How the EUR/USD Affects Miners; Which ETF Will Suffer More?

A large part of yesterday’s free version of the analysis focused on the Eurozone’s economic outlook and how it affects the precious metals. We’ll eventually get to Europe again later in today’s analysis, but let’s first examine gold related ETFs, namely the GDX and GDXJ. How low can they go? That will depend on the general moves in the stock market.

The GDX ETF didn’t move to the strongest combination of nearby resistance levels, but it did flash a few bearish signs, anyway.

The resistance that it reached was notable as it moved to its November 2020 low. Consequently, “it makes sense” for the mining stocks to have topped here.

In yesterday’s (Mar. 11) regular analysis , I wrote the following about the above chart:

Miners generally paused yesterday (Mar. 10), which is quite natural after a sharp daily rally. They closed the day slightly higher, but the RSI is not yet at 50 and the volume that accompanied yesterday’s small move up was nothing to call home about. It was just a pause, and the preceding short-term move is now likely to continue.

Yesterday’s volume was nothing to call home about, but the RSI moved to 49.94 – close enough to 50 to be viewed as a sell signal.

Moreover, please note that while spike-high volume would be a reversal indication, it’s not required for a top to form. The recent small tops formed without high volume.

Consequently, it could be the case that the top in the mining stocks is in, and that by selling GDX at $32.96 yesterday (March 11) we exited the long positions (and entered short ones) practically right at the top – a week after buying in the $30.80 – $31 area .

Before anyone asks, yes, miners were strong relative to gold yesterday, but it was practically the only thing that was positive about yesterday’s session and the USDX’s performance along with gold’s weakness seem more important.

Please keep in mind that every now and then miners very briefly (!) fake their strength (or weakness) relative to gold right before the reversal. The 2016 rally started with a fake breakdown and fake underperformance of gold. So, while the continuous underperformance of miners (compared to gold) is very often bearish, a single day of strength or weakness might be a trap.

How low can the GDX ETF go? Our final downside target area ($15 – $24.5) is quite broad, because a lot depends on what the general stock market will do. I’ll be looking at gold for the key signs along with a few other factors (including the Gold Miners Bullish Percent Index ) and determined the buying opportunity based on them – not necessarily based on the price of the GDX or GDXJ by itself.

Yes, this target is quite low, and thus might appear unrealistic, but let’s consider the following:

  • Miners are slightly above their early-2020 high – just like gold.
  • Gold is likely to decline to its 2020 lows or so
  • General stock market might have just topped.

Considering all three above factors it’s clear that a move to even the 2020 lows is not out of the question.

And this means that junior miners might decline more than senior miners. A move from the current levels to the 2020 would imply a decline by about 50% in case of the GDX, and by about 60% in case of the GDXJ.

Speaking of the GDXJ, let’s take a look at its chart.

The most interesting thing on the above chart is a big red warning flag for beginner investors . The flag reads: “verify the efficiency of a given tool on a given market, before applying it”.

The bottom part of the above chart features the MACD indicator . Normally, when the indicator line (black) crosses its signal line (red), we have a signal. If it’s moves above the signal line, it’s a buy sign, and if it moves below it, it’s a sell sign.

But.

If one actually looks at what happened after the previous “buy signals” in the recent months, they will see that in 5 out of 6 cases, these “buy signals” practically marked the exact tops, thus being very effective sell signals! In the remaining case, it was a good indication that the easy part of the corrective upswing was over.

I’m not only describing the above due to its educational value, but because we actually saw a “buy signal” from the MACD, which was quite likely really a sell signal. Today’s pre-market decline in gold (and the move lower in the GDXJ in the London trading) seems to confirm it.

So, how low can the GDXJ go? As it is the case with the GDX, a lot depends on the general stock market and our final target area is quite broad (between $18 and $26), and the key indications will come from other markets and the way they behave relative to each other.

There’s an interim (and strong) support provided by the $42.5 level, which might trigger a corrective upswing, but since we have just seen one, it’s far from being certain that we’ll see another corrective upswing so soon. This could be another opportunity to profit on a long position in the gold miners , but we can’t say that we’ll definitely go long at that time – at least not based on the information that we have available right now. Naturally, we’ll keep monitoring the situation and send out regular (and intraday) Alerts with details as more information becomes available.

Having said that, let’s take a look at the market from the more fundamental angle.

Fundamental Frailty (Part 2)

As you’ve likely noticed, I spend a lot of time analyzing the EUR/USD – that’s because the currency pair accounts for nearly 58% of the movement in the USD Index. And due to Europe’s economic underperformance and the relative outprinting by the European Central Bank (ECB) , a sharp rerating of the EUR/USD could be the engine that drives the USD Index back above 94.5

For some time, I’ve warned that the ECB’s bond-buying program was likely to accelerate. On Jan. 22 , I wrote:

The ECB decreased its bond purchases toward the end of December (2020), Then, once January hit (2021), it was back to business as usual. As a result, the ECB’s attempt to scale back its asset purchases was (and will be) short-lived. And as the economic conditions worsen, the money printer will be working overtime for the foreseeable future.

And with Eurozone fundamentals continuing to deteriorate, I added on Mar. 9:

The ECB’s splurge could begin as early as this week. With Eurozone bond yields already on the rise and the debt-ridden economy unlikely to tolerate a sustained ascension, the ECB’s weekly PEPP purchases (pandemic emergency purchase program) are likely to accelerate.

And what happened?

Well, on Mar. 11, the ECB stuck another fundamental dagger into the heart of the euro. Lamenting the rise in European bond yields, ECB President Christine Lagarde told reporters that “market interest rates have increased since the start of the year, which poses a risk …. Sizeable and persistent increases in these market interest rates, when left unchecked, could translate into a premature tightening of financing conditions.”

