1. How to Invest 10k and Get Bitcoin Rewards After 24h
Why now is the best time to invest in bitcoin mining
There is a combination of several factors and market conditions that make this specific time particularly favorable to invest in bitcoin mining.
Miners price (hardware) hit the all-time low, depreciating the Bitcoin ASIC (hardware) price down to 90%. The bear market is the best time to buy ASICs.
Imminent approval of the spot ETF will allow big institutions to invest in bitcoin, creating a spike in demand.
Bitcoin halving in April 2024 will cut the bitcoin reward in half, from 6,25 Bitcoin to 3,125 BTC, decreasing the supply of the already deflatory asset, with a total supply limited to 21 Million.
Following China’s miners ban, hash rate hit ~100 EH/s. It took over 2 years for the hash rate to increase by 4x to 400+ EH/s. Following the approval of the spot ETF Bitcoin price can increase much faster than hashrate. The inability of the hash rate to grow at the same pace as price creates an opportunity for incumbent bitcoin miners to make enormous profits.
New Generation Mining Hardware associated with Low-Cost Electricity provides the opportunity to significantly outperform a simple buy-and-hold investment strategy.
There is less technological advancement risk to new mining hardware purchases becoming obsolete. Moreover growing barriers to entry which should protect future profitability returns.
Last but not least: historically, Crypto Bull runs have been strongly correlated with the Bitcoin Halving event, which will occur in April 2024. The bull run is expected to start around 6 months after the halving, giving plenty of time to accumulate BTC yield from bitcoin mining.
Now is the best time to consider investing in a site development, and start mining: buying bitcoin miner machines, hosting turn-key, or simply hashing power.
How to select a reputable miner: risk assessment and metrics
Mining is capital-intensive, not profitable data centers need to be turned down. It requires specialized labor, the scouting of a proper site, low-cost energy (60/70% of the costs come from energy consumption), the ability to optimize data center operations (OPEX), and the ability to select the right miners/hardware (CAPEX). Throughout the years, the hash rate (the computational power needed to solve the puzzle and find the next block) reached an all-time high, combined with the entrance into the market of several new miners, leading to higher difficulty in mining a block.
Although mining can be highly profitable, it is a high entry-barrier type of industry, still blurry because it is nascent in the process of being 100% regulated, quite controversial due to the lack of transparency, and extremely misunderstood, especially for the contextualization of energy consumption.
One of the misconceptions about investing in mining is that if you don’t plug in and manage your rig (miners or hardware) yourself, then it is a scam. In reality, there are several ways to mine bitcoin without going through the complexity, and capital required to mine. Below I walked through the process of:
a. Selecting a reputable miner
b. Selecting the right investment product
How to select a reputable miner: risk assessment and metrics
What are the criteria that make a mining company reputable and its business stable, despite the cyclic challenges of this industry?
The biggest mining companies are public. The reason why mining companies go public is because they can tap into funds much easier than others, so that they can expand, and survive, in difficult times, usually cyclic.
Numbers of years in the business. Mining is a new industry. Seven years in the business is the equivalent of decades in other industries. Being in the mining business for so long means that the company has been able to overcome many market ups and downs, which is a sign that it might be able to overcome others, even in the future. It also means that it is profitable, and has been able to select the right source of energy, data center site, the right people, and manage the operations effectively.
Vertically integrated: companies vertically integrated have more control over their operations, and supply chain, because everything is developed internally, and not outsourced to 3rd parties. This potentially leads to increased efficiency and profitability. Usually, vertically integrated miners have built data centers, operations, hardware, and software in-house.
Mining companies’ main metrics to look after: the number of data centers under management, hash rate owned, number of miners, electricity cost, the power capacity of each data center, and data center geography differentiation. More diversified, more resilient to unpredictable regulatory hurdles.
Owning the mining pool: due to the increase in hash rate and number of miners, the difficulty of finding the next block continues to grow. For cash flow purposes, many miners share their computing power, the hash rate, in mining pools, so that they can increase the chance to win the block, although lowering the bitcoin rewards. Owning the mining pool reduces the counterparty risk, in case something happens.
Be a member of Bitcoin Mining Council — Being a member of the council provides transparency and legitimacy to the mining organizations since it is the most reputable BTC mining association in the world (Microstrategy, Marathon, Riot, etc), which independently audits its members that have to have at least 500 Ph of mining power.
Transparency in retrieving public information: team members, data center locations, services provided, social media presence, and all the data above already listed
Although there are no metrics set in stone from which to deduct miners’ trustworthiness, these criteria could be used as the foundation for due diligence and personal risk management assessment.
How to select the right mining investment product
Depending on the order of magnitude of the investment, bitcoin mining goes from site development to hosting turn key, to buying miners, or just hash rate trading through an OTC, hash rate contracts, or tokenization.
