If you manage to buy low and sell high, that makes you either a brilliant or fortuitous investor and that’s great. However, if you know a bit about investing you’ll also know that ‘dollar cost averaging’ into an investment position is an approach favored by some of the very wisest financial minds. Mining bitcoin is the ultimate in dollar-cost averaging, because you’re building your position 24 hours a day, 365. Once you’ve paid back the cost of your miner, you’re just printing money.
Also note that when Bitcoin goes up, the cost of your miner is catching up, and you can sell your miner with almost the same margin as you would sell your coins.
There's also one more interesting strategy, described by our CEO in our Telegram community group @cyberianmine to help leverage your hodled assets and benefit from both - Bitcoin growth and Bitcoin mining:
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Hey there Cyberians! Just wanted to share some late night thoughts:
1. I know that some of you are devoted HODLers, just as myself. And it always gives a bad FOMO-like feeling when you have to spend your coins, be it hosting or anything else life demands.
I always recommend hodling all the mined coins and pay for miners and the hosting fee from some other fiat source, so one could scoop the whole movement when the next Bitcoin bull run kicks in.
2. Some clients are often valuating which is more profitable - Hold Bitcoin vs Getting a Miner. As it turns out, it's not necessary to pick only one. You can do both.
I would like to share one of the strategy that I personally and some our clients already use. Crypto-backed loans on Nexo.io (custodial) or aave.com (on-chain DeFi). If you plan to hold your crypto long-term, you can take a loan in fiat using your crypto as collateral.
Here's an example of how it may work with Nexo in a simplified fashion:
Let's say I have a 10000€ worth of Bitcoin, that I want to HODL+Mine.
1. I put them onto one of the above platforms, then I can get a fiat loan of 5000€ onto my bank account.
2. I use the 5000€ to buy a miner with 12 months ROI.
3. I can set up miner to send payouts to the Nexo account.
4. To pay for hosting I can use the extra mined coins on Nexo to get another small loan, enough for hosting.
Scenarios after 6 months:
Worst-case scenario: Bitcoin falls by 50% (Your coins are worth 5000€)
My Bitcoins are sold, my debt is paid, but I still have the miner (pessimistic scenario: price of miner has fallen by 50%) + the mined coins (2500 -50% = 1250€).
If I just held Bitcoin, I would lose the same 5000€. Moreover, if Bitcoin continues to descend I can go even lower. So this crypto-loan can be considered as a stop-loss order at 50%.
Hodl: 5000€ | Hodl+Mine: 3750€ |
Nothing changes, Bitcoin stays flat
I still have 10k€ worth of Bitcoin (minus 5k frozen as collateral) + miner (5000€) + mined coins (2500€). At any time I can close my debt by selling the crypto on Nexo. And I can sell my miner for the same 5k on the Marketplace.
Hodl: 10000€ | Hodl+Mine: 12500€
Bitcoin ups by 50%
I have now 15k€ worth of Bitcoin (minus 5k frozen as collateral) + miner (7500€) + mined coins (2500€ + 50% =3750€).
Hodl: 15000€ | Hodl+Mine: 21250€
Bitcoin skyrockets by 3x
I have now 30k€ worth of Bitcoin (minus 5k frozen) + miner (15000€) + mined coins (7500€).
Hodl: 30000€ | Hodl+Mine: 47500€
The mathematical expectation is positive. Moreover, the longer period we take, the better the results of Hodl+Mine will be in all four(!) scenarios. If the Bitcoin doesn't fall in the next few months from the start, probability of higher result than that of HODLing is constantly increasing over time.
Of course there are some other factors that have to be counted in. Things like loan interest rate, miner's efficiency that influences the correlation between bitcoin's and miner's prices, difficulty change, new model releases and so on. Also we skip the strategy, where along with BTC growth one can take another loan and one more miner along the way and get the compound exponentially rising mining earnings.
In any case, I believe that's a very nice strategy for all HODLers and miners to explore.
Disclaimer: This is not a financial advise, just a thought experiment. Please do your own research.
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