And why is she so worried?

Well, if you analyze the chart below, you can see that Goldman Sachs’ Financial Conditions Index (FCI) has moved moderately higher. For context, the FCI is derived by calculating the weighted-average impact of the ECB’s overnight lending rate, sovereign bond yields, corporate bond spreads, equity prices and cross-border trade conditions.

Please see below:

To explain, when the white line above is falling, it creates an environment where money is cheap, abundant and easy for corporations to obtain. Conversely, when the white line is rising, it creates the opposite environment. As you can see, excess liquidity has begun to evaporate.

So, what was the ECB’s response?

Source: ECB

As expected, the ECB’s weekly PEPP purchases will now “be conducted at a significantly higher pace.”

Far from news for those that have been paying attention, Europe is extremely allergic to higher bond yields. Just yesterday, I wrote that rising Eurozone interest rates remain extremely unlikely. And because a picture is worth a thousand words, notice the reaction from the German 10-Year Government Bond yield?

Source: Holger Zschaepitz

Moving in lockstep, the Italian 10-Year Government Bond yield also followed suit.

Source: Jeroen Blokland

In stark contrast, the U.S. 10-Year Treasury yield actually rallied on Mar. 11 . And demonstrating material outperformance, since bottoming on Aug. 6, the benchmark has raced past the German 10-Year Government Bond yield.

Please see below:

What’s more, European lawmakers seem to believe that an economic resurgence is forthcoming. Projecting 3.8% GDP growth in 2021 – headlined by 5.5% growth in France (Europe’s second-largest economy behind Germany) – European officials believe that fiscal support will unleash pent-up demand once the coronavirus pandemic subsides.

For context, I wrote on Feb. 11:

Wishing, wanting and hoping, European lawmakers anticipate that more than €300 billion in excess household savings will lead to an economic renaissance in 2021. However, when you break it down, the balance only amounts to 4% of annual household income. Thus, the short-term bounce (if any) won’t last very long.

And to that point, if you analyze the chart below, you can see that excess household savings in the Eurozone are now less than $84 billion.

To explain, the brown bars above represent excess household savings in the Eurozone. And from the second-quarter to the third quarter of 2020, European households have spent nearly 60% of their Q2 excess savings . Thus, at this pace, there won’t be any “excess savings” left.

Also signaling economic weakness, the slump in Eurozone retail sales (released on Mar. 4) shows that consumers are spending their money on necessities and not discretionary items that boost GDP.

Please see below:

Falling off a cliff, Eurozone retail sales declined by 5.1% in January. Even more revealing, France (– 9.9%) – which is projected to be a beacon of Eurozone growth in 2021 – underperformed the bloc average, with December’s momentum quickly fading in January.

Source: Eurostat

On the flip side, U.S. retail sales rose by 5.3% in January (5.1% excluding food).

Please see below:

And while fundamentals continue to chip away at the EUR/USD, activity in the futures and options markets are signaling a shift in sentiment. Remember, narratives overpower fundamentals in the short-term, thus, changing opinions is like trying to fill a glass from a dripping faucet. However, the pressure may be rising.

Case in point: the latest Commitments of Traders (COT) report shows that non-commercial futures traders (speculators) have increased the EUR/USD short positions by more than 6,500 contracts, while reducing their EUR/USD long positions by nearly 5,900 contracts (the blue box below).

Source: COT

Even more interesting, EUR/USD futures’ volume exploded on Mar. 10. If you analyze the right side of the chart below, you can see that an abnormal number of contracts exchanged hands.

Chart, bar chartDescription automatically generated

Source: CME Group

And while the volume data doesn’t tell us whether these are bullish or bearish bets on the EUR/USD, the CME Group’s options data signals that it’s the latter. If you analyze the graphic below, you can see that there is little open interest for bullish bets of 1.1950 or above.

Source: CME Group

In stark contrast, there is plenty of open interest for bearish bets of 1.1850 or belowwith 1.1750 the most popular (642 contracts still outstanding).

Source: CME Group

In conclusion, the EUR/USD continues to swim against the fundamental current. And while daydreams of a Eurozone economic boom propel European equity bourses to new highs, the misguided optimism has also lifted the euro. However, with the USD Index already verifying its medium-term breakout and a boost from the EUR/USD likely to push it beyond the 94.5 level, the PMs medium-term outlook remains profoundly bearish. And while their correlations with the S&P 500 remains supportive in the short-term (which I predicted would be the case this week), a severe correction of U.S. equities increases the likelihood of a significant slide over the next few months.

Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

For a look at all of today’s economic events, check out our economic calendar.

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Deceptive Rally? Measuring Silver’s Relative Strength

It’s tempting to ride the silver rollercoaster. After-all, gold’s volatile little brother is just that – volatile. Its wilder price swings make some of the investment public believe they can profit from it more quickly. However, it’s important to remember and take note of the fact that silver (or gold and miners for that matter) should not be judged on its own when making a purchasing decision. It’s a bit more complicated and other factors come into play, such as relative strength.

One must track the precious metals’ performance against equities or the USD Index. Asking questions is prudent; how is silver doing compared to gold, and why? The USDX is moving lower but the PMs are not rallying? Hmmm, is there enough strength for them to break out? Silver or gold don’t exist in a vacuum. Instead, their performance has to be judged relative to other factors.

Chart, histogramDescription automatically generated

The white metal closed yesterday’s (Dec. 15) session right at its declining resistance line. It moved sharply higher today, soaring above both: its declining resistance line and its December high.

This is exactly what silver tends to do right before significant declines – it’s exceptionally strong – more than gold and mining stocks. Why would this be the case? Because silver is a relatively thin market, where many institutional investors can’t go as there’s not enough silver for them. The “big players” generally go for gold, and silver is favored by the investment public. The silver manipulation theories are making the demand among the investment public even stronger, and the investment public (as a general group, not any individual person) tends to enter the market close to the tops.