If you don’t want, or can’t mine yourself, several solutions allow you to earn bitcoin. Some solutions are plus, or menus transparent, so here I wanted to list the criteria for selecting the most trustworthy, at least when it comes to buying the commodity itself: the hash rate.
you want to see the rewards coming into your wallet the day after and not wait for the miners to be shipped to the data center and then set up you want to be able to trace the daily reward from the mining pool to your wallet using a blockchain explorer
you want to be able to try it for free before, to see how it works, how to monitor the reward daily, and how the electricity and maintenance bills work you want to have a simulator to calculate the potential earnings projection based on bitcoin value, energy costs, years of investment, and other metrics. you want to know how the rewards are calculated for example using this table:
You want to be easy to sell back the hash rate to the marketplace (many second markets take place on Telegram) or update the old one some platforms sell hash rates as contracts NDF non-deliverable forward for a limited time like 120 days. Others are only open to accredited investors, request a threshold, and a lock-in period of 36 months.
Mining companies Stocks: although investing in mining companies you might see the stock value go up, it is not a promise of getting part of the daily mining rewards as the stocks’ owners don’t have the control of company’s opex and future investments, future dividend payments, and mining stock performance
Trust no one, test and verify by yourself. Mining for free and see daily rewards coming into your wallet；
You can monitor where BTC rewards are coming daily, from the mining pool into your wallet with a blockchain explorer；
After seeing how it works, and how to verify the daily BTC rewards, check if there is a threshold and a minimum lock-in period. Eventually, decide if you would like to become a digital miner buying hashing power. The higher the amount of hashing power, and the longer the staking period, the higher the bitcoin rewards you will get.
2. Only A Handful of Bitcoin Miners Will Be Profitable After Halving: Report
The Bitcoin halving, an event that takes place once every four years, cuts the block reward paid out to miners on the network by half. While a lower amount of coins entering circulation is a welcome development for BTC holders as far as price is concerned, the same can’t be said for miners that will bear the brunt of a smaller reward in a highly capital intensive operation.
A report from CoinShares examining the impact of the halving on miners suggests that only a handful of miners will remain profitable, contingent on the price of Bitcoin remaining above the $40,000 mark.
Last year alone, the Bitcoin network recorded a 104% increase in hashrate, representing the amount of new computing power dedicated towards mining the cryptocurrency. The CoinShares report found that the average cost of production per Bitcoin for each miner post-halving would amount to $37,856.
Based on historical data around hashrate, miners appear to increase their capital expenditure in order to stay competitive in anticipation of the halving, after which they earn less immediate income.
This so-called “Bitcoin rush” that drives up mining difficulty in the months leading up to the event pushes out miners that are unable to keep up with the higher cost of production. Analysts estimate that the post halving hashrate could be driven up to as much as 550 exahashes per second (EH/s) by the end of 2024.
“This halving is likely to kick out those along the higher end of the cost curve, leaving those that remain who have ample liquidity with a great opportunity to acquire hardware at a discount,” noted
Accounting for miners’ cost of electricity, number of Bitcoin produced, computing power, and operational expenditure using their cash and reserves, the CoinShares analysts believe that Riot, TeraWulf and Cleanspark are best positioned going into the halving.
“Most of the pain miners will experience likely stems from hefty SG&A expenses which will likely need to be cut to remain profitable,” they said.
3. Bitcoin ETFs Launch Impact: Crypto Miners Brace for a Tumble
The recent proliferation of Bitcoin Exchange-Traded Funds (ETFs) has precipitated a significant tumble in Bitcoin’s value, a development that threatens to undermine the profitability of cryptocurrency miners, like Marathon Digital. As Bitcoin spot ETFs make their debut in the U.S., traditional investors are increasingly shifting from alternative cryptocurrency stocks towards direct exposure to Bitcoin. This shift has sparked heightened competition and a potential price war among fund managers, exerting additional downward pressure on Bitcoin’s price.
Impact on Crypto Miners
The drop in Bitcoin’s price directly affects miners by diminishing the value of the rewards they earn for validating transactions and adding new blocks to the blockchain. This process, known as mining, involves substantial energy consumption and investment in specialized hardware. As such, a decrease in Bitcoin’s value can render mining less profitable or even unprofitable for some operators. This situation might necessitate a reevaluation of mining operations, with miners potentially needing to explore more efficient mining methods, cut operational costs, or temporarily halt their mining activities if the costs outweigh the benefits.
Compounding these issues is the upcoming halving of Bitcoin mining rewards, a programmed feature of Bitcoin’s protocol designed to control its supply. This halving event, which effectively slashes the number of Bitcoins miners receive for their efforts, poses a significant risk to miner profitability, especially for those like Marathon Digital with high electricity costs. Consequently, the combination of falling Bitcoin prices and impending reward reductions is creating a challenging landscape for Bitcoin miners.
Despite these potential headwinds, some industry insiders view the launch of the Bitcoin ETFs as a positive development for the industry, as it could attract more people to the field. However, companies like MicroStrategy and Coinbase are grappling with their own challenges. MicroStrategy’s shares are trading at a significant premium due to uncertainty surrounding its substantial Bitcoin holdings and the risk of additional downside pressure. Similarly, Coinbase is also contending with challenges from emerging alternative payment methods and increased regulatory scrutiny.
As the market continues to react to the launch of the Bitcoin ETFs and adjust to the changing landscape, cryptocurrency miners will need to closely monitor the situation and adapt their strategies accordingly in order to maintain their profitability in these turbulent times.