Financial management, arbitrage, pledge loans, three ways to teach you to manage mining risks

With the development of blockchain technology and the popularity of digital currency represented by bitcoin, more and more users participate in mining digital currency. After more than ten years of development and evolution, mining industry has gradually standardized and specialized in all aspects, mainly in two aspects: on the one hand, mining has gradually developed from scattered and extensive to large-scale and refined direction; On the other hand, the financial instruments related to digital currency are gradually enriched.

The abundance of financial instruments facilitates industry participants to better avoid risks and lock in benefits. Mining is different from speculation. Investment in mining is a fixed asset with poor liquidity, such as mining machines and mines. In the long run, it keeps depreciating.

The essence of finance is to manage risk, and a miner who cannot manage risk is not a good miner! Today we are going to talk about how miners can use financial tools to manage the risks of mining.

01 deposit earns interest

As the name implies, deposit COINS to institutions such as exchanges to obtain stable returns. This business is easy to understand, similar to yu 'ebao, which is commonly used by us. The essence of interest generation of deposit money is that institutional investors borrow money from users at low cost, and use the money to make risk investment. Therefore, users can obtain certain annualized return, which is very low.

In the market, the product forms of deposit and interest payment are diversified, with obvious differences between platforms. There are regular, demand, regular cycle is also different, currency is mainly stable currency and mainstream currency, the corresponding annualized returns are not the same. For miners, bitcoin is the basic currency they use to earn interest.

The main risk of interest deposit comes from the platform, which has the risk of bankruptcy, running away and not being able to pay. When choosing a platform, try to choose a platform with large scale, high popularity and long operation time. Some platforms may have higher annualized interest rates, so miners should consider both risks and benefits, preferably not risk depositing money on obscure platforms because of small differences in annualized returns.

The group suitable for saving money and earning interest is the long-term hoarding party. Compared with putting money in the wallet, saving money on a reliable platform can not only gain the increase of the currency, but also gain the interest of the currency. The risk is platform failure or run away, as well as network hacker attack.

02 hedging

The market is an important factor that affects miners' earnings. If the miners do not know how to use financial instruments, they can only passively "follow the market". When the currency rises, the miners gain more, while when the currency falls, they can only be passively beaten. If you can use hedging, things will be different.If the currency is judged to be artificially high, miners can sell the minerals they dig for some time in the future, locking in profits ahead of time.

Here's an example: & NBSP; & have spent & have spent

In July 2019, the price of bitcoin rose to nearly 14,000 dollars. If you judge that the price of bitcoin is artificially high at that time, and you hedge against mining in the next four months (say, 8 bitcoins) at the high price (say, 13,000 dollars) The idea is to borrow eight bitcoins from a reputable exchange, sell them for $13,000, and gradually return the output of the COINS mined each day. As it turned out, the currency fell all the way down to as low as $6,500, and you had plenty of cash flow to lock in your gains at the high end, shortening the payback cycle.

Of course, hedging is also risky. The risk is that if you are wrong and the future price of the currency continues to rise sharply, you will run out of money, and because the currency price rises, the total net computing power increases, the difficulty increases, the output per unit of computing power decreases, miners need to produce more to make up for the currency hedging sold. Generally speaking, the risk of miners' hedging operation is controllable. Miners have to keep digging for minerals to hedge against the rising currency price.

Hedging is more suitable for miners in the standard of legal currency. Based on the judgment of the market, when the predicted currency price is the stage high, sell the currency output for a period of time in the future, lock in the earnings of legal currency, obtain the cash flow, the electricity cost of subsequent mining can be settled, the judgment is correct, it can also significantly shorten the cycle of mining return, and the risk of miners' insurance is controllable.

03 pledge loan

In some cases, the miners are in an awkward position. For example, currency prices continue to be low, cash flow problems, low prices and unwilling to sell currency, do not sell currency and no money to pay electricity bills. A mortgage loan would be a good way to resolve this awkward situation.

A pledge loan means that you pledge bitcoin to the platform, and the platform lends it to you at a certain pledge rate. You only have to pay a certain amount of interest on the loan, so that the miners can pay the electricity bill without selling COINS.

Examples:

Miner xiaoming is about to pay the 60,000 yuan electricity bill has not been paid, although he has some COINS, but the current low price, reluctant to sell the COINS at a low price. At this time, xiao Ming found that in a platform pledge bitcoin, can borrow USDT, USDT sold the borrowed money to pay the electricity bill. The initial lead rate of the platform is 60%, and the price of bitcoin is 50,000 yuan when it is mortgaged. When the lead rate reaches 80%, the platform will forcibly liquidate the position. So xiao Ming pledged two bitcoins to the platform and got a loan of 60,000 yuan. If the price of the currency rises in the afternoon, xiaoming takes the currency and eats the increase in the price of the currency. He only needs to pay the borrowing interest rate to the platform. This is a situation xiaoming looks forward to very much. If the currency price falls to the closing price (RMB 40,000 yuan), the liquidation will be triggered, and the platform will be forced to sell the COINS pledged by xiaoming to offset the loan. In order to prevent this from happening, xiaoming can recharge the platform with bitcoin and supplement the margin to prevent forced liquidation.

Pledged loans can also be used in other scenarios. For example, you predict the market opportunity to the bottom of the bear market, the secondary market has a lot of cheap mining machine, want to copy the bottom of the mining machine but no money, bear market and do not want to sell COINS, then you can also through the way of pledged loans to obtain cash flow, bottom mining machine, expand the scale of production.

The risk of a pledge loan is to anticipate in the wrong direction. If the value of the currency continues to fall after the loan is pledged, there is a risk of liquidation, which means the currency is forced to sell at a lower price. In the case of tight cash flow and market downturn, wrong judgment can be fatal, so when making pledge loans, pay attention to the margin of safety, leave a large margin for error, to avoid the tragedy of "dying before the dawn".

04 & have spent conclusion

With the development and maturity of mining industry, more and more financial products related to digital currency and mining emerge in the market to meet the needs of various users. The close combination of mining and finance is an inevitable trend in the development of the industry, and also a necessary skill for professional miners.

The essence of finance is to manage risks, and reasonable use of financial instruments can better manage risks. Everything has two sides. If you don't understand financial instruments well enough and make the wrong use of financial instruments, it is likely to bring greater risks. Guns are weapons and security in the hands of people who can use them, while in the hands of people who can't use them, they are risks and security risks. The same is true of financial instruments. & have spent & have spent

Compulsory course for professional miners: managing mining risks with financial instruments

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