The above-mentioned factors – along with the relatively small size of the silver market – make the white metal perform very well (too well) near the local tops. Of course, this doesn’t work each and every time, just like any other trading technique, and one should also look for additional confirmations before making a trade (like weak miners , which tend to react differently than silver).

It does imply, however, that it’s best not to take silver’s strength at its face value, and definitely not to view it as bullish unless it’s confirmed by the rest of the precious metals sector. Today’s breakout in silver and lack thereof in gold is not a bullish development, but a bearish one.

Moving on to the performance of the mining stocks, let’s take a look at the chart below.

ChartDescription automatically generated

The GDX ETF – proxy for precious metals mining stocks – moved higher yesterday, more than nullifying the previous day’s decline. But, overall, was it really strong? Absolutely not. In today’s trading on the London Stock Exchange, the GDX is up only a bit above Tuesday’s intraday highs, and it corrected only a bit more than a half of the December decline.

Simply put:

  • Gold is relatively weak compared to what’s happening in the USD Index
  • Silver is relatively strong to gold and breaking above the previous resistance levels without confirmations from neither gold, nor mining stocks
  • Gold and silver mining stocks are weak compared to what’s happening in gold

The above is a perfectly bearish combination on the relative strength front. Combining this with USDX’s proximity to its target area makes the overall implications for the precious metals market very bearish.

Thank you for reading our free analysis today. Please note that the following is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the downside target for gold that could be reached in the next few weeks.

If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

For a look at all of today’s economic events, check out our economic calendar.

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

How to Earn Steady Passive Income from Cloud Mining

The rise of cryptocurrency – as traditional currencies and as platforms for other much more complex financial products – has been quite stunning and with it comes the opportunity for investment. However, the volatile nature of cryptocurrencies means that investing and making a profit in cryptocurrency is subject to crypto volatility.

1 Bitcoin was worth about $7000 in Autumn 2017 and rose to an all-time high mark of $20k, representing a 300% ROI on investment for investors who bought at $7k. However, crypto volatility set in at the beginning of 2018, seeing BTC crash to a lowly $6000, representing a portfolio-wrecking deal for investors who bought at $20k with the expectancy of a sizeable profit.

Cryptocurrency investment is not all ‘high risk, high reward’ though, there is a way to earn steady, passive income. Interesting, yes?

Cloud mining as an investment option is a much more assured way to invest in cryptocurrency and earn steady passive income.

First Things First, What’s Cloud Mining?

Essentially, mining refers to the computational process of creating more of the finite number of Bitcoins or other altcoins like Ethereum and Litecoin. Miners get rewarded with these coins when they successfully show proof of completing the complex calculations in Blockchain algorithms ahead of others.

However, as the value of cryptos began to increase, the process of creating them also became more difficult. Sadly, though, the energy and computing power requirements of operating a sustainable mining operation was soon to put it beyond individual effort, especially for those who were into it as one of their multiple streams of income drives.

Why Cloud Mining Is the Way to Go for Earning Passive income

The key reasons therefore are:

  • Ease of investment: Earning passive income shouldn’t involve the hassles of buying and managing expensive equipment to run a data center for a mining project. With cloud mining, all you have to do is leverage on the services of cloud mining sites, and you’re on your way to earning appreciable returns on your investment
  • Open to both crypto enthusiasts and non-tech savvy people: Cloud mining means you no longer have to worry with dealing with technical equipment or environments. What’s more, even the non-tech savvy individual who knows nothing about Blockchain algorithms but is interested in the money-making dimension can earn here by simply subscribing to proxy mining services offered by several cryptocurrency cloud mining sites
  • Flexible investment options: Cloud mining investment offers you options with regards to which crypto you should invest in. You could choose any one of Bitcoin, Ethereum, and Litecoin or decide to split your investment among them to avoid putting all your eggs in one basket.
  • A better sense of security through binding contracts: Cloud mining contracts give both the crypto-savvy investor and the non-tech savvy one a sense of security because it makes them have an idea of minimum expectations from each investment in buying different hashing power rates and tenure.

How Much Can You Earn via a Cloud Mining Company?

Going by currently available data by blockchaininfo.org, about 1,800 Bitcoins are mined daily. If we multiply that by a hypothetical exchange rate of 1 Bitcoin to $8,500, we’ll be looking at a daily cloud bitcoin mining returns of $15,000,000.

Let’s calculate our profit on the example of a cloud mining platform Hashtoro.com. If you purchase an annual contract for 75 TH and invest 3.000 euro, you can rest assured that after all operating costs get settled, you would have earned over 1.7 bitcoin. And that excludes the appreciation effect of a rising crypto market.

Conclusion

While there are a variety of crypto investments that you could choose from, most are ‘high risk, high reward’ in nature and you could as well make a massive profit as you could hit rock bottom.

However, if you are looking at a legitimate source of steady, passive income via cryptocurrency investment, then you should leverage the services of cloud mining companies. So, Hashtoro is a top cloud mining company that helps you get steady, passive income while essentially doing nothing.

ABOUT THE AUTHOR

Alexander Petersons, product director of cloud mining service Hashtoro.com. IT specialist, serial entrepreneur. Started his professional career in small IT companies in Europe, then moved to America for several years. Worked on the development of mobile processors in Telecommunications equipment company Qualcomm (USA).

The Relevance of Cloud Mining Investment

Cloud mining permits users to purchase mining power of the equipment set in remote data centers, rather than utilize their own machines. All the mining is carried out in the cloud, with no offline issues like electricity, hosting problems, or installation and upkeep inconvenience.

