In July 2021, I embarked on an ambitious Bitcoin mining journey by pre-ordering my first Bitcoin miner. Fast forward to today, and I’ve invested a whopping $161,000 into purchasing 28 Bitcoin miners, averaging around $5,700 per machine. At the time, it felt like a shrewd move. Bitcoin was hovering around $33,000, not too dissimilar to its current trading range. I was optimistic, believing it had ample runway before it soared to its peak of $69,000 four months later, only to retrace its steps back down.
Best Decision at the Time
Reflecting on this decision, it’s still a toss-up whether it was a stroke of genius or a financial misstep. Since then, I’ve managed to mine about 3 Bitcoin. In contrast, I could have taken a more straightforward route by simply purchasing 5 Bitcoin on an exchange like Coinbase and tucking them away in cold storage.
Had I waited a couple years to buy miners, today’s landscape would allow me to acquire even more potent, next-generation miners, such as the S19k Pro 120 TH for $2,350 each. For the same amount I spent initially, I could amass 68 of these powerful beasts. In comparison, my current fleet ranges from machines with 90 to 110 TH of power. Averaging it out, each of my machines delivers approximately 97 TH or about 19% less power than some newer machines. With newer 120 – 141 TH machines in the market and the impending arrival of 200 TH behemoths (double my mining power), I’m in a race against time to mine as much Bitcoin as possible before my hardware becomes antiquated.
On the surface, this might look like a bad trade. Yet, I remain convinced that over time, I will have mined more Bitcoin than if I had opted to purchase 5 spot Bitcoin. However, this is not without its complexities and uncertainties.
I encountered several unforeseen hurdles along the way. Initially, I harbored aspirations of mining from the comfort of my home and later transitioning to an industrial facility. After upgrading my garage’s electrical capacity, I hit a roadblock – my utility provider refused to lower the cost of power, which stood at roughly $0.14 per kWh. This led me to squander about $24,000 between a fruitless garage build-out and equipment to hold the miners, eventually forcing me to relocate those 8 miners to a host charging $0.08 per kWh (42% less).
Another unexpected twist came from Compass Mining. After purchasing 20 miners, I encountered persistent delays in getting the miners operational. Currently, only 13 out of my 20 miners are up and running with them. With each passing day, I miss out on mining fresh new Bitcoin. I learned a valuable lesson to not place too many miners with any single hosting provider.
Benefits of Bitcoin Mining
Despite these unforeseen challenges, I still stand by my recommendation to start mining Bitcoin ASAP. Here’s why:
Inflation Concerns: If you’re worried about rampant inflation, Bitcoin is a must-have asset due to its asymmetric upside potential. Case in point, a Big Mac value meal now costs a staggering $18 in certain locations. As Bitcoin mining difficulty increases each day, it becomes tougher to mine, and the rewards diminish. So, it’s imperative to start as soon as possible, especially with only 9% of Bitcoin left to be mined.
Bitcoin Halving: Each day brings us closer to the next Bitcoin halving. Currently, around 6.25 Bitcoin are mined approximately every 10 minutes. Around April 2024, this reward will halve, and we’ll see only 3.125 Bitcoin mined approximately every 10 minutes. The scarcity factor drove my urgency to start mining ASAP.
Tax Benefits: Much like buying investment real estate, there’s depreciation value in purchasing Bitcoin miners. For residential rental properties, you can depreciate the asset over 27.5 years. For Bitcoin miners, it’s over 1-5 years depending on the accounting method. In my case, we are depreciating ~$32k per annum, which helps to offset my taxable income and contributed to my tax refund for the 2022 tax season. If I had simply bought spot Bitcoin, I would’ve missed out on these tax benefits. Additionally, operating a small mining business allows for deductions on certain expenses like Internet and electricity costs (consult your CPA; not tax advice).
Enhanced Returns: As of today, assuming a 2% difficulty adjustment, I’m turning a profit of approximately $1,974 per month, or $94 per month for each of the 21 miners that are online. This is a snapshot, subject to change based on various factors like difficulty adjustment, Bitcoin’s price (~$35,000 at the time of writing), electricity costs, and of course your miner being online.
This equates to an approximate 15% return on my $161,000 investment per annum. If all 28 miners were online, that’d be around $31.6k in profit annually, or a 20% return – far outstripping the typical 10% return in the stock market. Plus, there’s the added perk of not dealing with the headaches of property management, like fixing toilets.
My strategy is to continue mining through the next halving and up to the subsequent peak, which some predict could surpass $100,000 per Bitcoin. Timing the market is notoriously tricky, but my plan is to sell most of my older miners when demand spikes and supply tightens. Currently, supply is abundant, so if you’re considering mining, now’s the time to start. My goal is to offload these miners close to my purchase price, if feasible. By then, I hope to have mined significantly more than the initial 5 Bitcoins I invested in these miners.
So, to fellow enthusiasts and prospective miners, happy mining, and may your journey be as enriching and educational as mine has been.