How to react to the mining crash?

It’s not been a very good couple of weeks for those of us running mining operations. Frankly it’s likely to get worse before it gets better.

This raises a question of strategy. What do you do now? Online forums, subreddits, and other online blogs are of course all full of conflicting suggestions and strategies. There probably is no one right thing to do. It depends on your personal situation. That being said, at times like this, it’s probably important to weigh up all the options carefully and analyze the pros and cons. This of course is just a guide to my opinion- but evaluating and understanding opinions is a sensible thing to do at times like this.

Option 1: Give up, sell up.

This option may seem a bit of a knee-jerk reaction. However within a certain time frame (i’d say you’ve got about a week, maybe two) it’s actually not a terrible idea. The main reason being that the resale value of your cards does not actually fall as fast as profitability. The resale value market always lags behind.  Looking at the fantastically useful bidvoy price chart, at the time of writing most Nvidia cards have a value still 10% higher than when mining returns peaked around Christmas, and Nvidia and AMD are pushing RRPs up, a move that will take time to reverse. That means that if you’re quick, you can still get back your initial outlay and perhaps even make a profit, provided you didn’t pay some stupid inflated price for your cards.

I would argue that if you spent more on mining hardware than you can afford to lose, this may be a good idea. You’ll need to move very quickly. However if the market stays bleak and you end up looking at 2+ years ROI, it really is worth just selling up now. With new GPU generations looming, if you can’t make your money back inside 9 months, you may never make it back at all.

Sell up now if:

  • You overpaid for cards.
  • You cannot afford to lose the money you invested.
  • You paid for the cards on credit and didn’t already pay it off.
  • Profitability has dropped below the cost of electricity.

Option 2: Keep on Mining, but don’t upscale.

The price of bitcoin has always fluctuated over the years, and this could just be the dip between the waves. If that does happen, those of us who keep on mining in the dip will reap great rewards on the next rise. Continuing to mine based on a hopeful prediction of the future is a risk. If we assume the future is an unknown, and could go either way, then mining only makes sense if the future value of your equipment is not something that worries you. If you’ve already covered the hardware costs, or can afford to lose that investment and wish to take the risk, then you may as well keep going for as long as the returns outweigh the cost of electricity.

Keep on mining but don’t upscale if:

  • You bought your cards long enough ago that you’ve already made more back than they cost you, and you paid back any credit.
  • The ROI time is still within what you consider an acceptable period (I’d suggest 9 months or less, as new generations of cards are coming).
  • You’re confident that the markets will recover to new heights eventually.
  • You can comfortably afford to lose the value from your hardware.

Option 3: Damn the torpedoes, upscale the farm! 

This is where we separate the gamblers from the goldrushers. Make no mistake, if you’re mining you fall into one of these two categories, and if you’re buying cards today you are a gambler. As I mentioned in the earlier paragraph GPU prices are yet to fall in line with the drop in mining returns. So right now, most cards have an ROI of 275 days. With new cards coming, and a huge influx of used cards about to hit the market from miners selling up, GPU prices have to start declining rapidly at some point over the next few weeks. Building up your farm during a dip period makes sense, but only if you can get the cards at a price that does not guarantee a loss in value.  Buying the cards cheap that other miners are selling off, and adding those to your farm could yield huge rewards if values recover.

Upscale now if:

  • You find a supply of cards at or below the release-day RRP.
  • You are highly confident that coins are undervalued and will go back up.
  • You have access to free or very cheap power.

The bottom line method.

There is a pretty simple formula to help you figure out what to do.

Firstly, take a best guess at the daily loss of value of your hardware over the next year from today’s value. For example a 1080Ti card that today on ebay would be worth $800, but is likely to be worth $400 in a year is costing you $1.09 per day. There is some guesswork involved here. Historical ebay prices for previous generation cards will help. My research suggested about 30% value drop from RRP year on year is about right for most cards during periods where the crypto market isn’t dictating prices. Don’t forget to calculate in the cost of supporting hardware, and make sure you use today’s price not the price you paid.

Second, calculate the cost of daily power for that card.

Third, figure out how much you’re making per day. Don’t use Go to your pool or wallet and figure out the actual real amounts based on the last 24 hours income.

So then minus from your daily income the cost of electricity and the daily value loss on the card. You either have a profit figure or a loss figure. If it’s a profit figure, keep mining for as long as it’s a profit figure. If it’s a loss figure sell up, unless you want to gamble on future coin values.

So what about me?

Personally, my strategy will be a mixture of all three. I sold off a handful of older R9 generation cards this week, at a very health profit. Card values have yet to drop, so I don’t think i’ll ever see a better time to sell off R9 295X2 and R9 280X cards. My current generation cards, mostly RX480 and Rx580s will just keep on running. They’ve already paid for themselves, so anything they make over the cost of electricity is now pure profit. I bought most of them at the original RRP, so i’m confident they are still making money quicker than they are loosing value. I’ll also be watching the used market. If I see cards going again at prices ideally below the original RRPs then I will seriously consider building up my farm further.

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