It can be defined as streamlined mining of cryptocurrencies which assuages you of power costs, 24-hour observing, programming design and the various complexities related with the exemplary production alternative on your hardware.

Cloud mining encompasses various kinds of cryptocurrencies including the likes of cloud Bitcoin mining, cloud Ethereum mining, cloud Litecoin mining and a host of others. There have been countless opinions about the relevance of cloud mining – with some parties being unsupportive of it for one reason or the other.

Well, I want to reassure you that cloud mining is here to stay and it promises enormous benefits for those who are ready and willing to roll with it. Most importantly, it takes most of the work away from mining and delivers the same if not more output as the conventional form of mining.

Why Is Cloud Mining Relevant?

Some of the core reasons why cloud mining has always been relevant and will continue to remain so are addressed in the bullet points below:

  • Low Cost of Entry and Minimal Risks

Cloud mining offers a mining framework which allows easy entry, negligible dangers, and costs. It is distinct from customary models of mining that require procurement, constant upkeep, and configuration of exceedingly specialized equipment.

  • Quick Return on Investment

Given the present system complexity, you can earn a return on your investment within a period of one year. You will have mined 1.71 Bitcoin. Besides that, if its value rises, the client will get extra income from that development, as occurred in 2017. For miners who would prefer not to manage or to purchase and set up equipment or having to deal with waste heat, cloud mining is an excellent solution.

  • High Profitability

Most individuals who have entered into a cloud mining contract have enjoyed services that allow them to receive as much as 60% of revenue for the year on their investment. Not only that, they also get a consistent increase in the rate of the cryptocurrency.

  • General Convenience

It’s very hard to set up a miner in your own flat. Indeed, even a solitary S9 ASIC miner would heat up your apartment so much that you would need to kill the warmth in the winter. Attaching, say, 3-5 to miners would require more than 5kW limit. However, an average two-room loft doesn’t get that much at the outlet. Also, the noise level would be high to the point that remaining in the flat would be insufferable.

  • Easy to Set Up and Maintain

To set up a card-based mining farm, you will need to possess certain aptitudes in gathering and setting up equipment. The most widely recognized choice is a mining farm made of six GTX1080 graphics cards. What’s more, the costs for those graphics cards can fluctuate substantially, from 550 to 1100 Euros. You would likewise need to always screen that sort of mining farm, agonizing over keeping it cool and free of residue.

  • Legally Reliable

The companies who deal in cloud Bitcoin mining, cloud Ethereum mining, cloud Litecoin mining, and any of the other respective altcoins all have a legally registered status. They are in geolocations with transparent legal norms (predominantly in Europe) and are very much reliable. For instance, Hashtoro has its data center in Norway and Finland.

  • Predictable Profit

Unlike trading stocks and shares, where there can be a decline in prices as a result of reduced demand, cloud mining contracts are protected from such market forces. It owes its immunity to the average complexity of the network and the exchange rate. Utilizing this service enables you to earn money, and a fixed amount of remuneration and recognizable pointers of the multifaceted nature of computations allows you to effortlessly predict the profitability and use the BTC cloud mining (SHA-256).

Are You Ready to Invest In Cloud Mining?

From the points outlined above, you will no doubt agree with me that cloud mining is still very much relevant today. It has also maintained its position as a great alternative to the conventional form of Bitcoin mining and other cryptocurrencies.  

Cloud mining basically follows the same process of earning digital currencies but without the investment in computing power, constant monitoring of the mining process and paying electricity bills. With cloud mining, Bitcoin miners, Ethereum miners, and Litecoin miners all have their equipment leased from service companies that have powerful data centers with farms for mining cryptocurrency.

ABOUT THE AUTHOR

Alexander Petersons, product director of cloud mining service Hashtoro.com. IT specialist, serial entrepreneur.  Started his professional career in small IT companies in Europe, then moved to America for several years. Worked on the development of mobile processors in Telecommunications equipment company Qualcomm (USA).

Since 2012, with a team of like-minded people been working towards creating their own cryptocurrency. Crypto-enthusiast, author of articles on IT and blockchain. Education:

Riga Technical University and  Cass business school (The UK), MSc in Corporate Finance.

Best Cryptocurrencies to Mine in 2018

Whether it’s in reputable publications like Forbes and Newsweek, or your insufferable desk mate Ian who brings Soylent to work and who won’t stop telling you that “it’s the future of the free market, man,” cryptocurrency is just about on everyone’s minds these days.

Brought to popularity by Bitcoin in the early 2010s, cryptocurrency has slowly become one of the most intriguing and innovative new ways of conducting encrypted transactions. In an age where ever more of our information and economic activity takes place online, cryptocurrency has begun to gain prominence as a new method of decentralizing that process.

Here’s the thing, though – while Ian wears too many Homestuck T-shirts to the office and smells a bit like fish, he’s not super wrong about cryptocurrency. The last decade or so has seen an incredible boost in crypto’s profile, and along with that a wave of new currencies for people to mine (i.e. verifying crypto transactions through blockchain software).

Sure, everyone knows Bitcoin, but what other cryptocurrencies are out there? In 2018, a plethora of other cryptocurrencies have arrived, many of which have developed substantial user bases and no shortage of monetary value. If you’re looking to start mining cryptocurrency, you’ll want to keep a close eye on which ones are on the upswing and steer clear of those flash in the pan memecoins and dogecoins.

We’ve been keeping a close eye on which cryptocurrencies we’re most excited about in 2018; to help you decide which one(s) you want to start mining, we’ve put together a handy guide to the best cryptocurrencies to mine in 2018.

5. Bitcoin

  • Launched: January 3, 2009
  • Created By: Satoshi Nakamoto (unknown if he is an individual or group of people)
  • Algorithm: SHA256
  • Anonymity: Low
  • Maximum Supply: 21 million
  • Website: org

Why It’s Good

The O.G. cryptocurrency, Bitcoin remains by far the most well-known – and therefore well-mined – cryptocurrency on the books.

