This is just something I wrote, because there are a lot of these threads. I hope it clears things up.
So, is cex.io a good investment?
I'm writing this post for those of you that are considering investing in the mining operation at cex.io. Many of you will probably be quite new to the cryptocurrency world, so I will try to be as clear as possible. First, I would clear this up; yes, I do use cex.io myself. However, I'm writing this because I know something about it and have experience with it, not because I'm advertising it. Neither I want to bash the service, I only aim to give a realistic view to anyone who is interested.
Cex.io is an attractive option for a lot of people who are interested in mining, mainly for two reasons: it is easy to use and you can start mining with any amount of money. You don't have to buy and maintain expensive pieces of machinery. Obviously, this comes at a price.
The first thing a potential investor has to realize is that cex.io is not a viable long term investment. You are guaranteed to lose money if you just buy mining power and leave it mining for a long period of time. You will never get your investment back from mining profit alone! The main source of income for cex.io users is trading mining power - buy low, sell higher. Almost like you would do trading with any cryptocoin, just that it's quite different to coins. For many coins, at least a lot of people are expecting them to rise in value as time passes. This is quite a realistic prospect for many coins, like Bitcoin. But at cex.io you are buying and selling mining power. This is totally different! The real value of hashing power is decreasing all the time and at a very fast rate. This is because the hashing power of the Bitcoin network is increasing all the time, at least for a long time from now. While the network becomes more powerful, your share of the reward, proportional to your mining power, will be smaller.
Take a look at the following spreadsheet:
https://docs.google.com/spreadsheet/ccc?key=0AiFMBvXvL2dtdEZkR2J4eU5rS3B4ei1iUmJxSWNlQ0E#gid=0You can see how fast the difficulty has been rising and it shows now signs of slowing down. You can see that, for example at the time of writing this the network's hash rate has more than doubled in less than two months. This means, if you bought mining power two months ago, it will now generate only half as much Bitcoins as it did at the time it was bought, so it is basically worth only about half of that what is was two months ago. So, mining power will decrease in value very fast! From the spreadsheet you can see that the network's hashing rate has risen from 1.5 % to 4 % daily for the past months.
Let us assume a 2 % rise in hashing power per day. If you buy 1 Bitcoin's worth of hashing power today, you will get 20 Gh/s. At 2 % rise of hashing power per day, the reasonable value for your investment will have dropped by almost two percent also (not quite, but almost). But 20 Gh/s at the time of writing will make you approximately 0.0085 Bitcoins, less than 1 % of your investment. This is just to make clear that holding will not make your money back.
So, in short, unless you are able to buy mining power at a very good price, you can only profit from your investment by selling the mining power. Unless you are doing a one-off investment, you must have a clue how to sell and buy at the right times. So, you will have to speculate on the value of Gh/s and trade accordingly. This kind of trading is highly risky and the markets are far from being completely predictable.
So to be completely honest, if you thought cex.io is a good place to mine because you don't are not familiar with Bitcoin mining, then it is probably not for you, unless you just want to try it and are prepared for a loss. To be successfull, you have to be familiar with the market and know what will affect it. Difficulty changing, which happens approximately every ten days, is a usual point of speculation and the easiest one. There are loads of things that will affect the price, an easy example would be Bitcoin mining hardware shipments. I am not going to come up with a list, there are many things and you will have to familiarize yourself with all the factors. Even then, there are a lot of total unknowns. One thing a potential investor should consider is how does adding new mining power happen. I do not have the answer for this, but obviously cex.io can put more mining power onto its own market; to my knowledge they have not made any announcements regarding that, while surely that will push the price down and is information that should be available for the customers beforehand.
These warnings aside, it is of course possible to earn money trading on cex.io, but not everyone will make a profit. You should familiarize yourself with the market if you are seriously thinking of making money.
