This is a question I get from a lot of my students. Is it worth mining bitcoin or is it better to just buy and HODL?
Here’s a good thread that talks about it from Simple Mining https://x.com/simpleminingio/status/1823389818564588021
Is it better to MINE or BUY BTC?
At the end of the day, you want to choose the strategy that stacks the most sats.
It is generally cheaper to mine #Bitcoin than to purchase at the going exchange rate, although… pic.twitter.com/zIgmuZzAxF
— Simple Mining (@simpleminingio) August 13, 2024
At the end of the day, you want to choose the strategy that stacks the most sats. It is generally cheaper to mine #Bitcoin than to purchase at the going exchange rate, although…
This does NOT mean mining is ALWAYS the most PROFITABLE strategy.
Mining at scale requires a large hashrate, infrastructure, and access to cheap electricity.
For many individual Bitcoin investors, it makes the MOST SENSE to purchase BTC directly.
There’s also a catch…
Simple Mining bridges the gap and allows the average #Bitcoin investor to gain exposure to a PROFITABLE mining position.
Again, you want to choose the strategy that stacks the most sats.
Let’s look at some scenarios to see if it would make sense to have mining exposure:
We can view mining as almost a hashprice call option.
Has it been profitable to mine Bitcoin in the last 4-year cycle?
Yes, for the most part, but as with most things like this, many variables are in play.
For context, the Bitcoin exchange rate has a 4-year cycle around the halving:
This will be helpful to evaluate when is the best time to enter a mining position.
We will first look at the period of 7/24/20 to 7/24/24.
Both dates are ~ 70 to 90 days after a halving.
We will use a hypothetical case study of Bitcoin investors, Bob and Jane.
They are both looking to deploy capital with the goal of stacking as much BTC as possible.
They each decide to make a lump sum allocation and then a dollar-cost average for the period above.
Bob: Spot Buy with DCA
– A lump sum purchase on 7/24/20 of $2,500 (cost of new-gen miner at the time).
– The lump sum spot buy would gain ~.26 BTC based on the BTC price on 7/24/2020
– Start a daily DCA of $6 (daily cost of running S19).
– We will fix exchange fees at 1%, although this will have a minimal impact over this time period.
– From 7/24/20 to 7/24/24, this would result in ~ 0.30 BTC accumulated using a DCA calculator.
The total BTC stacked from this strategy is = 0.56 BTC (lump sum + DCA)
Jane: Purchase BTC Miner
– A lump sum purchase of an S19 on 7/22/20(top tier ASIC at the time) for ~ $2,500
– Machine operation specs are 95 Th/s, 34.2 W/Th, $0.08/kWh.
– We will fix pool fees at 0.07% (our pool fee currently)
– This machine would mine a total of 0.62 BTC from 7/24/20 to 7/24/24.
– The machine costs roughly $6/day in electricity, resulting in $8760 over 4 years.
– The opportunity cost of this is 0.30 BTC, which could have been DCA’d, so we will subtract this from the miner revenue.
– Finally, the BTC gained from the sale of the S19 on 7/24/24 would be ~ $670 or ~ 0.01 BTC.
The total BTC stacked from this strategy is 0.62 + 0.01 – 0.30 = 0.33 BTC
This looks like a no-brainer initially.
But this is assuming a 4-year use of the S19.
If we rerun this with a 2-year term, things look much different.
Bob: Spot Buy with DCA
– A lump sum purchase on 7/22/20 of $2,500
– Acquisition of ~.26 BTC based on BTC price on 7/22/2020
– Start a daily DCA of $6 (daily cost of running S19).
– DCA from 7/24/20 to 7/24/22 would result in 0.15 BTC accumulated.
The total BTC stacked from this strategy is = 0.41 BTC (lump sum + DCA)
Jane: Purchase BTC Miner
– A lump sum purchase of an S19 on 7/24/20 (top tier ASIC) for $2,500.
– Machine operation specs are the same as before: 95 Th/s, 34.2 W/Th, $0.08/kWh.
– This machine would mine a total of 0.44 BTC from 7/24/20 to 7/24/22.
– The DCA opportunity cost is $6 per day for electricity, which would be 0.15 BTC (see above)
– Finally, the BTC gained from selling the S19 on 7/22/22 would be ~ 0.18 BTC.
The total BTC stacked from this strategy is 0.44 + 0.18 – 0.15 = 0.47 BTC
The miner strategy stacks .06 BTC more than DCA in this case.
This example also does not include potential tax depreciation and KYC benefits.
This analysis shows the importance of the entry & exit points for the miner.
Mining can be more profitable if you believe that Bitcoin’s price will increase faster than the hashrate over time.
Good rule of thumb:
New generation machines purchased at hashprice bottoms (where miner capitulation is the highest) appreciate in value during pumps in the exchange rate, and mined profits remain fixed because hashrate lags behind(price increases faster than miners can come online).
No outcome is guaranteed in the #Bitcoin industry.
Volatility is to be expected.
The comparison of buying vs mining is a decision each investor must evaluate.
This is just a chip off the block when evaluating mining profitability.
Grid improvement, credit, and contribution to mining distribution can also impact which route is the best.
This is just a summary of the MINE or BUY BTC Simple Mining report.
My Opinion
Now, my opinion is that you either dive into the deep end of bitcoin mining or else it’s better to leave it to the professionals. Get a bitaxe, get a silent space heater or modify an S9 yourself to tinker with but don’t think of it as an investment.
If you don’t do it professionally, mining will leave you with less sats than if you had simply held bitcoin, that’s for sure.
There is an alternative though, buying Infinity Hash shares allows you to invest any amount into a professional community mining project and reap all the rewards with none of the technical hassle. You’ll benefit greatly, sign up now loveisbitcoin.com/infinityhash
