Should I Reinvest In Hasflare With The Price Increase?

Hashflare Math: Should you lot Reinvest?

Annotation: At the fourth dimension of writing this article, Hashflare rates were 1.50$ for 10 GH/due south

I recently came beyond Hashflare, a platform for mining cryptocurrency and found that it was a great platform to invest in cloud mining. The returns look promising and when I worked out the math, I found that reinvesting can increase your returns multi-fold. In this article, I volition be comparing 'no reinvestment' option with the 'reinvestment' option. I will as well be doing some math to figure out some magic numbers that maximize your gains. In this article, I will but be talking almost Bitcoin mining using SHA-256. However, Hashflare also lets y'all mine other cryptocurrencies.

Allow's get started. Beneath is a screenshot of the Hashflare dashboard.

As you can come across, x Gigahash/second for 1 twelvemonth costs you 1.l$. The acquirement forecast that you see on Hashflare is calculated on your current investment. Each contract that you purchase is valid for one year. There are couple of assumptions made in the forecast which I will be addressing shortly. At offset, the returns looked great. Irrespective of the size of your investment, you are looking at about 1.4% returns every solar day (maintenance fee included). What's the catch?

You lot pay upfront and dissimilar an investment in stocks or in cryptocurrencies where you get back your initial investment upon selling, here yous are losing the full initial investment X and the only returns are the accumulated gains from mining each day.
If the price of Bitcoin goes downward, your earnings (in fiat) goes downwards
If the difficulty of mining increases, your hashrate has bottom value

Hence, the 1.4% assumption might not hold forever. However, if the cost of bitcoin goes up steadily, then you should be skilful. Remember that by investing in crypto mining, you are substantially investing in the cryptocurrency you are mining.

Hash rate vs Difficulty over last 9 months (Source: bitcoinwisdom.com)

One keen potential in this investment is the magic of compounding interest. By that, I mean re-investing your gains, thereby increasing your overall investment. With this in listen, I was curious to know the maximum proceeds you could get by compounding your uppercase. Allow us showtime await at what the returns are without whatsoever reinvestment. To clarify on 'reinvestment', HashFlare provides you an choice to reinvest your gains from mining each day and buy more than hashing ability.

1. Investing without reinvesting gains

Let 'P' exist the initial investment.

Let 'R' be the render every twenty-four hour period. (It'due south roughly 1.4% but let's make it generic)

For our calculations, nosotros are going to consider a one twelvemonth time frame (365 days).

Hence, with a gain rate of 'R' per day on the investment 'P', you will roughly exist making a 365 x R return.

Hence, Total Gain without reinvestment: 365RP – P

With R ~1.four% in HashFlare, Gain = five.11P – P = 4.11P

i.east, you are quadrupling your initial investment.

(Notation: You don't get back your initial investment, hence nosotros deduct 'P')

two. Investing with reinvesting gains

Here is where things go interesting and y'all will see how compounding doing it's magic.

Our goal was to maximize the gains in a one year fourth dimension frame. Hence, nosotros should clearly not be reinvesting throughout the year. This would only lead yous to a net gain of 0 at the finish of 365 days. (With probably a lot of hashing power). To get the most out of this, you reinvest up to a certain menstruation and and so stop the reinvestment so that you start cashing in your ~one.4% gains everyday from and so. But how long practice you reinvest?

Permit 'Thousand' be the number of days nosotros reinvest our gains. Hence, we reinvest our gains for 'K' days and go back to earning 1.4% and cashing out our gains for (365 – K) days.

Initial investment = P

Investment after G days of reinvestment = P (1+R)^G

Hence, it is as though you started with an investment of P(1+R)^K for a duration of (365 – One thousand) days.

Equally we saw before, you lot earn 'R' (1.four% in our instance) every mean solar day.

Hence, Full Gain =(365 – M)R* [P(1+R)^K ] – P

Upon plotting the equation, we observe that this graph attains it'south maximum at K= 293.

Plotting the Gain from reinvesting your gains upto k days

That's right: to get the maximum gain by the stop of 1 year, you need to reinvest all your gains until 24-hour interval 293 afterward which y'all stop reinvesting, sit dorsum and picket your gains abound. Nevertheless, we still haven't establish out how much bigger the gains are going to be, compared to the 'no reinvestment' selection. To get the exact number, we plug 293 back into gain equation and using R = 0.014 (i.4%), nosotros get

Gain = (365 – 1000)R* [P(1+R)^1000 ] – P = 72 * 0.014 * P * 1.014²⁹³ – P

Hence, Gain = 59.23P – P = 58.23P

That's roughly 60x returns :)

The nice thing nigh having the equation with u.s. is that now we can explore other fourth dimension durations too. For example, if you lot feel i year is besides long a term, you lot can only adjust the 365. I plotted the graphs for menstruation elapsing of 300, 200 and 100 days as well.

Graphs for 365 days, 300 days, 200 days and 100 days

For a 300 day flow, yous reinvest until the 228th twenty-four hours.

For a 200 day period, you lot reinvest until the 128th day.

However, smaller the period, smaller the touch on of compounding on your gains likewise.

Conclusion

While the math does prove that yous can potentially go a 60x return, do remember that there are always assumptions that pb to this number. It is true that you practice become 60x returns if you consistently get a 1.4% render every twenty-four hour period, yet, it is totally possible that this rate varies based on the price of bitcoin and mining difficulty. Remember that cryptocurrencies are volatile and things tin can go either mode. So invest but that corporeality you are willing to lose completely in the worst case.

Hashflare let's you purchase hashing power through credit card equally well which is bully. The setup procedure is very quick and within no fourth dimension, you are mining cryptocurrency. Plus, the minimum investment is 1.5$ for 10 GH/s. Hashflare also has the reinvest option that automatically reinvests your gains into buying more than hashing power. Fifty-fifty a 10$ investment has the potential to become 500$ by the end of a year. And then definitely seems similar it's worth a shot!

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Hope you enjoyed the article. Please practice share your thoughts and comments below :)