Blockchain and cryptocurrency run on consensus and decentralization: instead of one overarching system determining the value of a transaction, Bitcoin revolutionized the idea of creating a large general consensus from each of its members on what transactions are worth how much bitcoin.

Because of its popularity and notoriety, Bitcoin arguably has the largest consensus-based cryptocurrency system out there, making it a very popular choice for crypto mining.

However, there are some downsides to mining popular cryptocurrencies – whenever a new coin starts getting more recognized in the overall community, the more rigs are dedicated to mining them. This actually makes it more difficult to mine, as each new rig joins the network; the more miners are interested in a coin, the harder the time you’ll have.

In the case of Bitcoin, its popularity is both its greatest strength and its greatest weakness. As a beginner’s coin, it’s very valuable, and the aforementioned consensus means that it’s relatively stable as coins go. However, lots of other cryptocurrency miners have started mining Bitcoin long before you, so in a way, you’ll be fighting for scraps.

(If you do want to keep track of Bitcoin’s ever-changing value, check out this Bitcoin price chart, which updates in real time.)

4. Zcash

  • Launched: October 28, 2016
  • Created By: Zooko Wilcox-O’Hearn
  • Algorithm: Equihash
  • Anonymity: Medium
  • Maximum Supply: 21 million
  • Website: cash

Why It’s Good

Zcash is a smaller cryptocurrency, but it’s a promising entry to the scene that shows a lot of potentials. Headed by founder and CEO Zooko Wilcox-O’Hearn, Zcash was launched in 2016 as a decentralized, open-source cryptocurrency.

Zcash’s major claim to fame is to be the HTTPS to Bitcoin’s HTTP; Zcash works to keep transactions transparent just like Bitcoin, but that transparency is private and highly selective. This adds an extra level of security to these transactions – while blockchains still record and publish transaction data, they don’t include sender/recipient/amount data.

Zcash also lets people have the option to ‘shield’ their transactions, letting you encrypt your content with zero-knowledge proof constructions or other advanced cryptographic techniques. Zcash has its own brand of the former, which they call a zk-SNARK.

Overall, Zcash is the best cryptocurrency to mine in 2018 if you want to invest in a coin that values a bit more privacy compared to the extreme openness and transparency of other, bigger coins. While decentralization is an important value to cryptocurrency, coins like Zcash provide a great alternative to putting all your transaction info out in the open.

If you’re looking to start mining Zcash, two of the best mining pools are Flypool (for the highest profitability) and Nanopool (for the best service).

3. Dash

  • Launched: January 2014
  • Created By: Evan Duffield
  • Algorithm: X11
  • Anonymity: Low
  • Maximum Supply: 22 million
  • Website: Org

Why It’s Good

Originally known as Darkcoin, Dash is very similar to Bitcoin but places a greater focus on secrecy. Dash miners and users enjoy greater anonymity through its decentralized master code network, which effectively makes it impossible to trace transactions.

One of Dash’s most innovative ideas is the introduction of the X11 algorithm, a composite function of a number of hashing algorithms

In just a few short years, Dash has reached a surprisingly large fanbase, likely due to its aforementioned emphasis on security and secrecy. This makes it perfect for mining; it’s stable, established, but not yet broken through into the mainstream.

Today, Dash has a market capitalization of $4.8 billion and handles almost $100 million worth of transactions on a daily basis. It’s small, but mighty, and has a tremendous hold on the cryptocurrency community.

If you want to start mining Dash, some of the biggest mining pools out there are Zpool, Supernova, MinerGate, Coinfoundry, and via BTC. You can use ASIC Miner Hardware to mine, or use your GPU or CPU. Bear in mind, though, that this kind of mining is not really cost effective anymore; it’s best to just stick to ASIC mining or follow the coin’s Reddit community to keep informed.

2. Litecoin

  • Launched: October 7, 2011
  • Created By: MIT graduate (and former Google engineer) Charlie Lee
  • Algorithm: Scrypt
  • Anonymity: Low
  • Maximum Supply: 84 million
  • Website: Org

Why It’s Good

Since Bitcoin is the big coin on campus, and therefore hogs all the attention, it may do you well to focus on a more obscure coin to maximize the value of your mining. Litecoin is a peer-to-peer online currency that allows for global payments at no cost, performed instantly.

Litecoin is a bit smaller in stature than Bitcoin but enjoys a lot of complementary success, as well as no small amount of respect in the cryptocurrency industry. It’s tremendously liquid, and has high trade volumes, meaning it’s not likely to go away any time soon.

Compared to Bitcoin, its smaller size allows for some distinct advantages: transaction confirmation times are much faster, and storage efficiency is much better. Rather than using Bitcoin’s SHA-256 function, Litecoin makes use of the Scrypt has the function used by another early altcoin, Tenebrix, offering a different kind of cryptocurrency that still enjoys robust industry support.

If you want to start mining Litecoin, some of the biggest mining pools out there are Litecoin Pool, Antpool, and LTC.top; those are great places to get started. Litecoin also features a downloadable client (Litecoin Core) on which you can store your LTC.

1. Ethereum

  • Launched: July 20, 2016
  • Created By: Vitalik Buterin, cryptocurrency programmer, and researcher
  • Algorithm: Ethash
  • Anonymity: Low
  • Maximum Supply: Infinite
  • Website: Org

Why It’s Good

If cryptocurrency mining gets you the most value for jumping onto smaller coins earlier in their lifespan, Ethereum might be a good place to start. An open-source, blockchain-based OS and computing platform, Ethereum is public, secure, and in the early stages of its lifespan.

