What is more profitable , mining bitcoin or buying bitcoin?

[mikeywith]

This is a million $ question , pretty hard to answer and does depend on many factors, but thought I'd share my personal experience here , after having read this

Time for aggressive expansion is when pricing is low to lowest.

I want to validate whether this statement is valid or not.

on March of 2019 I made this topic > https://bitcointalk.org/index.php?topic=5118139.msg50064209#msg50064209 , I was bascially wondering if I should use all my BTC to buy mining gears.

took me a while to decide, got the gears around end of April / start of May.

BTC price was at about 5k , the miners did cost me about 250$ each as oppose of 200$ because I couldn't meet the MOQ for that 200$ price as i decided not to go all in (something I do regret a bit)

so I will make a simple a calculation here to demonstrate whether I made a good or bad move in terms of profit , first we need a few numbers to work with

1- Miner cost in btc = 250$/5000$ =  0.05 BTC
2-Average Income to date (2 months) = 0.027 BTC not 100% accurate but pretty close
3-Current Miner price ( if want to sell today) = 500$/11600$ = 0.043 BTC

total BTC value as of today = 3+2  = 0.043 + 0.027 =  0.07 BTC made of 0.05 BTC with a net profit of 0.02 BTC or 250$ turned to 812$

too good to be true ? yes indeed because simply there is no power bill in the calculation, and I haven't sold any of the BTC earning. but let's do the same calcs and pretend I was paying 6 cents per kwh which seems to be the average in many places.

assuming an S9 consumes 1200w per hour or 1.2kw meaning at least 1.72$ a day or 50$ a month, but then I would probably have to cash out monthly and pay the bill , so the first cash out would have been the end of may when BTC price was at about 8000$ which means in the first month I would have lost 50$/8000$ = 0.00625BTC

the second bill would have been paid by end of June of price at about 11000$  = 50$ /11000$ = 0.00454 BTC

total bill = 0.01 BTC

1- Miner cost in btc = 250$/5000$ =  0.05 BTC
2-Average Income to date (2 months including electity bills at 6 cents per kwh) = 0.027 - 0.01 = 0.017 BTC
3-Current Miner price ( if want to sell today) = 500$/11600$ = 0.043 BTC

total BTC value as of today = 3+2  = 0.043 + 0.017 =  0.06 BTC made of 0.05 BTC with a net profit of 0.01 BTC or 250$ turned to 708$

fiat wise, your 250$ would have now worth = 580$
Mining wise, your 250$ now worth = 708$

There are a lot of other factors involved which I can't really cover all, because many of them simply depend on your luck, the time you sell your earning, a few gears go bad, difficulty spikes/drops , supply and demand on mining gears.

but overall, IMO during a bear market shift, when prices start to rise,  mining BTC is in most cases more profitable than simply buying BTC, which may lead me to think that investing in mining after the bull run has already started may be a terrible idea.

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[philipma1957]

Every mining farm has complex decisions to make.

Power cost
Power cost
Power cost.

Cooling
Energy density.
Cleaning the gear.
Keep gear safe from elements
Keep gear safe from vandals
Keep gear safe from thieves

Tax laws in country.

Mine and hold
Mine and sell

Buying gear.
Wiring building.

The list goes on.

In USA I can insure profit with mining.

By finding a way to get

Power under 3 cents

Or better yet. 50-50 coin spilt with power supply / host.

Solar can achieve this in USA NJ
West coast state of Washington has cheap power.

Tax laws allow favorable rules to expand.
But once shit gets hot like now certain profit by expanding gear becomes not true.

I went from 70th to almost 1 ph from oct 4 to July 4.

But

. 70 th oct
110 th dec.
220 th Jan
400 th feb
500 th March.
550 th April
600 th May
600th June

Then multiple orders and purchases from profits above. Right before coins went high.

2x t17 in hand will add
2x a1041 in hand will add

2x m20s. One is lost in transit
1x t3t39th innosilicon told me it ships next week

1x t3t50

Almost every piece of gear is paid off more then 40k

And with over 800th 1/2  the coins come to us at no cost.

400 th earns 400 x 0.00003267 btc a day.

So mining in my set of circumstances makes sense .

Much more then buy and hold.

As I did not have 40k when this started.

