As has happened with every other type of currency and commodity, the Chicken Littles of the investment world are now yelling that the sky is falling, and that there’s no point in anyone getting involved in Bitcoin mining. Or at least not unless you have enough disposable income to invest in an industrial crypto mining setup.
Now while it’s entirely true that all the easy Bitcoin cash is a thing of the past, that doesn’t mean that there’s no money to be made. What people are forgetting is:
- Digital currencies are new and very volatile
- Technology eventually meets user demand
- Energy production methods are improving, driving down the cost of electricity
How Bitcoin Mining Works
You can earn Bitcoin by using your computer to solve a puzzle. The quicker you can solve that puzzle, the more likely you are to earn a Bitcoin, which are only released once every 10 minutes or so.
The first Bitcoin miners used their home computer for mining. After that came the hobbyists using GPU rigs to mine at an even faster rate. Eventually dedicated mining rigs, such as the AntMiner S9, were built to industrialize Bitcoin mining.
Hobbyists vs. Professionals
Looking from the outside in, it would appear that Bitcoin mining is now completely dominated by huge companies with massive financial backing. And to a certain extent that’s true, but it’s still not a valid reason for not mining for Bitcoin.
Well, for example, one of the largest industrial Bitcoin mining operations just went out of business, losing millions. That means their investors lost millions, which will leave a lot of people with a bitter taste in their mouth when it comes to putting their money into digital currencies.
That’s a win for the smaller operator.
Rig Prices Will Drop
Another win is that the cost of dedicated mining rigs has stabilized, which is what happens before the cost of consumer electronics start to drop dramatically.
A dedicated ASIC mining rig might cost you US$1,400 right now, but that could quite easily drop to US$700 because there’s more competition in the Bitcoin mining market. Remember when a VHS player cost US$800? It only took a few years for the retail price to drop to $500, and then $200 and then $100.
You then need to factor in human ingenuity. There’s somebody out there working to make Bitcoin mining more affordable and efficient than ever for the smaller guy. That’s how these things work.
Alternative Energy Sources
One of the biggest factors in running a profitable Bitcoin mining operation is keeping your electricity costs to the bare minimum. The big mining operations in China are all run on free electricity generated by solar farms, so every cent they make is almost 100% profit.
But the advances in solar technology in the west – thanks in no small part to Elon Musk – means that bigger parts of the US grid could swap over to solar power in the very near future. In fact, the US government might have no choice but to do just that.
Even outside of anything we’ve written so far, you still have the option of taking part in a mining pool. Now, most of these are based outside the US, but that doesn’t mean you can’t take part in one, but it comes with its own price tag.
The idea of a “mining pool” is that you share the task of solving the Bitcoin crypto puzzles using the pool’s combined computing power to solve the puzzles faster than if you were doing it on your own.
Once the pool earns Bitcoin the proceeds are then distributed to everyone who took part, minus any fees.
Anyone with access to electricity provided by solar or wind farms can really benefit from being involved in a Bitcoin mining pool.
Although the focus of this article is on Bitcoin, it’s also worth mentioning some altcoins, such as Skycoin.
Because with all the focus on Bitcoin it means that there’s still tons of opportunity in other cryptos that are growing in popularity and value every single day.
But only a tiny handful of people are paying attention to them, so there’s still massive opportunity in mining these cryptos in the same way you would have five years ago with Bitcoin.
Remember the digital gold rush is only starting, and there’s more than one type of digital currency worth your serious consideration.
The Bitcoin Bubble
Lots and lots of people jumped on Bitcoin as soon as its value pushed past US$10,000. Some people remortgaged homes, or took out bank loans to invest, which was absolute insanity.
But the value of Bitcoin is no more sustainable than the housing price bubble that collapsed Western economies in the mid 2000s. Experienced investors expect a crash, with Bitcoin devaluing to around US$250 each. It’s just a case of when this actually happens – it could be twelve weeks or it could be twelve months.
When this does happen – and a crash is inevitable – the greedier investors will be wiped out, many of them dumping their Bitcoin in an attempt to mitigate their losses. Bitcoin will become very affordable again, but only for a short time.
The simple truth is this: People who are brand new to Bitcoin mining are getting started every single day. They just ignore the people who tell you that it “can’t be done”, because they’re already busy doing it.