Proposed by Vitalik Buterin, Ethereum started around 2015 with a brief run of around 12 million pre-mined coins, only to see a huge spike in popularity over the past year. In 2017, the coin increased its value by 13,000%, making it clearly a coin on the rise.

Though it’s only been around for a couple of years, Ethereum has enjoyed a tremendous amount of success – right now, Ethereum is the second priciest crypto coin on the market. While it’s incredibly difficult to mine, this also means that there’s a greater likelihood of profitability – not as many people will be doing it, so you can reap the benefits with the right mining rig.

Ethereum runs on a modified version of Nakamoto-style consensus, using transaction-based state transitions to track value and keep records. With the SHA-3 hash algorithm, Ethereum miners typically mine the coin using AMD and Nvidia cards; popular pools for Ethereum include 2Miners, Ethpool and Ethermine. For GPU mining, it’s best to use Ethminer.

While Bitcoin enjoys great popularity, it’s too established to give you the kind of profitability you want right away. However, Ethereum is perfectly positioned in 2018 to start mining, allowing you to get on the ground floor of a rapidly rising cryptocurrency. For that reason, we think it’s the best cryptocurrency to mine in 2018.

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Bitcoin Gold: A Return to Mining?

Cryptocurrencies have some confusing aspects and terms. For some people, this can start with the name itself. What is the “crypto” in cryptocurrency?  It can get more confusing from there. Looking at the bigger picture, cryptocurrencies are dependent on blockchain technology. This involves another set of new ideas and unique terms. Too often explanations are more confusing than helpful.

Fortunately, these concepts can be understood by the cryptocurrency and blockchain novice. Bitcoin Gold provides the perfect example of how all of these elements can come together and create value. A proper evaluation of Bitcoin Gold walks through the cryptocurrency world from start to finish.

What is Bitcoin Gold?

This journey starts with the idea that digital currencies can exist without centralized control. This is the brilliant concept that Bitcoin proved could work in the real world. In order to implement this idea, it was necessary to create the units of cryptocurrency through computer software. Bitcoin Gold and others pay individuals and groups to perform this task. This called mining.

Mining a cryptocurrency is nothing more than solving a math problem on a computer by running this software. The math involved in creating blocks is the “crypto” part of cryptocurrency. Those who solve the problem add that solution to the list of solutions. This is the blockchain. Those who solved the problem have the address of this block – i.e., own the cryptocurrency they created– and can transfer it to someone else.

Bitcoin ran into a problem because the type of math it used allowed certain types of computers to do the math better than other types. Because the value of Bitcoin was so high, it became financially rewarding to build this type of computer. These “ASIC” machines came to dominate mining, and so dominated the Bitcoin blockchain.

Some viewed this as centralized control of what was always intended to be de-centralized. They considered this a threat to the philosophical underpinning of blockchain that was serious enough that something had to be done about it. Their proposed solution was to change the type of math required to so that specialized computers did not have an advantage. The solution was Bitcoin Gold.

Hard Forks

Not everyone agreed that the problem was this severe or that the proposed solution was the best answer. This is not surprising since the community included those who owned machines specifically built to do the “old math” and had a financial incentive to keep things the way they were. A rift developed in the Bitcoin community over this issue.

The structure of blockchain includes a solution to this type of disagreement. The solution is called a hard fork, and it is just what it sounds like. A hard fork is a new string of transactions branching off from the previous list. The start of this new list is the change to Bitcoin Gold, and it happened on October 24, 2017. Everyone holding Bitcoin at that date received an equal amount of Bitcoin Gold to use on the new fork of the blockchain, that is, the new string of transactions.

This move was criticized at the time as a simple attempt to create new value off the “Bitcoin” brand. Keep in mind that the total number of cryptocurrency units doubled at the time of the hard fork. However, this does not mean the value double since the market value of Bitcoin Gold was not the market value of Bitcoin. In fact, if no one supported the new Bitcoin Gold cryptocurrency it would quickly become worthless.

This threatened to be the case, particularly because of criticism of how the transition was handled. Some actions by the proponents of Bitcoin Gold had at least the appearance of simple greed, including delaying the release of mining software to the cryptocurrency community. This supposedly allowed those with “insider “access the opportunity to create units of Bitcoin Gold without competition.

Eventually Bitcoin Gold achieved a stand-alone status in the cryptocurrency markets. Although the value does not rival Bitcoin, it does command a respectable market price and is actively involved in the development of new blockchain technology, including the Lightning Network.

Bitcoin Gold Mining

However, the low market price relative to Bitcoin means that specialized miners have not flocked to the creation of Bitcoin Gold. Keep in mind that any concentration would undermine the expressed purpose of creating Bitcoin Gold in the first place. This has created an opportunity for less technologically savvy individuals to participate in the creation of units of Bitcoin Gold without assembling computers specifically tailored to this purpose.

However, the value and potential value has attracted enough miners that some specialization is recommended. Remember that solving the math equation – hashing – is only one step in the process. It’s also necessary to arrive at the answer before anyone else and successfully post that solution to the blockchain. In effect, miners compete with each other in a cooperative venture.

Mining enthusiasts recommend against using a standard personal computer for this purpose. They suggest that using a high-quality graphics card significantly increases the likelihood of successful mining. Keep in mind that even if a computer is already owned and is not being used for other purposes, mining is not free. There are electrical costs. Mining Bitcoin Gold requires enough success to represent a return on this investment.

In addition to a graphics card, mining enthusiasts also recommend installing additional memory and checking the power supply for the entire system. The technical aspects of evaluating and installing any of these components are well beyond the scope of this article. However, they can be easily found on the Internet, along with the software required for mining.

