Bitcoin has been in the news a lot lately, and for good reason. Although Bitcoin’s value has been volatile, it has still seen significant growth over the past year. And one group that has reaped the benefits of this growth are Bitcoin miners.
Bitcoin mining is the process of verifying and adding transactions to the blockchain, and miners are rewarded with cryptocurrency for their efforts. In a year when most assets lost value, Bitcoin mining actually generated a positive return. In fact, it has outperformed major indexes such as the S&P 500, Nasdaq, and gold.
So how did Bitcoin miners achieve such success? A key factor is the cost of electricity. We have assumed a cost of 8.5 cents per kWh for our calculations. This is significantly lower than the average cost of electricity in the United States, which is 10.5 cents per kWh. This lower electricity cost gives miners a competitive edge and allows them to generate more cryptocurrency.
Another key factor is the sales strategy. Some miners choose to sell all their BTC as soon as it is mined in order to maximize profits. However, this strategy can be risky because the value of cryptocurrency is so volatile. Instead, we assume a strategy of selling just enough BTC to cover the cost of electricity and keeping the rest. This allows miners to take advantage of price increases while protecting themselves from potential losses.
Overall, Bitcoin mining has been a very successful business over the past year. Thanks to lower electricity costs and smart selling strategies, miners were able to outperform major indices and generate significant profits.
When it comes to cryptocurrency, one of the most popular questions is whether it is worth investing in Bitcoin mining. After all, cryptocurrencies can be volatile and mining takes time and money. However, at the end of June 2021, the market price for an S19 was around $6,300. This means that over the course of a year, the machine would have generated around $3,117 in profits in BTC.
Because the price of ASICs roughly correlates to the price of BTC, the machine is now worth around $4,000.
So, from an investment of $6,300 in July 2021, you now have assets totaling $7,177, a gain of 13%. During that same period, if you were buying BTC spot, you would be down 33%.
By way of comparison, over the same period, the S&P 500 fell by 6% and the Nasdaq by 14%. Gold was down 1%. Keeping all of this in perspective, Bitcoin mining looks like a much more promising investment than ever.