctuate like crazy, but their profit per day lingers around $20 or even more per day. To reiterate, every number I mention here is based off of the assumption that one if using a 7970, obtaining a hashrate of 700kh/s.

Then should I grab any coin at the top of the list? This is where you must use your own judgement. Some of these coins hit the top of the list, then hit the bottom within the next few hours. An example of such a coin would be Mincoin, which at the time of this writing, is at the bottom third of the list. Then there are coins like Tagcoin, which jump from being number 1 to hitting the middle all the time.

My way of choosing a coin goes as follows:

1) What coin do you have easy exchange opportunities with?
This point is critical. If a coin is at the top of the profitability charts, but you have no way of pulling that out to CAD or USD (or fiat currency of your choice), there's no point mining it. Of course, if you are experienced and comfortable with exchanges, it would be possible to extract any coin into any currency of your choosing, but that would require additional time investments.

2) What coin has a lot of trading volume?
This point may or may not be important, depending on how you pull your currency out into the real world, but nevertheless it is still something to consider. I have seen Mincoin sitting at a standstill at Cryptsy with buyers and sellers camping out miles apart expecting the other side to make a move. This occurred for many many hours (or days, who knows), and trading volumes are tiny green spikes at the bottom of the chart. Coins without a lot of transactions can be seen as not being very popular. Nobody is pumping, and hell, nobody is even dumping. I just don't see a lot of growth potential in such coins. Even if such a coin hits the top of the profitability charts, it's not going to stay there for long. Mining is a long term endeavor. One must take into account possible price fluctuations over a period of a month, 2 months, and even a year (if such a thing can even be predicted).

3) Infrastructure developments.
This involves knowing who the developers behind the coin are and the kinds of projects they are working on. A lot of coins don't have active development teams behind them. Wallet clients are never updated, and there are minimal pushes for the coins to be released on exchanges. How will a holder of the coin be able to spend it? If the only way to access the coin is by trading through Bitcoins, then there isn't very much of a chance for the coin to become widely accepted in the future, even if it's value may rise on the short term.

So then, what is my cryptocurrency of choice?

Worldcoin.

There is a healthy amount of trade volume (on Cryptsy, I don't check other exchanges). It's profitability on Coinwarz has consistently been in the top third. While it never reached number 1, it never fell below the halfway point. At this point, my projected income per day fluctuates between $20 and $25. In addition, I feel safe about it's value due to the low fluctuation rate.
The investor connection I have is willing to buy Worldcoins to me at any time for cold cash. In addition, I can easily trade it on Cryptsy for BTC, which always has buyers at any price in the case that he is unavailable to make transactions.
Scharmbeck Financial Services are being developed around this coin, which will allow for straight trading with USD to WDC complete with integration from American bank organizations. This is actually huge news. Upon release late this year/early next year, I fully expect a rise in price per coin. Any gain, whether it's 20% or 2000% is a plus for me.

As this post is getting a little bit long, I will stop here and post more on this topic when I see fit.