Mining VS Buying Bitcoins – Where will $10k get you ?

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As Bitcoin’s price continues to rise recently we’ve been getting a lot of emails from people who are asking if it’s better to mine Bitcoins or to buy them. Last year, when Bitcoin was initially covered due to the crisis in Cyprus, many people took up the “hobby” of home mining. At that time (April 2013) it was still possible to generate a nice amount of Bitcoins through mining at home with your CPU or even a graphics card. But since then mining has become much more difficult and today it’s almost impossible to mine at home without investing a substantial amount of money.

The question remains – if you had $10K to invest in Bitcoins today, would it be better to just buy Bitcoins with this money or use it to get mining equipment and mine them.

bitocin mining difficulty

So how much Bitcoins will $10K get you through exchanges?

Well if you’re going to buy Bitcoins that’s an easy answer. At today’s exchange rate you can get somewhere around 25BTC (I use CoinLlama to calculate the best possible price). So now the question remains can we beat this in the long run by mining.

Of course there is no simple answer to this since the question to is Bitcoin mining profitable depends on many variables such as electricity cost, the increase in mining difficulty etc. But for the purpose of this post I will assume that I live in Louisiana USA (this is the lowest cost per Kilowatt you can find in the US today).

Finding a good Bitcoin miner is quite the hassle

Since most of my money will be spent on my mining rig it’s important to choose wisely. The problem with many mining companies is that their products are out of stock most of the time and they create pre-orders, here is an example form KnCMiner. I don’t like this method since it’s just calling for trouble (e.g. Butterfly labs).  After searching some more online I found this pretty powerful 2TH/s Bitcoin miner from Bitmain which seems to be in stock.

Antminers4

how many Bitcoins can I mine with $10K ?

Now I’ll head up to my Bitcoin mining calculator and drop in the numbers, the only problem is that there are 2 variables which I’ll have to guess. The first is how much will the Bitcoin mining difficulty increase over time. The second is what will be Bitcoin’s exchange rate once my money runs out. Fortunately since I’m only comparing mining to buying and not testing for overall profitability I have no need for the second variable – meaning, I only want to see if I can get more than 25 Bitcoins through mining.

I will used up $8750 to buy 7 Antminer S4-B2 miners. On checkout I can choose to host my miners in a hosting center in China. This is probably recommended since it will allow me to avoid storing and cooling the miners myself (they are very hot and loud).  Another option would be to host and ship the miners directly to me. Seeing as the shipping costs would be ~$825 I may prefer to ship my miners directly to the hosting center (~$277 shipping cost). Even though the electricity cost in Louisiana (~$0.0977/KW/Hour) is lower than the hosting farm ($0.12/KW/Hour) I still prefer to ship the miners to the hosting center.

Total expenses up until now:

Miners – $8750

Shipping – $277

Hosting price per day – $4.587

Electricity cost – $0.12/KW/Hour = $2.88/KW/Day

So now that I’m all set it’s time to see how many Bitcoins I can get out of these babies. My daily expenses add up to $7.467 which mean I can run these miners for 130 days before I run out of money. I’ll put all of the variables into a Bitcoin mining profitability calculator and try to figure out how much BTC I’ll be able to generate.

The result….well it depends :) since some variables need to be guessed different calculators will show different results. However NONE of the calculators I used showed that I will make more than 25BTC through mining. Most calculators suggested I’ll make around 23BTC (almost head to head with buying Bitcoins) and some suggested I’ll make as little as 10BTC. I can’t say which ones are more accurate since many guesses are taken into account with these calculators. Keep in mind that there’s also a time factor where you get the money 4.5 months after you’ve made your initial investment.

mining earnings

So who’s the winner ?

I guess if you’re looking at mining as a long term investment than perhaps it can generate you more coins in the long run but it’s also much more risky. First of all miners can break down, and even if you host them somewhere accidents do happens. Also there’s no way to know how high or low will the Bitcoin mining difficulty reach so numbers can change drastically. If you want an immediate winner than I’d definitely go with buying Bitcoins instead of mining them.

Keep in mind that this post was mainly theoretical and there’s a lot of hassle and unexpected events I didn’t take into account (shipping delays mainly), but it should give you an idea about what to take into account before jumping into Bitcoin mining.

Ofir Beigel

Owner at 99 Coins ltd.
Blogger and owner of 99Bitcoins. I've been dealing with Bitcoin since the beginning of 2013 and it taught me a lesson in finance that I couldn't get anywhere else on the planet. I'm not a techie, I don't understand "Hashes" and "Protocols", I designed this website with people like myself in mind. My expertise is online marketing and I've dedicated a large portion of 99Bitcoins to Bitcoin marketing.

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32 Comments on "Mining VS Buying Bitcoins – Where will $10k get you ?"

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DHARANI KUMAR REDDY
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DHARANI KUMAR REDDY

Dear friends

I have investment of about 6 million dollars. Can I enter to mining as power cost is very low in India and I am planning to have contract with big ASIC comapnies. Suggest me can I go for mining or Trading.

Zsofia Elek
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Zsofia Elek

Hi Dharani, before starting Bitcoin mining, I suggest you reading this article: https://99bitcoins.com/bitcoin-mining-profitable-beginners-explanation/

Nigel
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Nigel
Forgive me If this is a stupid question but let’s say you went the mining route with the 10k USD you had to spend. After 10 months you would have mined 25 BTC. So isn’t it the same as you buying 25 BTC ? because you still keep all the appreciation bitcoin would have made in the span of 10 months. So isn’t is the same as you owning 25 BTC? So after 10 months it would be just like you bought 25 btc with 10k USD plus you get to keep whatever future BTCs the miners produce. Please correct… Read more »
Zsofia Elek
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Zsofia Elek

Hi Nigel, it all depends on the price of the Bitcoin. It can happen you get your money back in less or more than 10 months.

