Goodbye Cryptomining o7
I'm ending cryptomining operations. Btw o7 is a person saluting.
TL;DR: I had a great time cryptomining. Time to sunset it.
Hello Professionally Curious One!
Stocks are 👎
Crypto is also 👎
Real Estate is probably 👎 soon.
That being said, today is a goodbye to my cryptomining ops. Effective yesterday, I have ceased all mining and will be salvaging. Today’s piece is a o7 to that.
As always, you can find TL;DRs and graphics ranting explaining the concepts.
In Case You Missed It
Sections You Can Skim To:
What’s going on?
What does that mean for your Cryptomining?
How are you managing?
Was it worth it?
TL;DR: Stock down. Crypto down. All down.
Haven’t you heard? Crypto market is down.
Here are the stats (6/15/2022):
Bitcoin at $21k, down from $67k Nov 2021
ETH also down, with a current price of $1,100, down from $4,800 in Nov 2021.
People’s Portfolios have been annihilated, both in stock and in crypto. It’s predicated that real estate is next, but we shall see.
TL;DR: It is no longer sensible for me to continue mining.
Strictly speaking only for ETH based mining ventures, here are the facts I had to face when I started cryptomining:
Back in December 2021:
ETH 1.0 used a PoW Model, meaning cryptomining is necessary.
ETH 2.0, a long touted development which brings in a PoS Model making hardware mining not necessary, was expected to deploy early 2022.
ETH 2.0 upgrade is expected to be delayed
Knowing this, I pulled the trigger to expand more cryptomining.
February 2022
ETH 2.0 was delayed, and expected to come later in 2022, which gave me at least 6-7 months of operating time.
Yay! I even came up with a plan to switch to ERGO/RVN, and/or add my hardware to a validator node and get rewarded that way.
Until…
ETH Price Volatility
January 2022 - ETH was at $2.6k - that’s okay for me.
March 2022 - ETH went to $3.3k -Yay.
May 2022 - Thanks to Luna, ETH Dropped to $2.1k - I’m reeling, but still manageable and recoverable given past history.
June 2022 - ETH hits $1.2k, dropping from $2.2k over a weekend,
Ouch.
In face of such market calamity, I have to reassess - does it make sense to keep the lights on, or kill it?
My floor ETH price was $1750, with an absolute floor of $1350. Anything lower, and now I'm working to lose money at that point.
Lets explore that, shall we?
TL;DR: Grateful that cryptomining changed my relationship with crypto for the better, but bummed that I have to discontinue it.
I’ve learned a lot from Cryptomining. In fact, writing about cryptomining is what started this newsletter. But alas, I am now at the decision point of “do I call it quits, salvage the operations, and use the recovered cash to buy ETH directly?”
For me to understand whether I should consider salvage, I had to forecast what 2022 is most likely going to look like now that ETH and the rest of Crypto is dropping.
So, here’s the the Financial Model Backing my thoughts. If you’re a Big 4 Auditor, you can skip this section and go straight to it here. For everyone else, I’ll explain what’s going on:
What you are seeing here is a visual roller-coaster of revenue, cost, and profit, with the main pull of revenue based on ETH’s fluctuating month to month.
Revenue goes up, and down, as ETH value goes up and down.
You can see in May that it still makes sense to keep mining, even with an operating loss.
You can see in June that my costs exceed my revenue.
You can see beyond that, that it’s insane, and this assumes an optimistic recovery scenario.
With time running out to continue mining (cause of ETH 2.0), this scenario begs the question: Exit, salvage, and buy ETH? Maybe on buying ETH, but exiting looks like my best move.
This is the 6 month performance, assuming I convert ETH into a USD upon payout.
The decrease in ETH value to below $2k starts to impact my profitability by May. By June, my cost exceed revenues.
Lets use the downward spiral to forecast a future.
ETH continues to drop 40% in value each month (pretty aggro I know, but is it?) with a 20% recovery each month thereafter (LOL, not likely).
Under this model, unless ETH gets to well above $1300, I will be burning money trying to mine ETH. And that’s with a 4 month recovery period, which I highly doubt will happen.
In fact, if ETH is $1000, its cheaper for me to buy ETH directly using the $160 to get 16% of an ETH, than it is for me to spend $160 in electricity to get only 12% of ETH.
What would this look like cumulatively? Shouldn’t I be hoarding it?
This graphs shows you the diminishing profits (in green) - static cost, but dropping revenue, means a diminished operating margin.
Based on fluctuating ETH price, this is what my cumulative performance is, assuming I convert ETH into a USD upon payout. You can see see how the drop in ETH value destroys my profit margin.
By September, it is expected that I would have mined 1 entire ETH coin, which would be valued at $521 by then. It has potential to recover and come back to $4000, but if 2018 Crypto crash is an indicator, that 1 ETH won’t make it there for 4 years.
You can check out my excel workbook on this. While it doesn’t factor hardware cost or any other indirect incentives, it is a solid enough basis for me to make decisions from.
TL;DR: Yes, yes it was.
Getting into cryptomining changed my relationship to both crypto, and to writing. Without cryptomining, I wouldn’t be writing, nor would I be practicing in the field. Without cryptomining, crypto would be treated in my mind as simply a surface level security (stock).
The crypto industry has given me a renewed out look, and serves as a sweet spot between Finance, Technology, and absolute chaos. And I love it. I dare say, I needed it.
Bringing us back to this newsletter - this newsletter was started as an explainer of the things I was encountering.
Cryptomining focus writing
Cryptomining 100 - What is it all about ←- IT STARTED THIS ALL
As I begin to sunset the operation, I will remember fondly to the experience this mining rig gave me.
It was a great heater in the winter, especially when the heater was broken for a month.
It paid all my utilities, including the cost to operate itself - until recently.
I know too much about crypto. Whether for good, or for bad, it gave me curiosity to be interested.
p.s. anyone want to buy some Graphics Cards? :)
p.s.s. I’m still writing. Don’t you worry that’s not going anywhere.
$434 ETH in August? We really ARE going to Goblintown!