In the previous study, we only had a short period of mining with the machine, since this new generation came out at the end of the 3rd era of mining. The following study will take place over a much longer period and will yield very interesting results, we are sure you will agree. We repeat the experiment with the same strategies in comparison, they are:
- Buy and Hodl Strategy: With this strategy, the individual buys Bitcoin and then holds it, seeking to make long-term gains.
- Dollar-Cost Averaging: With this strategy, the individual periodically purchases small amounts of Bitcoin every two weeks regardless of the price of Bitcoin
- Mine and Sell Strategy: In this strategy, the individual buys a Bitcoin mining rig and then sells all of the rewards, exchanging them for cash at the end of each difficulty cycle.
- Mine and Hodl Strategy: This last strategy means that the individual buys a mining rig and then sells the required operating expenses as cash; however, the remainder of the rewards are held as Bitcoin
Like the mining era that preceded it, the 3 era of mining was tumultuous. Bitcoin remains a market full of thrills and it is not recommended for someone who does not see long term. That being said, this case study should prove the comparative significance of an investment in buying versus mining your bitcoins.
In light of this data, we will see that despite a marked period of mining farm that closed the doors, went bankrupt, etc. Bitcoin mining is a viable long-term strategy that generates profit even when prices are down. We will also see that mining is a strategy that is superior to its purchasing alternatives which are however highly praised. In addition, all our case studies are produced from the perspective of D-Central customers, that is to say, we use our all-inclusive pricing grid to generate this data.
What does it look like with an entire epoch: A Case Study
This case study took place between the dates of June 7, 2016, and April 21, 2020. In all cases, the initial investment was 2114$ Canadian Dollars (CAD).
The 3rd era of bitcoin mining was marked by the Antminer S9, a model which is still active to this day in certain limited places in the world. It was also during this era of mining that the ICO craze was born, and that the Blockchain bubble exploded. It goes without saying that this has been accompanied by fluctuations in the market. Following this incredible time, the data:
- Buy and Hold Strategy: 2114$ Canadian Dollars were invested in Bitcoin on June 7, 2016. The investment was held for the entire duration of the study. Then, the entire 2114$ investment was sold on April 21, 2020. It had appreciated by 1162% at 24584$.
- Dollar-Cost Averaging: 2114$ Canadian dollars were invested in Bitcoin between April 21, 2019, and April 21, 2020, in equal parts of 77.15$ every two weeks. The investment was held for the duration of the study, an increase by 398% at 8421$.
- Mine and Sell Strategy: 2114$ Canadian Dollars were invested on April 21, 2019. The investment was used to acquire an Antminer S9. Every two weeks, the entirety of the mined Bitcoins are sold. By following the rate of the market, by April 21, 2020, the total appreciation was 447% at 9462$.
- Mine and Hold Strategy: 2114$ Canadian Dollars were invested on April 21, 2019. This investment was used to acquire an Antminer S9. Only the number of bitcoins required to cover the operating expenses at D-Central were put up for sale at the end of every two week period. The pace of selling was maintained throughout the duration of the study. In the end, the total appreciation was 2254% at 47670$.
Of note, for the bitcoins that were sold at the end of every two week period, the closing price used was the weekly close of the week the difficulty periods ended. In addition, the hosting prices used in this case study are D-Central’s managed hosting prices, ranging between 65$C/KW and 75$C/KW. This equates to a rate of between 0.0632$US and 0.0729$US per kilowatt-hour, all-inclusive. This price includes rent, energy, air conditioning, insurance, ventilation, and wages.
The difficulty of mining has exploded, new generations have succeeded, the competition has tightened, despite everything, our case study shows that a customer choosing D-Central for the hosting of his machine at the beginning of the 3rd mining era and having deployed only $ 2,114 in initial investment would once again have the best gains compared to the alternatives.
Bitcoin mining is the acquisition of bitcoins as it should be
Mining Bitcoin is still overlooked by numerous investors who are looking to take advantage of the opportunities that Bitcoin provides. One of the significant benefits of mining Bitcoin is that it effectively generates a strong cash flow even if the value of Bitcoin starts to decline. In a sideways market, Bitcoin might be yielding 0$ in capital appreciation; however, those who mine Bitcoin can still yield daily rewards. In essence, this is similar to holding rental property. The property might appreciate; however, if someone is renting the property, there is also a steady flow of income. Bitcoin mining generates both income and capital gains, particularly with the Mine and Hold strategy.
The Benefits and Pitfalls of Dollar-Cost Averaging
Furthermore, the Mine and Hold Strategy also follows closely a strategy called dollar-cost averaging. This strategy requires putting in a fixed dollar amount into the Bitcoin market at consistent time intervals (such as biweekly). There are several benefits by spreading out investments in Bitcoin. Some of these include:
- The investment will capitalize on the rare opportunities provided by a steep Bear Market and its low prices
- It removes the risk of mistiming the market wildly
- Investors are less likely to act on emotions
- It helps investors focus on long-term results
The dollar-cost averaging strategy helps to manage wild Bitcoin fluctuations. This strategy is ideal for investors who wish to participate in a market with extreme volatility and who wish to capitalize on the long term. This strategy allows people to take advantage of bear markets by maintaining a steady investment there. This makes the losses less painful, but note that the gains are also less attractive. This is a great way to invest when people are afraid to invest on their own. The Mine and Hold strategy closely follows the many benefits of the dollar-cost averaging, providing a much higher profit opportunity. It becomes, even more, a no-brainer to follow this strategy, knowing that this case study is based on recent figures, at an all-inclusive hosting rate. With Bitcoin mining, people receive bitcoins daily, which equates to the dollar-cost averaging but only with more coins.
The opinions expressed here are only world views from D-Central administration and do not express financial advice. Please do your own research.