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Reasons behind investing in bitcoin mining and HOW TO DO IT

Laura Spinaci
16 min readOct 17, 2023

Transforming bitcoin mining in ESG Corporate Governance Strategy and Investment Product which overlap Financial Services, Energy, and Technology fostering a Geopolitical Transformation.

Bathhouse Data Center in Brooklyn, New York

In this article I walked through the difference between investing in bitcoin vs different digital asses vs bitcoin mining, adding profound videos and documents (from accredited sources), for those who would like to dive deeper into bitcoin mining as an alternative and hard asset investment ESG compliant in line with Impact investing principle and EU Corporate Sustainability Reporting Directive (CSRD).

Bitcoin mining, and bitcoin mining as an investment are greatly misunderstood. The aim is to bring some clarity with metrics and auditable resources.

Bitcoin Minining Concil August 2023

There are different ways to invest in bitcoin mining that do not imply huge capital investment and mining expertise. In this article, I wanted to explain how to do it, starting by explaining the difference between investing in bitcoin vs bitcoin mining.

Before starting, although I’m glad to share my experience and connect, these are not investment advice. Everyone should do her/his research and make decisions based on specific personal, or business conditions, goals, and interests.

INTRODUCTION

There are plenty of reasons to invest in bitcoin and bitcoin mining, and why now (Q4 2023/2024) is the best moment to do it, but if you have only four minutes rather than reading this article (where I’m going to explain it more granularly starting from bitcoin itself), I would suggest watching the teaser of Dirty Coin, a short film by Alana Mediavilla-Diaz, that sum up gracefully why bitcoin mining is the rare example of sustainability across the three dimensions of a circular economy, which are economic, social, and environmental.

https://vimeo.com/dirtycoin

INDEX

  1. Why invest in bitcoin vs other digital assets
  2. Why invest in bitcoin mining vs directly bitcoin
  3. Why invest in bitcoin mining vs (DCA) Dollar Cost Average
  4. How to invest in bitcoin mining without being a professional Miner
  5. How to select a reputable miner: risk assessment and metrics
  6. How to select the right mining investment product
  7. Why now is the best time to invest in bitcoin mining
  8. Learn about bitcoin mining industry: documents and videos

1. Why invest in bitcoin vs other digital assets

Did you see Dirty Coin teaser above? if it isn’t still not clear why bitcoin should be considered separate from other digital assets, then keep reading my articles, Bitcoin Internet of Value and Bitcoin Value proposition and use cases, or follow what highlighted Fidelity Asset services, which manages $4.5 Trillion from a total of 43 million investors, in their very recent analysis:

Traditional investors typically apply a technology investing framework to bitcoin, leading to the conclusion bitcoin as a first-mover technology will easily be supplanted by a superior one or have lower returns. However, as we have argued here, bitcoin’s first technological breakthrough was not as a superior payment technology but as a superior form of money. As a monetary good, bitcoin is unique. Therefore, not only do we believe investors should consider bitcoin first to understand digital assets, but that bitcoin should be considered first and separate from all other digital assets that have come after it.

Following what Fidelity said, bitcoin is a monetary good, a store of value because is scarce (only 21 million), in an increasingly digital world. Bitcoin, like no other digital asset, is the most secure, decentralized, sound digital money any “improvement” will necessarily face tradeoffs.

To the best form of money and monetary good, I would humbly add another angle. Not only bitcoin is the best form of money and monetary good, but it is also important to evaluate Bitcoin in terms of the underlying technology, its infrastructure, and the base layer.

Bitcoin is not yet a superior payment technology, like Amazon was not the superior form of e-commerce in the marketplace, while the logistic infrastructure was under construction. Amazon’s logistic infrastructure is like Bitcoin’s base layer (yes, the one inefficient with only 7 TPS, transactions per second that is so stable, secure, and resilient, that you could build the worldwide payment infrastructure on top of it!) How many years did it take for Amazon to build its infrastructure? 25sh?

Lightning payment network, and the other layer 2 and layer 3 solutions, are like the digital services built on top Amazon’s logistic network, with servers worldwide, applications, and merchants.

Bitcoin base layer is growing decentralized, worldwide, like the internet in 1998, while other blockchains are trying to reach global adoption through a patchwork of heterogeneous technologies, with incompatible foundations-based governances, where the level of decentralization is not algorithmic but established by human beings, with unfeasible interoperability between them.

Bitcoin base layer is 14 years old, Layer 2 payment protocols are only 7 years old, and some of them are even way much younger. The not-yet-superior payment network already transfers value globally, connecting part of the globe never connected with the international financial system before, at a fraction of the cost, allowing almost real-time micro and macro payment. Yes, replacing the inefficient financial infrastructures run by central banks and governments across the globe, with only one worldwide, purely peer-to-peer, decentralized, publicly accessible, superior payment network, might take 10/20 years still.

