Is it better to invest in Bitcoin by buying directly from the market or invest in mining equipment such as ASICs? This article will explore both options and compare the pros and cons of these strategies.

Bitcoins vs. ASICs in ROI

We should compare the ROI of these options in both dollar value (metric for traditional investors) and also just the amount of Bitcoin stacked (a metric of true Bitcoin believers and maximalists that see the Bitcoin price going up forever and Bitcoin becoming a global financial standard)

Direct Bitcoin investment ROI

The ROI for direct Bitcoin investment is straightforward in dollar terms:

ROI = (Current BTC Value - Initial BTC value) / Initial BTC value

For example, if you bought 1 Bitcoin for $58,420 and its value rises to $116,840, your ROI would be 100%. In Bitcoin bull market conditions the price can go up even 10x, so the possibility of making ROI of multiple hundred percent in dollar terms is completely viable.

In terms of the amount Bitcoin acquired or "sats stacker", historically looking the sooner you buy the Bitcoin, the better. The profitability of ASIC miners depends on their ability to generate more Bitcoin than their purchase and operational costs combined. Consider this scenario: you invest 1 BTC in acquiring miners, but after three years, they only yield 0.9 BTC. Despite any potential appreciation in Bitcoin's value, you've lost 0.1 BTC on your initial investment. In this case, simply holding Bitcoin would have been more beneficial.

Mining ROI in dollars

Calculating dollar ROI for mining with ASIC is a bit more complex and has different factors that affect it:

ROI = (Total BTC Mined * Current BTC Price - Initial investment - operating costs) / Initial investment

Then there are multple factors that can make significant fluctuations in this ROI:

• Initial cost of the ASIC miners and other mining infrastructure

• Electricity costs, which can vary a lot depending where mining operation is located

• Mining difficulty (historically on average a 4.6% up per month)

• Day-to-day Bitcoin price fluctuations

• Pool fees

• Equipment failures and other maintenance costs

• Halving and it's impact in cutting the block reward

In the short term, running a mining operation with good ASIC hardware can provide steady returns in dollar terms, assuming somewhat stable conditions, reasonably priced electricity, and a steady price or an uptrend. However, long-term profitability can vary a lot on the factors mentioned above.

Again if you think in terms of Bitcoin acquired or sats stacking - the idea of investing in ASICs depends a lot in the hash price going up radically month-over-month, because otherwise a better ROI than just buying Bitcoin with your initial investment. In this scenario, you have to consider thinking about all the costs etc. in bitcoin to calculate the ROI. Let's first look at the concept of hashprice and its potential explosive increase in a short timeframe.

Understanding the hashprice and its potential increase

Hashprice represents expected value of mining rewards per unit of computing power (usually expressed in dollars per terahash per second per day).

Three main factors could lead to an explosion of hashprice:

1. A halving of network hashrate: This is highly unlikely, as it would require a significant portion of miners to stop operations simultaneously. Also historically the Bitcoin network hashrate has grown almost exponentially.

2. Increase in transaction fees: While possible, dramatic fee increases are not guaranteed. This could change however in a Bitcoin bull market scenario.

3. Bitcoin price doubling or tripling: Historically, this has been the most common cause of radical hashprice increases in bull market conditions.

So, among these scenarios, the doubling or tripling of Bitcoin's price in a relatively short timeframe is the most likely factor to radically increase the hashprice.

Mining ROI in Bitcoin

If we think ROI in Bitcoin acquired for the option of buying ASICs and running a mining operation, the hashprice would need to go up dramatically while the mining difficulty would continue increasing in steady uptrend to make this option somewhat viable.

We can use the calculator at https://smokinghopium.io/ to see if a break even or ROI is possible.

If we assume a strong bull market of 4 years with an average monthly price increase of 15% and a modest difficulty increase of 4.6% per month, we get the following calculations for a 200TH miner that costs around 4000$ currently. The electricity price is at $0.081/KWh in the beginning, the pool fee is 1.5% and we assume a 98% uptime. The inflation rate is 4% which increases the electricity a bit price year by year.

We can see that in BTC terms, the breakeven is never reached and the actual ROI is negative -14%. The Bitcoin price at the end of this bull run is a whopping 17,7M USD.

If we set the average monthly price increase to 20% and keep the other variables same, the miner will reach break even in 12/2027. Return on investment is 3.6% in Bitcoin terms and Bitcoin fiat price is staggering 73M USD.

Conclusion

As a conclusion we would recommend buying Bitcoin direcltly if you are a sats stacker. If you have access to relatively cheap energy, running a mining operation can be profitable in Bitcoin, but this requies a mega bull-run of Bitcoin - while this is certainly possible, it's not a 100% likely scenario.

In dollar terms, buying or mining will most likely yield a profit on a long enough timeline.(Some good conclusion text here)