I now own 40k in gear with buy solar that could sell for 60k


My initial investment was 8 s9s cost of 4800.

So 4800 in coin in dec was about 1.5 coins which are now worth 17000

While buysolar and I have 40k in gear worth about  60k

I owe around 6k so 60k-6k = 54k profit.  All tax sheltered legally due to USA law.

The warehouse owner has about 2btc and 30ltc plus improvements to his warehouse.

I folded most of my 1/2 the coins into the gear.

So mining in my case is a no brainer.

That 400 th earns .01305 daily or 145 a day.

Since we have 6k to pay off that is about 40days. Or aug 13.

None of the gear gain is taxable until I sell it.

So on Aug 13th

I will have turned

8 s9s into

23 s9
25 l3+
8 m10
1 m20s.   And 1 lost one m20s
1 Inno t2t24th
1  Inno t3t39th
1 Inno  t3t50th
1 a921
2 a721
2 a1041

All gains are not taxed due to plowing it back into gear.

Amazon does this to avoid tax and grow.
Law works for USA miners.

[WhyFhy]

Mining, Timing on purchases can factor in a lot on this weight though.
There are situation where you could never roi and buying BTC would have been easier
Buying miners at the top of a marketswing. I was running a op proposal in 2017 and backed out bacause I saw a bad potential marketswing and didnt feel like being sued by a bunch of guys for convincing them to buy $3,000 Asic's that might be worth half that in a few weeks. If I would have bought in this situation the roi would have went from like 40 days at the time to like 700 days if i recall correctly

Its easier to buy BTC ,but more profitable to mine it.
The real question is ,Is it worth all the stress to mine to turn BTC0.05 into BTC0.06
I'd say yes.Its something to do! Sometimes challenging!
These are the funnest numbers ive ever played with in my entire life that directly benefit me.

[Artemis3]

Mining is potentially more profitable, but demands much more work. And learning can be expensive, once you know it things get easier. Also size matters a lot, it is far more complicated the larger you become, its basically an industrial business.

Holding is very simple, but it needs discipline (ie, hold, not spend). Sometimes the miner is already committed with the equipment bought and can do nothing but wait until it ROIs, can be helpful with certain individuals.

[philipma1957]

Mining offers more control but is more work and more discipline.
You need to make six month diff projections.
Very hard to make a 6 month diff projection.

But I have some techniques for spotting lulls like I did in Oct 2018.

Believe it or not there is a potential long term diff flatness coming up again.

It involves s9 retirement.

I have been working on modeling s9 shut downs vs adding new gear.

We know price is driving diff to all time highs.

But the 2018 oct 4 numbers were mostly all s9 gear

And we were at 57,000,000,000th
We are now at 67,000,000,000th

We know some s9s broke
We know some s9s are at 80-85 watts a th.
We know some s9s are turned off.

And we know

70
60
50
40 watt th gear is being added.

We will reach the point that s9s are worthless at a diff of 16t and a price of 10k
So when we get there s9s drop off and 50 watt gear adds on.
We go flat in diff.   So watch for 16t diff and 10k price as it will mean a diff lull.

The caveat is 16t diff with 10k price.

If we are at 15k when we reach 16t diff and we are approaching the  1/2 ing then price may scoot up  to

A new high and diff could move onwards and upwards.

I do all this modeling over and over.

[mikeywith]

Great analysis as always, but i have one issue with this speculation, which is you don't take production speed into calculation.

We know that all manfutures are doing pretty bad in terms of speed and quantity regarding the new gen miners, i do not have an exact view on how this could affect all these numbers but it only make sense that it does affect these numbers to a good extend, overall the retirement of S9s could be way to far as coins price increase and not enough 40-50w th gears are being added.

I agree to the theory of diff flatness as there is noway a million  7nm gears will hit the market at once, but somewhere along the line with even 50% of the hasrarte running at 40w th a huge amount of old gears will have to shut down before more new gen miners come online, a few months of flatness is very reasonable but only after the halving.

[philipma1957]

Great analysis as always, but i have one issue with this speculation, which is you don't take production speed into calculation.

