Crypto Mining vs. Investing: What’s Profitable at the Current Rates?

With the current crypto prices, electricity rates, and mining difficulty, investors should think hard before committing their capital to mine instead of buying crypto.

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Once upon a time, you could mine one whole Bitcoin (CRYPTO:BTC) in a matter of days with one underpowered computer. Now, even the most potent rigs made up of expensive GPUs cannot even get you one-tenth of a Bitcoin in a month.

However, that doesn’t necessarily mean that mining Bitcoin has become unprofitable on principle, even at the current down-trodden price. But at such a low price, wouldn’t investing in Bitcoin make more sense?

Mining vs. investing

Bitcoin is currently trading at about $48,859 per unit, which is a 38% drop from its most recent spike. However, in light of the current conflict, the price is expected to go down further. From a mining perspective, the lower the price goes down, the more unprofitable (considering the cost of electricity that goes into it) it becomes. This is relatively straightforward.

However, a miner doesn’t have to sell their Bitcoin as soon as it’s mined at the current price and may hold it just like an investor. But there are pros and costs of mining. The main pro is that, apart from buying the mining rig, which is still tiny compared to buying one whole Bitcoin, the price is spread out over the course of months, even years.

The main con is time. Mining takes a lot of time, especially if your goal is to get one full coin before selling, which can easily take years with one rig (even if it’s the most powerful one). Further complicating the matter is that the more Bitcoins are mined, the more complex and time-intensive mining for new coins becomes. It’s a macro factor that impacts you, but you can’t control it.

It may take you eight months to mine one-tenth of a Bitcoin with one $17,000 rig and about $2,450 in electricity. At this rate, you might not even recover your investment in years.

And if you use the same amount to buy Bitcoin when it’s low and possibly some other cryptocurrencies, your chances of making a profit in less than a year are much higher.

Investing in a miner

If you don’t have that amount of cash and you are also not sure about mining or buying the asset directly, a middle ground is investing in a miner like Bitfarms (TSXV:BITF). This gives you exposure to mining capability, which is exponentially more powerful than what a single mining rig can offer you. At its current hash rate, the company can mine hundreds of Bitcoins a year.

Considering its cost projections for each Bitcoin mined ($6,900), the company will likely stay profitable from its mining business, even if Bitcoin drops another 50%.

The stock is currently trading at a 61% discount from its 2021 peak, and even if it just reaches that point again in the next bull run, you can easily double your capital.

Foolish takeaway

The crypto bear market may not last long, or it may experience a long period of stagnation or dipping if the international market sees more uncertainty stemming from the Russia-Ukraine war. The best time to buy would be when the dip fully matures, and the closer to that point you can buy, the better.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool owns and recommends Bitcoin.

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