MEEM
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MEEM

I have been using Genesis Mining, and with US$10K you definitely get as much power to consider them as the third alternative: do not buy, do not hardware mine, but use a cloud mining service like theirs.

Shafar Ahmed
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Shafar Ahmed

coins-miners is a fraud

Robert Van Kirk
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Robert Van Kirk

Our hosting center ASICSPACE offers co-location for prices as low as 11 cents/kwh, the cost of which is all-inclusive. See our website: http://www.asicspace.com/.

Do our low prices change the conclusion of your study?

Ofir Beigel
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Ofir Beigel

I haven’t checked different spaces or mining contracts for that matter. I believe that mining contracts may still be profitable but they pose different issues of possible fraud that I will cover in a different post.

Robert Van Kirk
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Robert Van Kirk

We’re not doing mining contracts, we’re doing co-location. :)

Tarious
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Tarious
Great article Ofir. I want to bring additional information to this discussion. I am a hobbyist miner, and I routinely buy Bitcoin when it is under $300.00. I currently have 12 Antminer S4’s, and 12 S3’s hosted at my home. I find Bitmain to be a very legitimate company and they stand behind everything they sell. My power cost is .08/KW. My miners typically pay for themselves, and all associated costs by 4 months. I expect my miners to be profitable for 1 year or more. For this reason alone, mining makes sense for me. In addition, the miners produce… Read more »
Ofir Beigel
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Ofir Beigel

Awesome addons thanks for sharing!
You talked about Namecoin also, can you explain a little more about that ?

Tarious
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Tarious
Ofir, I mine with BTC guild. This FAQ excerpt will provide a better explanation than I can offer: Q: What is a Merged Mining/What is Namecoin? A: Merged Mining is a process where other coins can be mined simultaneously with Bitcoin, without losing any speed/efficiency. BTC Guild participates in merged mining with Namecoins. Namecoins were the original “alternate coin”/”altcoin”, where the Bitcoin technology was adapted to a system with a purpose. Today, Namecoin is used as a decentralized DNS system for registering domains with the ‘.bit’ suffix. These can only be accessed by users who use a DNS server which… Read more »
Man
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Man

You could mine bitcoin for 130 days and then sell the hardware and buy bitcoins?

Ofir Beigel
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Ofir Beigel

Yes you can and that should be taken into account as well, thanks.

Evan Nelson
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Evan Nelson

Seeing things so clearly, in numbers, makes me reconsider my decision of starting to mine Bitcoins. I have about $15.000 and want to invest them in Bitcoins. I was thinking about mining but seeing all the costs associated with this makes me want to just buy Bitcoins. It’s fast, simple and safer. I want to thank you for writing this post and explaining some of the dangers and costs of mining Bitcoins.

Tony R
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Tony R

We need more posts like this, not only within this forum but externally to educate those that are intimidated by this new revolution. Great job!

John Jackson
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John Jackson

Definitely recommend buying bitcoins as opposed to mining them. There is too much competition and the difficulty is immensely high which makes it impossible to guarantee a profit from miner. Coupled with the fact that many miner companies have gone rogue or were straight scammers (looking at you BFL) attempting to mine for profit instead of just a hobby is extremely risky.

Nick
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Nick

I wonder why there are still people trying to mine Bitcoins from home. It’s clear that you need a lot of money to start and that the whole thing is risky so why are people still doing it? Do you have an explanation for this, Ofir?

Matt
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Matt

To heat the house up here in the north. My electrical heaters won’t return anything, but a few miners in the basement and garage pays for themselves plus the energy. I even prefer a bit outdated miners as they are cheap and easily found in my own region

Daniel
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Daniel

Heh, a great way to utilize the waste of energy! My computer keeps my room really warm, but what about the summer, a great method to get heatstrokes ;)

Ofir Beigel
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Ofir Beigel

I think some people treat mining as a “hobby”. Also if the Bitcoin price explodes than you may make bigger profits from mining than from buying

crazydownloaded
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crazydownloaded

You should use a REAL profit calculator instead, like https://coinplorer.com/Hardware/Simulate (mine, but the best still). My advice: DO NOT MINE! Buying is WAAAAAY a better deal right now.

Ofir Beigel
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Ofir Beigel

Thanks for the link to the calculator !

Julia Martins
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Julia Martins

Thanks for writing this, Ofir!

Ofir Beigel
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Ofir Beigel

you’re welcome :)

Alexander
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Alexander

WOW! Had no idea about that mining farm accident! Thanks for sharing that link! This made me realize that it’s not smart to invest money in mining and it’s much more safe to invest directly in Bitcoins. I can’t believe that facility didn’t have proper protection in place so that fires or other accidents wouldn’t happen.

Damika Irving
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Damika Irving

I’d rather use $10k to buy Bitcoins then to risk them investing in equipment, hosting and anything else needed to mine Bitcoins. A couple of months back I bought Bitcoins worth of $2k and now they are worth $2300 so it’s clear that this is the best way to do things. If I had more money now I would buy more Bitcoins.

Owen
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Owen

Good miners are so expensive! Do you have any other suggestions of miners besides the 2TH/s Bitcoin miner?

Ofir Beigel
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Ofir Beigel

I had several but they all seem to have sold out :)

Gerard
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Gerard

OMG! Who is still thinking about mining Bitcoins from home? I mean, people, it was good a while ago but now you will lose money almost surely. Mining is a really dumb idea and no one should do it. Such a waste of time and money and you are never sure you will even break even!

Bentley Ross
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Bentley Ross

Man, this is a detailed post with costs and returns! I love it! You’ve done a great job!

Ofir Beigel
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Ofir Beigel

Thanks!

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