Bitcoin and other cryptocurrencies have been on every investor’s lips recently, and it’s a polarizing subject. Some have started hedge funds solely dedicated to cryptocurrencies, while famous JP Morgan boss Jamie Dimon outright called Bitcoin a “fraud.” However, even JP Morgan couldn’t resist buying the dip in Bitcoin prices just days after Dimon’s comments.
But as you may know, there’s another way to get your hands on Bitcoin besides outright buying it at market prices: mining. Basically, Bitcoin miners lend their computer power to the Bitcoin network to build and maintain its ledger of transactions. In return for a miner’s computer effort, they’re rewarded with bitcoins. While this made early miners fortunes, the market is much more saturated than it was even a few years ago. As more miners join the network, it becomes harder and harder to mine a bitcoin.
This has led to a sort of digital gold rush. The better the computer you have, the more you can mine. A regular computer won’t be profitable anymore because of the minimal amount you can mine vs. the electricity it takes to run the Bitcoin mining program. In fact, this “digital gold rush” into bitcoin has caused some shortages of key computer components for companies like Nvidia and AMD. Some have even turned to buying computers specifically designed to mine Bitcoin – called “mining rigs.” The best of these can be bought for around $2,000, and will reportedly only break even after a year (at a Bitcoin price of $4,000).
In conclusion, if you’re willing to spend some money up front for a quality computer to mine Bitcoin, you could be profitable in about a year – assuming key variables like price and market for mining remain stable. But looking back on Bitcoin’s history, those are some big assumptions.