How to Navigate the Turbulent ASIC Market

There are basically 4 different ways to fund your ASIC purchases. I definitely could be missing some but a lot of income/funding falls into one of these categories;

1. Cash flow from outside ventures or revenue streams. Some examples of this would be cash flow from a small business (for us this is our hosting business).

2. W-2/1099 (regular job). Pretty self explanatory, this is the majority. Cashflows can be really high and consistent for this group.  

3. Investment dividends or growth. Taking profits from one part of your portfolio and investing it into a new part. That new part being Bitcoin miners.

4. Bitcoin mining cash flows. Using the Bitcoin you mine to buy more miners

The problem is, I believe that selling Bitcoin to purchase more hashrate is a mistake. But then that begs the question "Well how am I supposed to grow my fleet without being able to use the cash flows being generated from my Bitcoin miners?".

There are a couple of different perspectives for this that I will go into that require different strategies.  

Perspective 1 - Public mega miners: Generating massive amounts of Bitcoin, mostly unprofitably. Investors are willing to overpay in the form of stock/shares. Selling their Bitcoin to buy miners really doesn't affect them much because the shares are so liquid. The hashrate that they have under management is given a value by the stock market that is reflected in the stock price. They can easily sell equity to fund investment into miners. Typically this is how a lot of them have done it. For them, selling equity to fund miner purchases is the go to strategy.

But the major downside to this is during a bull market the public miners can sell less equity (because they have higher valuations) but have to pay a higher price per TH. Look no further than all the machine orders last bull market at $100+ per TH! When machine prices are low like right now the equity/valuations of the public miners is also lower. Meaning they have to sell more equity to purchase machines. 

In short, they are always at the mercy of the cyclical nature of Bitcoin mining.

The next two parts are where 99.9% of people fall into so keep reading!

Perspective 2 - Private Miners: This would be Wilson Mining. The equity in our business is not very liquid. It doesn't have a market to trade on, nor do we have any desire to sell it anyway. This is where we need to be thinking about how to buy miners that doesn't involve selling the Bitcoin we mine. Since our business doesn't have equity that is liquid, the best thing we can do is hold our profits in Bitcoin. 

So we need to generate cash flow outside of self mining. For us this is hosting. We can use our hosting profits to buy miners and not have to sell the Bitcoin profit to continue to expand our fleet. I think this model works really well and private miners will continue to do it. We get a seperate line of revenue that gets to operate within the same business. 

Because of the hosting side of our business we are less exposed to the cyclical nature of mining. But it still absolutely effects us and is something we have to deal with as a business in order to continue growing. 

Perspective 3 - Small pleb miners. Our customers and home miners. This is the most interesting group I think because all 4 cash flow options are available to them. We have customers who own small businesses and use some of the cash flows to purchase miners. We have customers who work (we assume) high paying W2 jobs that have disposable income to invest into miners. A portion of our customers are already wealthy and are taking profits from other parts of their portfolio to get some exposure to this new asset class. 

Because this groups cash flows are generated outside of Bitcoin mining it makes them very anti-fragil to the market conditions that Bitcoin loves to give us. When mining profitability is low they can capitalize on cheap miners from their outside cash flows. When mining profitability is high they are capturing all the upside from the miners they own and then waiting for market conditions to turn, to then buy more miners when they are cheap again. All of this done with cash flows that have no correlation to mining. 

The point I'm making for anyone who isn't a public miner, is that having cash flow outside of self mining is your cheat code to capitalize on the cyclical nature of mining. 

Historically we are at the time in the cycle for mining where it is very profitable to be buying miners. Profits are slim the months after the halving but they always turn around as the supply shock causes the price to appreciate rapidly.

 Hashrate/infrastructure can never keep up with price (Look for another blot post about this soon). Capitalize on this part of the cycle with cheap miners, ard reap the rewards of the bull market.

Secure your miners & hosting here.

Cheers,

Wilson Mining