Most people have seen the dramatic fall in the price of Bitcoin over the last few weeks, and that drives the question, how do we profitably mine bitcoin during extreme volatility?
When you’re unsure of what to do with the Bitcoin that you are awarded for completing transactions on the blockchain through your bitcoin miner, you always have the option of immediately selling, in order to avoid the volatility altogether. There is a second option available, which is to hold the Bitcoin you were awarded, and hope that the price rises in value.
This option should only be taken if you are sure that the price of Bitcoin is going to rise. No one can really know if the price is going to rise, of course, but we can take calculated risks based off our individual trading strategies. For example, if the price of Bitcoin has fallen and you really believe it’s not going to go any further, this may be a time to start holding onto your newly awarded Bitcoin, in hopes that the price will rise.
It’s interesting to see that even those that mine bitcoin, instead of purchasing it, must make trading decisions. Some may sell immediately, others may hold. You must take one of these two options, or even a blend of the two, possibly selling your awarded Bitcoin immediately during bear markets, and holding onto your awarded Bitcoin during bull markets, for example.
Don’t go into bitcoin mining thinking that you don’t ever have to worry about the Bitcoin markets. Think about your business plan regarding bitcoin mining and figure out what the best plan of action is.
Now that you have addressed the very important issue of deciding whether to sell or hold your awarded Bitcoin, one of the next questions to ask yourself is, how do I earn more money mining bitcoin? There are many factors to consider when making a proper plan to increase the profitability of your bitcoin mining operation. The cost of energy to power your mine, the cost of the miners, and future government regulations are all important to think about.
Why Does it Take So Much Energy to Mine Bitcoin?
One of the most important aspects to creating a profitable bitcoin mining operation is dealing with the high cost of energy. Why does it take so much energy to mine bitcoin, you ask? Great question! When the average bitcoin mine is powered by an average energy source, such as electricity from a power plant, it becomes difficult to profitably mine bitcoin.
The cost of energy is high, and the amount of Bitcoin you are awarded for processing bitcoin transactions within the blockchain through your bitcoin mine is low. The two have a history of canceling each other out, or even costing you money to operate your miner.
We don’t really know why energy costs so much (the basic rules of supply and demand, probably), but we do know why it’s not entirely profitable to use average energy sources, which is mainly due to the small amount of Bitcoin you are awarded.
They key to running a profitable bitcoin mine is to lower the cost of energy. The best way to do this is to utilize energy sources that are in excess. For example, hydro dams create electricity for their grid, but there are points in time where that grid cannot fully consume the massive amounts of electricity which are being produced. During these times, hydro dams may shut off their operations. Their electricity isn’t being purchased, so why run the hydro dam?
In this situation, the company that operates the hydro dam could take a much more profitable approach. Instead of turning off the hydro dam, they could activate their already-installed bitcoin mine, and power it from the excess energy that the dam is producing.
This approach can be taken with many other energy sources: wind turbines, ocean turbines, solar panels, even fossil fuels. This is a profitable way to power a bitcoin mine and a great idea for increasing the profitability of an energy source by adding a second revenue stream. It’s always nice to add some diversification to a business plan.
Liquihash specializes in creating and managing bitcoin mines that are powered by excess energy sources. The mine can be owned by the company that owns the excess energy source, or you may choose to allow Liquihash to build and manage their own bitcoin mining operation on the excess energy source, while paying you a regular royalty. Want to learn more? Check out our website by clicking the button below.