Cryptocurrency mining quickly became one of the most lucrative investments you could make in the world of digital currencies but also beyond that. However, problems quickly emerged due to the cost of energy needed for such an investment. The tech required for mining also became too expensive and too complicated to maintain.
One of the ways investors tried to go around this is to use cloud mining instead of setting up a mining facility of their own. This created a new market and a way for smaller investors to get in on the game.
What is Cloud Mining?
Cloud mining refers to crypto mining that doesn’t require the user to have their own equipment. Instead, they use a cloud network of equipment and pay for their ability to use them. The investors then get their share of crypto coins that they can use or sell.
Many providers are offering this service and you can use this website to compare and contrast them. Make sure that you know what are your long-term obligations before deciding on a provider since this is an investment that takes a while to come to fruition.
Energy Costs
The main reason cloud mining is a better alternative to having your own facilities is the cost of energy needed for mining. It has increased in recent years and is now the main reason why setting up a mining facility isn’t obtainable for most investors. On top of that, the cost of energy has skyrocketed.
There’s also an environmental concern that comes out of producing and consuming such amounts of energy that has made it increasingly difficult to justify doing so. Cloud-based mining provides a less expensive and eco-friendlier alternative.
The Equipment
The equipment needed to mine cryptocurrency has also become more scarce and therefore costlier. It is now more difficult to manage and operate and maintaining it requires skills that not all investors possess or understand. It’s therefore a niche market that not everyone can enter.
Cloud mining allows the investors to bypass this expense and start investing in the market, without having the tech knowledge needed to mine themselves. However, this doesn’t by itself mean that cloud mining is profitable. In fact, the costs of running the equipment and maintaining it, bite into your profit and often take a big chunk.
Cryptocurrency Value
It’s also important to take into account how valuable cryptocurrencies are since their value on the market determines how profitable cloud mining actually is. The volatility of the crypto market makes it a dangerous investment since you can never know for how much you’ll be able to sell the coins you’ve mined.
There have been a few dips in the crypto market but it has also managed to rise after them and remain an interesting investment. Generally speaking, the market has changed because it became more mainstream and open to new investors.
How The Markets Have Changed?
Cryptocurrency markets have existed in current form since 2018 when they became more than a niche interest in the IT sector. When we take into account the changes that took place in the last 4 years – the market still looks profitable and a worthy investment. The value of one BTC was $8000 in 2018.
The value of BTC is much higher at this point and it’s somewhere around $40.000. This means that investing in cryptocurrency is still a worthy endeavor and you can make much more than those who did so 4 years ago. That difference makes up for the costs of cloud mining.
More Coins to Choose From
At first, there were only a few coins to choose from and only one or two that were actually profitable. This has changed in recent years, and now there are almost countless coins to choose from. However, this also makes making a choice rather difficult.
It’s sometimes best to stick to Bitcoin and Etherium since those are the most profitable coins and ones that are most accepted by the mainstream financial institutions. There are also smaller and less known coins that make a good investment since you’re getting in on the ground floor.
Tax Concerns
One of the main benefits of crypto cloud mining and investing in cryptocurrency, in general, is the fact that the tax intuitions don’t recognize crypto and therefore there are no taxes to pay. This is starting to change as crypto is becoming a more popular investment option.
As more governments and banks are accepting crypto, more of them are starting to tax the profits made from it as well. This is something to take into account when making your investment in cloud mining since it can affect your overall profits at least in the long run, once you sell the coins that you’ve mined.