Blastingcap: What if coin prices remain stable and dont rise?
Who would win, the miner or investor.
Simple scenario, the miner don't NEED coin prices to rise to profit. The investor does. Therefore, the investor relies on a riskier prospect.
You keep saying buying earlier in the year, no shat, its hindsight, anyone can be filthy rich with hindsight! lol. For buyers now, you think BTC and LTC is gonna be 10x the current rate next year?
By saying that a miner doesn't "NEED" coin prices to rise to profit, the implication is that you will mine-and-sell-as-you-go. For instance, a risk-averse miner can convert some coins each month into US dollars to pay for power bills, keeping the few coins that remain. (An especially risk-averse miner would sell EVERY coin ASAP as they mined it.) In a totally flat market where coins stay at a certain price FOREVER, this isn't a bad strategy. It's like buying treasury bills in a year when stock prices are flat. The big problem is that you keep a LOT fewer mined coins this way, because you converted so many of them to pay off your power bills, so that when coins do go up, you don't gain nearly as much as you would have if you had mined-and-held. Example: 2013. Depending on your exact power costs, you would have needed over $25k worth of mining equipment to make the same profit as the guy who simply bought $700 worth of LTC and sat on it. Why? Because for most of 2013, LTC was almost worthless, ranging from a few cents to a couple of bucks. So to pay your monthly power bill you would have to sell a lot of LTC. By the time the November 2013 rolled around and drove LTC prices up, you would have had a LOT less LTC than someone who mined-and-held, assuming you don't get free power. (The especially risk-averse miner who sold every coin ASAP would not participate in the price rise of LTC at all, making for even lower returns.)
(What I said is true not only of 2013 but also every year since bitcoin came out. In 2010 you could buy BTC for a fraction of a penny, for instance, and by year's end it was much higher. 2011, same thing. 2012, same thing. So it's not just hindsight, it's history. If you think 2014 is the year of flat/down bitcoin prices, go ahead and bet on that, but that's a risky bet.)
So which is it, are you going to mine and hold or mine and sell as you go? Mine-and-hold has historically been a bad strategy--if you're bullish on crypto long term, you are 10-20 times better off buying-and-holding rather than mining-and-holding. Mine-and-sell-as-you-go has historically been even worse of a strategy because crypto has appreciated so much.
Basically mine-and-hold is like buying very expensive insurance in case coins go down in value. The insurance is so expensive that over long enough periods of time it costs more than its worth.
Mine-and-sell-as-you-go is like buying a Treasury Bill--low risk, but very low returns. You still deal with scammy pool operators/hacks, etc., and noise/heat issues and wearing out equipment faster.
And buying-and-holding is like buying shares of a stock. The worst than can happen is you lose whatever you put in. But you also get to participate fully if the stock price goes up.
A summary of strategies goes something like this:
1. If you are bullish on crypto and don't have free/near-free power, buy-and-hold is by far the most profitable strategy (10-20x better than mine-and-hold, and even better than that vs. mine-and-sell-as-you-go).
2. If you are bullish on crypto and have free/near-free power or just want to use your existing gaming card to mine part-time, then mine-and-hold is not quite so bad. If you get truly free power (I don't mean mooching off mom and dad's power bill), then it's probably better to mine-and-hold than buy-and-hold. You still get heat/noise issues and deal with scammers, bad pools, etc. and wear equipment out faster, but the biggest expense in the long run is power bills.
3. If you're bullish on crypto and don't get free power but basically get a video card for "free" seeing as how you were going to buy it anyway for gaming, then mine-and-hold is briefly more efficient than buy-and-hold. But in the long term, electricity cost is your dominant cost, not video card cost, so buy-and-hold should still be more profitable and you don't have to deal with scampools/bad pools/hacked pools, power bills, heat, noise, and wear-and-tear on equipment including replacing burned-out or depreciated equipment.
4. If you think crypto will go flat or down, then you should mine-and-sell-as-you-go to pay power bills, or even sell everything as you mine it and pocket the difference. You still deal with noise/heat and wear out your hardware faster, though, in addition to scammy pool operators/hacks, etc. This strategy is very low profit, but also low risk.
5. If you are REALLY down on crypto, there are places where you can actually short-sell bitcoin so if BTC value goes down, you profit. This is very risky because if BTC prices go up, you could lose a LOT of money. I do NOT recommend doing this except as a partial hedge against some other very long position you already have (e.g., you already own 1000 BTC), and only if you know what you're doing.
You know what surprises me is how myopic people can be sometimes about finance; it's like they can see only one solution to a problem, when there are MANY solutions. Here's a real life example: some people hate debt. Absolutely hate debt. So they pay off their student loans ASAP even if they got a great rate on it. This is inefficient if they could get higher returns elsewhere. For instance, if your loans are 1% but you can get a 3% FDIC-insured CD, you are better off paying the minimum on your student loans and putting the money into the CD instead. You get taxed on the CD, true, but you also get to write off student loan interest on your taxes. In the end, you are better off than the guy who paid off the low-interest student loans ASAP. (The non-risk-averse can even invest in something riskier than a CD.)