For those unwilling or unable to take on the technical aspects of mining by themselves, it is possible to join a mining pool, which is a cooperative group that uses the computing power of individual machines to mine Bitcoin Gold. Each member of the group is rewarded with a percentage of the profits equal to their contribution. Mining groups can be easily found on the Internet and have a range of technical requirements.

How to Buy Bitcoin Gold (BTG)?

It is also possible to purchase Bitcoin Gold on a variety of exchanges. The market is very dynamic with new exchanges adding Bitcoin Gold. The best option for identifying an exchange is the official Bitcoin Gold website which currently lists 19 different exchanges where Bitcoin Gold is available.

The exchanges operate in a variety of locations and are not available in all countries. Some offer to exchange national fiat currencies such as US dollars for Bitcoin Gold, while others only exchange for Bitcoin or Ethereum.

Buying Bitcoin Gold with Fiat Currencies

For those who are looking to buy Bitcoin Gold with fiat currencies, not many exchanges provide this option. CEX.IO is one of the only exchanges that provide you the purchase of Bitcoin Gold with USD. If you previously own Bitcoin, all you need to do is to register in CEX.IO, confirm your account and search for BTG/USD.

Other exchanges that support Bitcoin Gold with fiat currencies include YoBit and DSX.

Another easy way to buy Bitcoin Gold is via AvaTrade which provides Contract for Differences (CFD’s) on Bitcoin Gold. The broker allows you to buy cryptocurrencies with a leverage position in a fairly simple process.

Buying Bitcoin Gold with Cryptocurrencies

For those looking to buy Bitcoin Gold with cryptocurrencies, you will need to go through an exchange that caters for the BTG/BTC or BTG/ETH pairing that you are looking to buy Bitcoin Gold coins with. Binance has the largest wide selection of cryptocurrencies, including BTG/BTC.

In the event that you don’t already have an existing account on an exchange and are not holding Bitcoins or Ethereum, open an account on Coinbase and purchase Bitcoin or Ethereum. Do note that, while there are higher transaction fees when purchasing with debit or credit card, the purchase is instantaneous.

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Bitcoin Gold Wallets

Regardless of how you plan on obtaining Bitcoin Gold, it will be necessary to hold it in a wallet. Like everything else in the cryptocurrency world, wallets are going through rapid change. Wallets that support the Bitcoin Gold blockchain are listed on the Bitcoin Gold website. Each has its own attributes and advantages.

The main distinction between wallets is between “hot” (online software wallets) and “cold” (offline hardware wallets). A cold wallet that is not plugged into the Internet is clearly more secure than a hot wallet that exists on a central server. Even wallets housed on personal computers that are connected to the Internet are vulnerable to attack.

Keep in mind that wallets are distinct from accounts on exchanges. While both can hold Bitcoin Gold or other cryptocurrency, accounts at exchanges are much more vulnerable to theft by hackers. This is simply because they represent a richer target. All cryptocurrency experts agree that Bitcoin Gold and other currencies should be stored in a private wallet –either hot or cold – and moved to an exchange only for trading.


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BTG – Holding and Trading

Bitcoin Gold is growing in popularity, as evidenced by the growing number of exchanges that offer it. However, it is also still very young, even under the standards by which cryptocurrencies are measured. These factors mean that the brief trading history might not be a good indication of the trading value. Still, there is one clear relationship that stands out.

The chart below from Coinmarketcap.com shows the price of Bitcoin Gold expressed in US dollars (Green line) and Bitcoin (Yellow line). There is a clear distinction before November 27, 2017, and afterward (seen as the point where the blue market cap line is calculated correctly).

Bitcoin Gold Chart
Bitcoin Gold Chart

Since this point in time, the price of Bitcoin Gold has been significantly more volatile when measured in US dollars than it has been when measured in Bitcoin. In fact, for most of 2018, the price of Bitcoin Gold has seen little movement when measured in Bitcoin.

This strongly suggests that the price of Bitcoin Gold moves directly with the price of Bitcoin. Anyone seeking to trade Bitcoin Gold based on volatility such as day traders will be disappointed if they hold Bitcoin as their reserve currency (assets that are held until a favorable buying opportunity is identified and after the targeted asset is sold).

There are two reasons for this. First, the movement in price going from Bitcoin to Bitcoin Gold is small (i.e., the yellow line is relatively flat). This leaves little opportunity for profitable trades. Second, volatility in the price of Bitcoin itself could potentially eliminate any profits made on trading Bitcoin Gold.

Holding Bitcoin Gold as a long-term asset instead of Bitcoin is also somewhat problematic. The chart indicates that the market does not perceive a significant difference between these two cryptocurrencies. Keep in mind that Bitcoin Gold has the same mission, vision, and values as Bitcoin. The developers simply feel that they have followed these standards more closely than Bitcoin.

In other words, as a cryptocurrency investment, Bitcoin Gold is fairly indistinguishable from Bitcoin. The most significant differences are the separate blockchain and the different mining technique. These are technical matters that may make a difference in market value in the future if Bitcoin Gold proves successful.

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Conclusions

Understanding these core value propositions is critical to understanding Bitcoin Gold and the investment opportunity it may represent. It is impossible to predict if these factors will materialize in an increasing market price, and even more difficult to determine if that price movement will be independent of Bitcoin. In this view Bitcoin Gold is a very similar investment to Bitcoin.

However, the most fundamental error that can be made is to assume that the current price differential between Bitcoin Gold and Bitcoin will close because the two are interchangeable. This assumption ignores the “first mover” advantage of Bitcoin and the fact that the Bitcoin community does not completely support Bitcoin Gold.

The technical issues that distinguish Bitcoin Gold may prove to be inconsequential in the long-run, and the market price may continue to move with Bitcoin. It is simply too early in the development cycle of Bitcoin Gold to fully judge the situation accurately. However, to the extent that Bitcoin continues to be accepted as the premier cryptocurrency, Bitcoin Gold will not be far behind.

