Why mine when you can buy?
Mining Bitcoin is a way to gain dynamic exposure to the Bitcoin ecosystem.
A question we at Nakamotor are often asked to defend:
Why is it better to mine Bitcoin rather than buy it outright?
Buying Bitcoin directly requires 0 carry cost, 0 operation, and you are only exposed to price risk. Why would anyone in their right mind want to go to the extra work mining it? In short, it’s a way to gain dynamic exposure within the Bitcoin ecosystem and capitalize on industries of scale.
We’ll answer with a few high points pulled from our pitch deck:
Mining Bitcoin is a way to have a cashflow generating asset tied to the growth of Bitcoin. Hard assets (ASICs + mining infrastructure) inside of a corporate structure allow a lot of optionality, tax advantages, or synergy with non-Bitcoin assets (e.g. oil & gas production). Many investors/companies are prevented from buying Bitcoin directly. Mining creates more options for exposure to the Bitcoin ecosystem.
Historically, mining has actually outperformed Bitcoin’s average ~200% CAGR. A miner who thinks strategically can enjoy periods of massive upside where the cost of “producing” a Bitcoin is dramatically under spot. A well-executed mining operation is expected to outperform a direct investment in Bitcoin over the lifetime of the deployment.
Miners trade price risk for operational risk. As miners budget on longer timelines (quarterly, annually, & project lifetime) the intraday/month price volatility is less important, and more so the aggregate annual profit.
Summer 2021 may go down as important to mining as the formation of OPEC was to global oil production. For North America, this means for the next 2 to 3 years we should see massive domestic growth of Bitcoin mining. This creates a once-in-a-lifetime opportunity to build in the space and define it over decades to come.
It is very possible that this current bull cycle might be the first time it still makes sense to deploy ASICs at the “top”.
The theme of 2021, 2022, and possibly 2023 is build-build-build. It’s more exciting than ever to be a Bitcoin miner as capital floods into the space.
Charlie Spears, Strategy
Big money moving in North America
Blockstream raises $210 million for their own ASIC production.
FTX buys LedgerX. Not too long before they buy the whole world.
On-chain metrics at full-send—
Capriole hash ribbon signal flips to “buy”
We’re at $50k and transaction fees still at rock bottom.