We know that all manfutures are doing pretty bad in terms of speed and quantity regarding the new gen miners, i do not have an exact view on how this could affect all these numbers but it only make sense that it does affect these numbers to a good extend, overall the retirement of S9s could be way to far as coins price increase and not enough 40-50w th gears are being added.

I agree to the theory of diff flatness as there is noway a million  7nm gears will hit the market at once, but somewhere along the line with even 50% of the hasrarte running at 40w th a huge amount of old gears will have to shut down before more new gen miners come online, a few months of flatness is very reasonable but only after the halving.

I took speed into consideration.  we know they can crank out gear at high speeds. medium speeds low speeds

When buysolar went to China to consult with  Canaan/Avalon he watched the assembly line build A841's

they can build a lot of gear very quickly.  There is no question bitmain could flood the market with s17 pros if it chose to do so.

They flooded the market with s-5's to beat down spondoolies
they flooded the market with s-9's in spring of 2018 helping to crash BTC prices in 2018 yet continue to grow hashrates from April to Oct of 2018 as prices tumbled .  When miner finally caught on the over purchased prices crash more and the diff finally fell.

the difference between then and now is the s7 was pretty much under 25% of the network when prices were dropping and bitmain was dumping is s9's

while I estimate s9's are at least 60% of the network as I type.

There was close to 50eh in s9 or older gear last oct. 
There still may be 45-50eh of it mining now.

 that is a lot of m20s and s17 units along with innosilicon t57 and avalon a1041 gear. that needs to be built and shipped.

[gentlemand]

You need some guts to buy BTC in the first place. You need plenty more to lay out for hardware and its set up. On top of that you're doubling, tripling or quadrupling the unpredictability when you throw in difficulty changes, power bill increases, hardware failure, losing your premises.

It's something that would simply never has and never would occur to me as a worthwhile idea. I'm glad those who do can make it work for them. Rather them than me.

[philipma1957]

You need some guts to buy BTC in the first place. You need plenty more to lay out for hardware and its set up. On top of that you're doubling, tripling or quadrupling the unpredictability when you throw in difficulty changes, power bill increases, hardware failure, losing your premises.

It's something that would simply never has and never would occur to me as a worthwhile idea. I'm glad those who do can make it work for them. Rather them than me.

Power cost
Power cost
Power cost

If you are at 4 cents  since 2012  you turned profits.

Most people can't get that number  for them  it is harder to earn via mining.

[WhyFhy]

i can get 049kwh but distribution  levels out much higher. , ive been considering llcing a private electric company as this seems to be only way to really get things truely under 059kwh thats probally over my head tbh.

[philipma1957]

Yeah getting the 4 cent rate all in means large farms.

Most guys beyond hobby but not big can’t do it.

I am up to 150kwatts using about 110 kwatts of it.

My deal is 50-50 coin split.  Which is not 4 cents. It is always 50-50

So when times are tight like December 2018 I do better then the warehouse host partner.

When times are good like now July 2019 the warehouse host does better.

Finding cheap power is not an easy task.

Our first power cap was 60-70 kwatts.

We are now at a 150kwatts cap.

If coins do as well as they are doing we will add 900 amps at 240 or about 215kwatts.

That would be the max about 365kwatts.

Say 100 m20s or 6.8 ph.  That would be at least 1 more year.

It would also be well past the 1/2.

[WhyFhy]

if im ever in that neck of the woods id like to check it out , it would be interesting too see all of the tie ins. Is it worthwile to bank andresell power? Or would the few hours of savings it creates not be worthwhile?

[philipma1957]

banking  power can work but  it is complex as to when to bank and when to spend what you banked.

[mindrust]

Most of the time mining is a loser's game.

There is one occasion where its better than just buying hodling and that's if you have free and electricity and bought your miners nearly for free. Even then either you'll eventually run out of miners because they'll get broken or the network difficulty will be so high you won't be making any money.

If you are after money, don't mine, Buy & Hodl.

If you want to help with the security of the network, buy a few but don't really expect any big returns.

[philipma1957]

Most of the time mining is a loser's game.

There is one occasion where its better than just buying hodling and that's if you have free and electricity and bought your miners nearly for free. Even then either you'll eventually run out of miners because they'll get broken or the network difficulty will be so high you won't be making any money.

If you are after money, don't mine, Buy & Hodl.