2. Why invest in bitcoin mining vs directly bitcoin

There are professional traders and everybody else. The job of professional traders is to make short and long-term profits out of any assets they invest, then some people want to speculate because digital assets opened up a low entry barrier type of investments, sometimes really profitable. Eventually, some people invest in digital assets because understand, or see the technology’s long-term vision. Based on these three macro categories people interpret digital asset investment in different ways.

For a person who believes that bitcoin will grow infinitely in value, investing in bitcoin is like investing in a property in a prestigious area of an economic hub of an international city (as Micheal Saylor said). Those people will hodl (terms that refer to the crypto community strategy of not selling, well explained in the video below) forever or won’t spend their bitcoins as long as possible, but rather borrow fiat money against bitcoin, using them as a commodity. Apart from those types of investors, bitcoin is considered a long-term investment because the appreciation in value is by design due to the scarcity (only 21M) combined with supply-demand dynamics.

Video by @KristineCranley

So, why invest in mining rather than directly in bitcoin? The two are not mutually exclusive. A person in their 70s who needs some liquidity out of their assets, might not be interested in the bitcoin long time horizon, unless for an inheritance to their family, or donations to the next generations. Others with less risk appetite might prefer to invest less, in less time, and get some yield regularly, as an alternative form of dollar cost averaging (investing a fixed fiat amount regularly, regardless of the share price). Others don’t want to go through an exchange, or KYC, to buy bitcoin and prefer earning them through mining.

Some people want to mine themself but can’t for many reasons, one of them is electricity cost too high that would not make them profitable. Mining profitability depends on the hardware model, electricity and bitcoin price, and miners' numbers on the network.

https://www.youtube.com/@kristine-noahsbitcoin795

Investing in bitcoin mining combines high profitability with a high cause. Mining is fostering the electrification and civilization of underdeveloped areas of the world, securing the network, contributing to decarbonization, and incentivizing the usage of sustainable sources of energy (because it is the cheapest) and stabilizing the grid reducing energy bills cost, bringing back jobs in rural areas, reducing pollution, all of that ESG compliant

https://lekkerfeelingfilm.com/

Mining investing dynamics, capital allocation challenges, and huge opportunities:

Source: https://www.youtube.com/@Blockstream

3. Why invest in bitcoin mining vs Dollar Cost Average

Bitcoin dollar-cost averaging (DCA) is a strategy that involves buying a fixed amount of bitcoins (1 bitcoin = 100M Satoshi, Sats) at regular intervals, regardless of its price.
The goal is to smooth out Bitcoin’s price volatility by buying it in small increments over time. This method is popular among long-term investors who want to build a position in Bitcoin without exposing themselves to the risk of buying it all at once at a high price.
To implement a Bitcoin DCA strategy, an investor can set up a recurring buy order with a cryptocurrency exchange, or use a DCA app that automates the process. The frequency of the purchases can be daily, weekly, or monthly, and the amount can be adjusted based on the investor’s budget and risk tolerance.
One advantage of bitcoin DCA is that it removes the emotional element from investing. Instead of trying to time the market and make decisions based on short-term price movements, investors can focus on their long-term goals and stick to their investment plans.

  • Bitcoin mining is the most profitable solution (ROI) for long-term investors looking to hold for +3 years
  • By investing in mining, you are obtaining a portion of newly mined BTCs that accumulate over time, and after 2+ years the accumulated yield surpasses what would have been invested directly in BTC.
  • It is a form of passive income generation with daily returns, whereas investment in BTC directly generates no yield
  • It performs better than DCA in BTC during market downturns and price dumps (with mining you keep accumulating new BTC every day, with DCA the value of investment simply goes down)

4. How to invest in bitcoin mining without being a professional Miner

Mining is capital-intensive, if 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 profitable, it is a high entry-barrier type of industry, still blurry because nascent, controversial, due to the lack of transparency, and extremely misunderstood.

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.

5. 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. Five 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 is profitable and has been able to select the right source of energy, data center site, the right people, and manage effectively the operations.
  • 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, 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 counter-party 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 (https://bitcoinminingcouncil.com/bitcoin-mining-council-advisory-members/).
  • Transparency in retrieving public information: team members, data centre locations, services provided, social media presence, and all the data above already listed
  • The mining company should know and understand its cost structure such as costs and expenses the company incur to be able to adopt a viable and sustainable business model, in the long term, whether and when to pivot or proceed. You want to make sure there is clarity about that, at least on paper, before signing a contract that will take years to ROI
  • A mining company should possess ownership of the land where its operations are established. The involvement of third parties in the supply chain determines the level of risk assumed. When lands are public or leased, the future of the mining site is contingent upon the landowner, who may choose to terminate the lease at any time.
  • Assess whether the infrastructure is mobile or fixed. Mobile data centers can be deployed rapidly and relocated if there is a need to transport your mining rigs elsewhere due to unforeseen circumstances.

