So as most of you know I use NiceHash on my gaming rigs and mine to NiceHash pools on my mining rigs using SMOS. @seikin - did a small write up on this as we were seeing a bunch of people that thought they were mutually exclusive. NiceHash and SMOS that is.
Before I get into this write up I need to lay out some of my bias’ as these are very necessary to understand in our decision making process as they play a role in every one of our decisions. There will be some that I miss or do not realize I have but these are the known ones for me.
- I value my time very high. Time is a currency/commodity that you cannot get more of and our jobs whether employeed by someone else or self employed puts a dollar value on this time. Anything I can do to reduce my time spent doing something that I do not enjoy is put at the forefront to reduce that time spent.
- I am in the US and follow the tax laws to the best of my ability. Whether or not you take this route is something you personally need to account for but this is a pretty big bias in this community so it needs to be stated.
- I like to keep my portfolio between 75%-80% BTC because it is a known non-security and thus poses less risk of headaches and such down the road. This bias may change over time as regulations are hashed out or another Crypto takes its place
Those are the three major biases, and as stated previously I may have forgotten some or are unaware of some.
Now to the meat of the article here. Most new and some old miners are constantly chasing the “most profitable coin”. I think this is extremely foolish in most cases as this is very similar to chasing a major pump like a trader. There are two major differences I see in this analogy. A trader first has a historical graph that can give some indication where in the cycle that pump is. For the miner this information is not readily or widely available. Secondly the miner has to wait for his payout which may come much later than the pump thus voiding out any gains the miner may have seen. Mining is about the long haul earning overtime much like a DCA investor.
Everything mines to NiceHash. Sure some people are going to cringe when I state this but look at bias’. Nicehash hits all three of these important points for me. It reduces time spent doing book keeping (all mining in the US is a business whether registered or not with regards to taxes) it has a daily payout at the same time with in an hour or so each day. This puts it as part of my morning routine when I wake up I pull up cointracking.info and punch in my 1 payout for the day. Maybe 2min on a slow day if I didn’t have my coffee.
Number 2 and 3 is in relation to taxes and regulation. Since I keep 75%-80% of my portfolio in BTC this eliminate the time and taxable transactions that I would incur if I was to mine BTCP or some other coin because I am being paid out in my primary coin. If I was to do a weekly cash out of say ZenCash or BTCP to BTC then there is another transaction I need to keep track as there may be taxable gains/losses I need to keep track of.
Now lets look a couple of different scenarios that I have seen posted here in the Pub across many different threads.
Going to include this data from whattomine this morning for the examples below.
This is on 6 x 1080ti mining rig $0.10 electric sorted by 24hr profitability as this is what most people use.
The chaser (mining specific coins)- This person is constantly asking or watching whattomine for what the most profitable coin is. This strategy only works if you are cashing out immediately. The reason for this is that the profitability on NiceHash, whattomine, or any other resource will change over time whether that is hourly or daily it changes. So unless you are cashing out you are not seeing profits so chasing does you no good as you did not cash out during that profitable window.
Some other state they are cashing out their coins weekly or monthly. This is a better strategy for chasing as you are chasing a moving average instead of snapshots in time. This can also be flawed as in you do not know where that coins actual price will be when you do go to trade.
Repercussions of chasing that many people that I talk to do not take into account.
First it is very time consuming for a very small increase in profit if done correctly. If cashing out to FIAT daily your income taxes are done, but if you are like most here you are cashing the coins you mine for some other coin that you want. This triggers a taxable event as you are selling one asset for another. So now you have the fee of sending those coins, you have the tax event of selling the coins, then you have the fee of the exchange for your sale, and then you incur another sending fee when removing them off the exchange. Forgot to mention the original mining pool fee. Now you have just incured 5 different fee’s to change your Zclassic to say BTC and move that BTC to your hardware wallet. This is all to gain a $0.48 percieved gain. That $0.48 profit could easily get knocked down into the negative by the time those fee’s are added up.
The person chasing moving averages say 7day or 30day is going to minimize the coin transfer fees as they stay the same no matter how much coin is being transferred. They will incur higher exchange fee’s but these are a percentage so if everything stays flat this should be comparable. It also reduces the total number of transactions that need to be accounted for with regards to book keeping.
I forgot about one last set of transactions and that is if you cash out to FIAT to pay the electric bill or pay down your mining rigs. This would incur several other fee’s. The coin transfer fee and then the fee from what ever system you use to turn BTC/ETH into FIAT.
The last thing is risk and each person has to put a value on this themselves and that is you need to keep track of all the different wallets for all the different coins you are mining. If you are mining 1 or 2 this may not be a big deal but I see some people that are chasing 5-7 different coins along with the ones they are holding. This means you need to keep all of those wallets up to date and secure the private keys. This also adds time to the process and more to keep track of increasing the risk you will mess something up. I know many that do this with their trades also but just make sure you are keeping this in mind remember my bias number 1 is to reduce my time spent dealing with stuff I do not enjoy. I do not know very many people that enjoy keeping track of 8-10 wallets or what ever it may be.
My strategy is pretty simple. I mine using NiceHash. I never see the coins that the purchaser is mining so my only taxable transaction is the recieving of BTC. I state this because from what I can tell with miningpool.hub you are paid out in the coin you are mining and then it is automatically exchanged for the one you want thus I feel this is a taxable transaction.
Once a week on Friday’s my DCA day also. I transfer my balance from NiceHash to Coinbase this is a free transfer. From here I can cash out to FIAT to pay off my mining rigs or electric bill this fee will be the same as the chaser or move BTC to an exchange to do my DCA. This is all dependent on what week it is. For example Week 1 - stays in BTC Week 2 - stays in BTC Week 3 - Goes to Alts Week - 4 I withdraw electric and the rest stays in BTC. Rigs were paid off a long time ago. This is far fewer transactions and fee’s that I have to deal with.
Then there is also the person that just wants to mine to support or gather a specific coin and HODL. If you like ETC and your goal is to acquire more of it and occasionally trade out for another coin then your goal would greatly benefit by just mining ETC directly. As you more than likely from a research / idealistic perspective want to support the project and by mining you are supporting the project while also acquiring more of that coin. This goes for any of the networks though. I just wanted to include this type of miner but this miner doesn’t chase so its was in my eyes some what irrelevant.
I know I was a bit all over the place and there will be questions or clarification needed but thought this topic deserved its own thread instead of being spread among all the other mining threads.
Nekko - NiceHash strategy summary
- Single daily transaction for mining income
- Fewer wallets to keep track of (arguably more secure / conservative)
- Fewer fee’s involved in calculating profits
- Dang near a set and forget operation giving me more time to do other things
Chaser - Strategy Summry
- More than likely several transactions daily that need to be tracked
- Increase in fee’s across the board
- Requires constant fiddling
I am not here to advertise NiceHash in fact I wish there was another option that didn’t involve me being paid in one coin that is automatically exchanged into another one. Just wanted to throw some of my thoughts on why I feel chasing is the wrong move. In fact I have seen one last strategy that might be a better alternative if I didn’t value the simplicity of my strategy so highly. That is to take a few of the most liquid coins and mine the one with the largest network hash drop. This will normally show up as the least profitable coin out of your list. This strategy is an accumulation strategy as the net hash drops it means you will be rewarded with more coins for any given hash power. Then you just accumulate until it gets to your sell point thus setting your own profit with patience.
Please feel free to discuss and let me know if you see a better way or maybe this gave you some perspective on how to increase your effeciency and time spent mining.
Remember TIME is a currency and it is the only one that we cannot get more of. “Time is money my friend”-World of Warcraft goblin Auctioneer