If you want to help with the security of the network, buy a few but don't really expect any big returns.

why did you post this?

it is not true for anyone that purchased over 13500 and plenty of people did purchase at that price.

granted it is true if you purchased at 3200 dec 2018

but it is simply true sometimes  for mining and simply true sometimes for buy and hold.

I did far better mining and growing from dec 2018  then  buy and hold would have done.

I mined and folded coin back  growing from  70th 5(s9s) and 2500 usd used to buy more gear and parts.   to 730th.

All the gear is paid off and I am mining  0.02 btc a day.

Yeah my mine and grow plan did better then buy and hold.

my power is cheap but not free.  some gear was cheap.

So yeah  I could have 1 btc if I bought and held  3200 to 10400

or 3200 cash and miners combined  are now 730th in miners actually  870th in sha 256  and 11gh scrypt.

with 730th on line
and  3gh on line.

but in about a week

it should be

860th

11gh  as I had some technical diff.

My gear is worth way more then 1 btc.

I would guess the 8 m10  =  6000
I would guess the 2 m20s = 4000

I would guess the 20 s9s  = 6000

1 s17
1 t17
1 s15
1 t15
1 a921
1 inno t2 t24
1 inno t3 t39       easy 8000

puts me at 24000  vs 10,500 if I held. not counting  25 l3+ and other gear.

So in my case I was way better off mining and folding coins back into gear.

[mindrust]

That's why I said "most of the time"

It really depends on your current situation. Some people don't even have access to the latest hardware.

Just ask 10 people, 9 times out of 10, you'll get the same answer: Hodling > Mining

Nice to hear that it worked for you, for most people it really didn't.

If those people DCA'ed instead, the chances are higher than %90 for them to be in the profit zone.
https://bitcoin2day.net/buying-bitcoin-has-been-profitable-98-2-of-the-days-since-creation/

[mikeywith]

https://bitcoin2day.net/buying-bitcoin-has-been-profitable-98-2-of-the-days-since-creation/

That article is a bit misleading, the timing of buying and selling BTC is crucial, I do tend to agree to your statement for the most part , however !

the timing of entering the mining industry is key point , starting in a bear market is more likely to be profitable, however buying the gears in a bull market where gear prices are inflated is not profitable - buying the coins instead would be much more profitable.

Let's do some simple math.

Invested 19k to buy  1 btc on Dec 2017 , now after 577 days current status in fiat = 10500$ or  -44%

Invested 19k to buy S9 at that point S9 was selling for 4000$ of-bitmain  19k/4k =  4.75 S9 or 66TH worth of hashing power with free electricity and based on today's difficulty, you would make 1.09BTC

now of course difficulty was lower than today so you would make more in BTC but then given the power cost and assumig you would have to cash out to pay the bills, and without having to go though the math like i did in the OP , it's obvious that you would end up with less than 1BTC in your wallet as of today, and the best case scenario would have been break-even + mining efforts.

also the above numbers are based on the assumption that you never had a problem with your miner throughout the duration of 577 days (unlikely )

so to sum this up , let's agree that there are 3 types of trends in BTC

1-Down trend.
2-Up trend.
3-Sideways.

mining during an up trend = more profitable  > based on the numbers i provided in the OP.
mining during  sideways  = more profitable > based on the simple fact that mining generate passive income in BTC while hodling does not.
mining during a down trend is a terrible idea> based on the 19k example.

now of course since it's not easy time the market, luck will always play a huge role, but there is something about mining that only a miner can understand, it's a way of being really involved in BTC , buying it and hodling then only watching the price goes up and down is nothing different from buying Gold or Apple stock, but mining is fun , mining is life.

[philipma1957]

Sideways mining =$$$     you only need  a good power deal since :

diff is flat
price is flat
profit is flat

This tends to make good prices for used gear. Most of the s9's I purchased in Dec and Jan were under 250usd with psu included.

I saw it coming last Oct  and really did well with my business plan.
Right now we could be shifting to a down turn.
Which is indicated by bitmain's decision to stop selling to brokers and open the sales  at a stiff premium.

With
830th btc
11gh ltc

and a 50 50 coin spilt I will be netting 130 usd a day.  It would be nice if diff stays good for a while.
I may add a third m20s. We have to wait and see.