Why Bitcoin Cash is Better than Bitcoin

Bitcoin experienced its first hard fork during the summer. The hard fork was as a result of a disagreement between Bitcoin’s core developers and miners. The dispute continues and is ultimately an attempt by Bitcoin’s mining cartel to hold on to all of the hashpower for Bitcoin mining, while the core developers are looking to decentralize away from the mining cartel.

The entire ethos of Bitcoin is for decentralization. The removal of a centralized control over Bitcoin’s future has been what many within the Bitcoin community have called for. Bitcoin may have removed control away from governments and central banks, but as Bitcoin evolved, the capabilities of miners have also advanced and with it has a new battle has born, control over the mining of Bitcoin.

Things have become more complicated since the cancellation of the SegWit2X hard fork that was scheduled for this month. The Bitcoin world has been left with the choice of three as a result of the fork cancellation. The original Bitcoin and Bitcoin’s offshoots, Bitcoin Cash and Bitcoin Gold that have come about from the much talked about hard forks.

Bitcoin Gold supports the desire to prize away from the hashpower monopoly held by the Bitcoin mining cartel. Following Bitcoin gold’s collapse in recent days, however, it’s clear that the cryptoworld and Bitcoin’s world, in particular, has decided which are to face off against each other. It’s now down to Bitcoin Cash to fight off Bitcoin’s superiority over the cryptoworld.

Bitcoin VS Bitcoin Cash: It’s a Mining Competition

The Bitcoin civil war has now truly started and the choppiness in the pair’s prices is a clear indication of how the Bitcoin world has been repositioning in recent days.

We saw Bitcoin Cash surge to a record high over the weekend, touching a high $2,799 before the great retreat. On the day, Bitcoin Cash not only moved above Ethereum into second place by the market cap, but Bitcoin Cash also saw more hashpower than Bitcoin.

It’s quite a monumental shift considering the fact that Bitcoin’s hashpower was estimated at more than 5 times that of Bitcoin Cash before news hit of the cancellation of SegWit2X.

So, what’s the difference between Bitcoin and Bitcoin Cash and why is there so much focus on Bitcoin’s first offshoot?

To fully understand, it’s important to recognize the rationale for the Bitcoin Cash fork back in August of this year.

It has ultimately been down to capacity issues, with Bitcoin transaction times having slowed for as long as 10 minutes. How to address capacity has been a battle between the miners and the core developers. The miners looking for both an increase in blockchain capacity as well as transaction timesץ For the core developers, the desire is to make the necessary improvements to Bitcoin, whilst looking to remove the concentration of the hashpower that sits with a handful of miners.

With neither side willing to concede, Bitcoin Cash was created through the hard fork. The weekend surge in Bitcoin Cash price and the increase of the hashpower came as mining for Bitcoin Cash became more profitable, the faster transaction times being the key. On Saturday, it was reportedly 69.4% more profitable to mine for Bitcoin Cash than for Bitcoin and miners are ultimately only interested in one thing…

The shift in hashpower and miner preference for Bitcoin Cash came as a result of the price spikes seen in Bitcoin’s offshoot. Ultimately, those favoring Bitcoin cash are in favor of a payment-efficient Bitcoin version over the master cryptocurrency Bitcoin, but not the miners.

The Sunday spike was as a result of particularly high trading volumes on one of South Korea’s largest exchanges, Bithumb.

Since the Sunday anomaly, Bitcoin’s hashrate superiority has returned and as at the time of writing, Bitcoin’s price has managed to recover to $7435 at the expense of Bitcoin Cash, which has fallen further back to $1,050 from Sunday’s $2,799.

Bitcoin’s superior hashrate and price recovery suggest that the market has decided to stick with the original Bitcoin and shift away from the hard forked alternative.

From a mining perspective, the chicken and egg question in the cryptoworld is whether hashrate rises are followed by price gains, or whether price gains are followed by hashrate rises.

If we look at the events over the weekend, there was a material shift in hashrates for Bitcoin Cash that resulted from a price spike. As a result of the price spike, Bitcoin’s price suffered and mining became less profitable, leading to smaller miners either turning off their mining operations or mining Bitcoin Cash.

Miners are unlikely to stop mining a particular cryptocurrency, if there is no decline in price or more profitable alternatives. The latest prices moves have ultimately led to a recovery in Bitcoin’s hashrate. At the time of writing, Bitcoin’s hashrate stood at 9.2459E compared with Bitcoin Cash’s 1.4632E, making Bitcoin’s hashrate more than 6 times that of Bitcoin Cash. This is in stark contrast to November 12th, where Bitcoin Cash’s hashrate stood at 5.825E, compared with Bitcoin’s 4.8777E.

Bitcoin/Bitcoin Cash Hashrate
Bitcoin/Bitcoin Cash Hashrate

The chart below shows the hashrates for the pair over the last 3-months, and it’s worth noting that the November 12th shift was the 2nd occasion that Bitcoin Cash saw higher hashrates since its existence.

Assuming Bitcoin Cash does not experience a similar fate as Bitcoin Gold, we can expect miners to shift between the two. Bitcoin is unlikely to go anywhere anytime soon, with Bitcoin likely to find plenty of support on the dips. Price recoveries would then see miners return to Bitcoin, assuming the Bitcoin Cash had reaped the benefits of Bitcoin’s demise.

Bitcoin Cash may have the larger block size that allows faster transaction times, but it will always boil down to profitability. It’s a money game after all and with miners having invested significant capital into mining centers, they’re unlikely to be particularly interested in their true beliefs on decentralization and how Bitcoin should evolve. The ability to anticipate price moves between the two will be key to miner profitability and the more successful miners will likely be more focused on what to mine and when rather than why.