Good Afternoon from BitOoda!
We thought it would be helpful for our readers to reflect on the past year in the BTC mining space. 2019 had its up and downs due to various factors, such as access to cheaper electricity, transitions from older to newer machines, and BTC price movements.
We believe there are three key sources of uncertainty in Bitcoin mining:
1. The cost of electricity is the biggest determinant of expenses for a mining operation,
2. Difficulty / network hash rate determines the miner’s share of total Bitcoin being mined in a given period, and thus how many Bitcoin the miner has earned in that period, and
3. The price of Bitcoin determines the miner’s revenue based on the number of Bitcoin earned.
After a slow start to the year, both the Bitcoin Network Hash Rate and Difficulty grew in 2019, owing to increased power capacity being dedicated to the space and an upgrade cycle of newer, more efficient machines. In this environment, we believe two key developments at BitOoda can help miners manage their risk more effectively:
With the BitOoda Difficulty™ swap, miners can protect themselves against unexpectedly large increases in difficulty, where the payoff of the contract helps offset potential losses resulting from drastic shortfall differences between actual Bitcoin mined vs. the miner’s projections. As we mentioned in our previous piece, “What’s up with Difficulty”, we have successfully executed these trades on behalf of our clients, resulting in a realized profit to offset BTC shortfall. At BitOoda, we believe it is critical for miners to protect themselves against these unique business risks.
Furthermore, we recently unveiled the BitOoda Hash™ physical hashpower contract. This product enables miners to sell their capacity, thereby mitigating difficulty and price risk, and they can redeploy the contract proceeds to self-fund their mining capacity growth. Meanwhile, investors can buy the contract to essentially acquire Bitcoin at a discount to spot, without physically owning / operating a mining operation. We believe this is especially attractive to alpha funds, but also to anyone who has a constructive view on Bitcoin and wants to get long at a discount.
At BitOoda, we strive to provide the global ecosystem of miners with solutions to all their needs, whether it’s through risk management and hedging, co-location services, or sourcing hardware. If you are a miner and would like to learn more about how BitOoda can help you can optimize your strategy, please reach out to firstname.lastname@example.org.
Some additional mining data for your consumption: