The total cryptocurrency market cap has decreased by a whopping -72% since its peak just a year ago, while the crypto greed-fear index is at 20, indicating extreme fear. The bear market may be upon us, and many traders are expecting a bleak outlook for the foreseeable future. During this time of uncertainty and fear, many may be tempted to either minimize their loses by selling their cryptocurrency assets, or may be enticed to carry further risk by attempting to “buy the dip”. Either way, traders are left with carrying loss or risk. What if there was a third option that reduces risk and disperses loss, while allowing people to stay in the crypto market to reap potential future benefits?
The answer is in cryptocurrency mining. In this guide, we cover the economic incentive of mining versus trading in a bear market and further explore the additional benefits that mining with M2 Pro can bring to both existing and new miners.
Market Independence
Whether bull or bear, the one constant in the cryptocurrency space is the robustness of the network. For example, we can compare the change in the price of Bitcoin (BTC) and the number of transactions on the Bitcoin blockchain. While the price of BTC today has dropped by nearly -73% compared to one year ago, the number of transactions on Bitcoin blockchain has dropped by a little under -10% within the same period.
The huge difference between the price volatility of a cryptocurrency asset and the level of its blockchain usage serve as an irrefutable proof that those who participate in maintaining the network are relatively sheltered from the market volatility, as the change in an asset price does not affect the change in network traffic. As miners receive fixed block mining compensation, they have constant access to receiving cryptocurrency assets as long as the blockchain network is live without having to take the market fluctuations into account.
Cost of Acquisition
An economic argument in comparing purchasing cryptocurrency assets and mining cryptocurrency can only be made by looking at the cost of acquisition per asset. Calculating the cost of acquisition for those who purchase cryptocurrency directly from the secondary market such as exchanges is very simple. For example, the cost of acquisition for 1 BTC would be the market price of 1 BTC (which is currently hovering around $16,500). Note that in such a case, the cost of acquisition is 100% dictated by the market price as the cost is exactly the same as the market price.
Calculating the cost of acquisition for miners is slightly more complicated. In order to accurately calculate it, one must look at the price of the miner, lifetime of the miner to understand the rate of depreciation, and the operational cost. Of course, this varies on what miner is being used and how high is the energy cost in the miner’s local area.
With the M2 Pro, the cost of acquisition for crypto assets is significantly low. With the hardware manufactured in accordance with the highest German engineering standards, the expected lifetime of the M2 Pro miner is more than a decade. As the M2 Pro is also operating on extremely low power consumption levels, the operational cost is virtually 0. Combining these factors, anyone can see that using the M2 Pro to mine cryptocurrency significantly undercuts the cost of acquisition in comparison to purchasing the cryptocurrency directly on the market.
Not only is this a smart short-term solution to beat the bear market, but it is also a great long-term plan to continue to be better positioned in comparison to the market.
Unaffected by the Fall of CeFi
The collapse of CeFi (centralized finance) giants such as Celsius and FTX have planted uncertainty in the eyes of the traders. If they cannot rely on an exchange to safely keep their assets to trade, and they cannot count on services to generate further yield on their assets, there aren't many places traders can turn to.
For miners, they do not have to rely on an exchange. With their constant, steady access to mining cryptocurrency, they do not need to rely on a middleman to obtain these assets. For M2 Pro miners, they enjoy further benefits as the mined cryptocurrency assets are deposited directly into their DataDash mobile app. A fully-backed custodial platform, DataDash allows miners to further stake or bond their mined assets to enjoy increased opportunities.
Real-Time, Short Cycles
Mining is real-time based and short cyclical. What that means is that when a person participates in mining, the resulting cryptocurrency balance is reflected in real-time value according to the block time. For BTC, the block time is around 10 minutes. For ETH, the block time is around 12 seconds. This means that for BTC miners, they are receiving a little bit of BTC every 10 minutes. For ETH miners, they are receiving a little bit of ETH every 12 seconds.
This concept is particularly beneficial for M2 Pro miners. As the mined amount is determined based on the dollar value of the miner’s contribution to the network, miners receive relatively consistent dollar value in cryptocurrency. This means that the change in the price of the cryptocurrency is reflected in real-time, and is quickly adjusted as the cycles are short (10 minutes for BTC and 12 seconds for ETH blockchain). A replication of this can be achieved if a trader would participate in DCA (dollar cost average) method of trading in which a fixed value of cryptocurrency asset is purchased on premeditated frequency. However, to perfectly resemble M2 Pro, this would mean that the trader would make a purchase as often as every 12 seconds. Of course, this would result in significant accumulation of trading fees. Hence, the power of M2 Pro cannot be fully matched by any other approach.
Diversification
This benefit only applies to M2 Pro - the world’s first and only Web3 IoT multi-token miner. When mining with the M2 Pro, miners enjoy simultaneous access to multiple assets such as Bitcoin (BTC), MXC, and DHX. Furthermore, 2023 will witness the launch of DOT mining on the M2 Pro, introducing further diversification possibilities for those mining with M2 Pro. This positions the M2 Pro as the superior miner compared to both PoW ASIC miners and even PoS miners, which require miners to hold and stake a significant amount of one token. Thus forcing miners to bear significant risk as they put all their eggs to one basket.
Conclusion
As the bear market sets in, traders’ loss of hope and the possible contagion that comes from such scenarios can bring significant loss to even some of the most seasoned traders. One of the best approaches is to distance oneself from the market by participating in mining, and optimizing the mining set up to lower the cost of acquisition of assets while maintaining full control. When diversification is added, the approach becomes even more bear-market proof. All of this and more are achievable with the M2 Pro.
With plug-and-play installation that requires less than 5 minutes to set up even for beginners, and the DataDash app that connects to your M2 Pro 24/7, M2 Pro miners are in the best position to continue to thrive during the bear market, and fully flourish when the crypto summer is upon all of us once again.