Although there are no metrics set in stone from which to deduct miners' trustworthiness, but these criteria I would say could be used as the foundation for due diligence and personal risk management assessment.

6. 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, there are several solutions that allow you to earn bitcoin. There are solutions that 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 them set up
  • you want to be able to trace the daily reward from the mining pool
    to your wallet using a blockchain explorer, for example: https://www.blockchain.com/explorer/addresses/btc/1Q2SP1KU4e6Lf7bVMzBJkDXtRPi6XXpNnY
  • you want to be able to try it for free before, to see how it works, how to monitor the reward daily, 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 like for example this: https://hashrateindex.com/rigs
  • you want to know how the rewards are calculated for example using this table: https://medium.com/@GoMining/vetokenomics-gomining-rewards-details-238d78484bf5
  • You want to be easy to sell back the hash rate to the marketplace (many second markets take place on Telegram)
  • There are platforms that sell hash rates as contracts NDF non-deliverable forward for a limited period of time like 120 days. Others open to accredited investors request a threshold, and a limited period of time for qualified investors interested to split the value of the token bought, then tradeable on the secondary market.
  • 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
  • Mining rigs plus hosting:

7. Why NOW is the best time to invest in bitcoin mining

Due to current market conditions, hash rate price, mining difficulty adjustment, depreciation hardware price, next year‘s bitcoin halving, and bitcoin spot ETF approval, now is the best time to buy bitcoin miner machines, and consequently invest in mining site development, hosting turn-key, or simply hashing power.

Following the China Miner ban, hashrate hit ~100 EH/s. It took over 2 years for hashrate to increase by 4x to 400+ EH/s. The reflexivity of the Bitcoin price means it can increase much faster than hashrate; following spot ETF approval Bitcoin realistically increases by 4x increase in as little time as two months. The inability of hashrate to grow at the same pace as price creates an opportunity for incumbent Bitcoin miners to make enormous profits.

New Generation Mining Hardware + Low-Cost Electricity provides the opportunity to significantly outperform a simple buy-and-hold investment strategy. Now is arguably one of the best times we’ve seen to start mining bitcoin.

Source: https://data.hashrateindex.com/chart/asic-price-index

There is less technological advancement risk to new mining hardware purchases becoming obsolete. Apple, Samsung, and others are first in line for the very best microchips. This means only an estimated 3x and 2x improvement in mining hardware efficiency over the next four and following four years.

Bitcoin Council Minining HW Efficiency August 2023

Trust Dr. Adam Back who invented Hashcash (a type of proof of work used in the bitcoin mining process), the protocol followed by miners to mine bitcoin, about:

bitcoin price, and mining bitcoin favorable conditions.

Source: https://www.youtube.com/@Blockstream

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.

If you still don’t feel comfortable investing in bitcoin mining, try 3 steps to mine bitcoin for free, test how it works, and verify daily BTC rewards without being a professional miner.

1) Trust no one, test and verify by yourself. Mining for free and see daily rewards coming into your wallet

2) You can monitor where BTC rewards are coming daily, from the mining pool into your wallet with a blockchain explorer

3) After seeing how it works, and how to verify the daily BTC rewards, 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.

Starting from +10k investment I can walk you through the process if you want to start mining bitcoin quickly and securely getting bitcoin rewards after 24h, please feel free to get in touch.

If you are an accredited investor and want to evaluate either a site development investment or hosting turn-key or have specific requirements and questions I would like to connect: https://linktr.ee/lauraspinaci_da

Connect on X — @lallispinaci; Linkedin — /in/lauraspinaci;

8. Learn about bitcoin mining industry and investing

Articles to understand better the bitcoin mining industry, circular economy, why bitcoin should be considered separately from other digital assets and start to see the vision of transforming mining in ESG corporate governance strategy and consumer product:

If you want to start mining bitcoin quickly and securely getting bitcoin rewards after 24h, please feel free to get in touch, or connect.

If you are an accredited investor and want to evaluate either a site development investment, or hosting turn-key, or have specific requirements and questions, you can send me an email, or connect: https://linktr.ee/lauraspinaci_da

Connect on X — @lallispinaci; Linkedin — /in/lauraspinaci;

Bitcoin
Bitcoin Mining
Investing
Proof Of Work
Energy

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Laura Spinaci

Written by Laura Spinaci

78 Followers

Business Transformation, Sustainable Data Centers, Impact investing

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