Your portfolio is only as good as its foundation.
Why stable operating costs, reliable electricity, and political stability are critical in the current market and what to watch out for.
With the advantage of dollar cost averaging into Bitcoin by mining, and the potential for capital gains on rig hardware over time established in previous articles, the question turns to maximizing the return for purchasing mining hardware.
In the most basic sense, there are 3 foundational aspects that contribute to operational profitability:
#1 High uptime
A critical part of mining Bitcoin is actually successfully mining Bitcoin, and at the end of the day, it all comes down to minimizing downtime. It doesn’t matter what $ per kWh rate you pay if your rig has no uptime. If your rig is not running, it is creating zero cash flow.
#2 Stable political jurisdiction
If your rig is not in a secure facility or a stable political jurisdiction, it can be stolen or confiscated. Your rig is an asset in and of itself. From April 2020 to March 2021 a single S19 increased in value from $2,220 to $11,850, a 5.3x or 433% increase. Your mining rig is a derivative of Bitcoin itself, be sure to run it and secure it suitably with the correct partner.
#3 Reliable and fixed cost electricity
Bitcoin becomes increasingly interesting in an inflationary environment. Due to the nature of power purchase agreements with utilities, energy grids, and hosting providers, miners can lock in their electricity rate for a number of years. This means you can keep your operating expenses fixed while prices of virtually everything else, including Bitcoin are likely to be increasing over time.
The table below outlines how a mining rig’s operating margin, daily revenue, and daily profit increase as the price of Bitcoin increases holding mining difficulty equal.
The above example is holding mining difficulty equal and increasing the price of Bitcoin. If the price of Bitcoin began trading at $80,000 tomorrow, this would be accurate, but in reality, the price of Bitcoin would likely be climbing more slowly and mining difficulty would be slowly climbing with it.
Below are the same price points, but it assumes mining difficulty has doubled from August 29th, 2022. While this certainly will not happen overnight as millions of Bitcoin ASICs would need to be manufactured, sold, shipped, and plugged in overnight, in the long run, mining difficulty will likely continue increasing.
Outsource data center construction and operations with as few intermediaries as possible
Just like with holding Bitcoin itself, don’t trust, verify. Unlike simply holding your Bitcoin, building and operating a mining data center at scale is not an easy task. It requires a vast array of experts in an industry where few exist. On top of building a Bitcoin mining facility from the ground up, you must build it in the right location with access to ultra-cheap electricity and in a stable political jurisdiction.
In addition, building a Bitcoin mining facility is costly and takes time. This is money that could have been spent purchasing more mining rigs and time that could’ve been spent mining Bitcoin before the difficulty increases and the block subsidy gets cut in half (2024 halving).
Mining Bitcoin is not as simple as dollar cost averaging into Bitcoin from your bank account. There is operational risk and required expertise that comes with any successful business venture.
Blockware’s Bitcoin Mining Hosting Model
By outsourcing the data center construction and operations to Blockware Solutions, you are building your Bitcoin mining portfolio on a solid foundation. As noted below, the hosting model has been proven to be easier and more effective than building and operating your own data center.
There are risks mining Bitcoin, as there are risks in any business, but mitigating risks requires finding a trusted partner with a good reputation. Blockware has Power Purchase Agreements (PPA) secured and there are no additional counterparties between you and your mining rigs. Blockware has been highly selective as to where Bitcoin mining facilities are built, and the Blockware executive team has met and worked with key political leaders in Kentucky to work and make Bitcoin mining welcomed for years to come.
All content is for informational purposes only. This Blockware Intelligence Report is of general nature and does consider or address any individual circumstances and is not investment advice, nor should it be construed in any way as tax, accounting, legal, business, financial or regulatory advice. You should seek independent legal and financial advice, including advice as to tax consequences, before making any investment decision.