How To Invest In Bitcoin Mining Farms & Other Digital Assets

Can Bitcoin mining farms be a profitable digital asset?

To many, Bitcoin mining is a complicated process with a dirty secret (although the energy consumption is not so secret anymore). However, Bitcoin mining farms can offer plenty of opportunities for digital asset investors.

We look at some reasons to invest in Bitcoin mining farms and ways you can add these digital assets to your portfolio.

What Are Mining Farms?

A mining farm is a data center equipped with specialist hardware designed to mine Bitcoin and other cryptocurrencies.

In the early days of crypto mining, this was commonly done by individuals on a single computer, but as crypto has become more mainstream, the complexity of crypto mining has increased greatly. To reflect this, individual miners have been replaced by mining farms and pools that group hardware together to increase computing power.

So, what exactly does this mining involve, and why is it so important?

Mining forms the backbone of cryptocurrencies, helping to verify transactions and introduce new coins into the system.

 

digital asset investor - blockchain

In the case of Bitcoin, transactions are grouped into blocks and encrypted with a complex puzzle. A block is then released into the system roughly every ten minutes and miners compete to solve the equation, earning a Bitcoin reward in the process.

As Bitcoin has become more mainstream and the currency’s value has skyrocketed, this has tempted more and more people into mining. The computers have also become more efficient, and the competition to solve the equations and mine each block is fierce.

To regulate how many blocks get mined each day, the system automatically adjusts the complexity of the equations based on how much computing power is in the system, so the more miners there are, the harder the blocks become to mine.

The competition and the increased difficulty of the puzzles mean that it’s impossible to win the race with just a single piece of hardware. Instead, you’ve got to bring lots of computer power together, and one answer to this is mining farms.

With this growth, mining has become big business, offering different options for investors to build digital assets.

Why Are Bitcoin Mining Farms an Attractive Digital Asset?

One of the key drivers in crypto investments is volatility. It puts many people off, and it draws many people to digital currency.

You just need to look at the day-to-day value of Bitcoin to see this.

The question is, what do you do if you see the long-term value of crypto but don’t want to be involved in the wild swings of holding cryptocurrency?

This is a very young industry. At present, you don’t have quite the same tools available to you as a digital asset investor as you might if you were investing in stocks. That is changing quickly (a prime example is the Bitcoin ETF) and there are ways for investors to diversify their portfolios and build their digital assets.

Bitcoin mining farms are an attractive investment because, unlike cryptocurrencies, they offer something tangible. Crypto is underpinned by a huge amount of infrastructure and technology. The businesses that provide this are entities with employees, assets, and shareholders.

This fits much more closely with traditional investment and is a way to gain exposure to crypto without being tied into the day-to-day volatility. While the infrastructure and technology supporting crypto are closely tied to the industry, they don’t exist in a vacuum. They have implications for other industries too, so there is a greater level of protection.

The Future of Mining

When considering an investment in mining farms, we’ve got to look at where the future of mining is headed. If you keep even half an eye on crypto news, then you’ll know that mining consumes a huge amount of energy.

If Bitcoin were a country, it would almost be in the top-30 countries globally for energy consumption. The vast majority of this consumption is due to the mining process, and worse, much of that energy is completely wasted (lots of computers compete to solve the puzzle, but only one wins the race — in theory, all the other computers’ energy is wasted).

On the face of it, this doesn’t make mining farms seem like a great investment!

There are two important points to consider though:

  • The proof-of-work mining system is an important element of the key principles behind many cryptocurrencies — it’s unlikely to switch to another system.
  • The industry is very young — every industry has challenges and they find ways to overcome them through innovation.

Rather than seeing energy consumption issues as a reason not to invest, they might spell opportunity for digital asset investors. There are already lots of innovative businesses working in the background to make mining more efficient. Take our BLOQ PARKS, for example, they allow mining farms to set up quickly, with huge computing power that runs on more efficient systems and makes use of renewable energy.

digital asset investor - bloqpark

For mining farms and technology innovators that can improve their efficiency, the rewards are huge, and the same is true for investors who hold their shares as digital assets.

Different Ways of Investing in Bitcoin Mining Farms

So, how can you gain exposure to Bitcoin mining farms as part of your digital asset strategy? Here are some different ways you can invest in Bitcoin mining.

Invest in Publicly Traded Mining Companies

The simplest way to invest in Bitcoin mining farms is by investing in the mining companies themselves. Many of these are now established companies with big revenues — Riot Blockchain posted revenues of $31.5 million in its recent quarterly financial report.

Other options such as Hut 8 Mining Corp, Marathon Digital Holdings Inc, and Bitfarms Ltd offer a simple way into crypto mining farms and show similar growth.

Outside of holding cryptocurrencies, this is one of the more direct ways of gaining exposure to crypto. Since Bitcoin mining rewards are paid out in Bitcoin, there’s likely to always be a close correlation between the performance of the coin and the value of the business.

 

Invest in Companies with an Interest in Crypto Mining

If you want to distance yourself slightly more from the currencies themselves, then investing in companies that provide infrastructure and technology to the mining industry is an excellent option.

Many of the companies working on making crypto mining more energy-efficient fall into this category, and there’s lots of innovation going on. These businesses still give you plenty of exposure to crypto but could be a much more stable digital asset.

digital asset investor - mining

 

For example, if public discontent grows about Bitcoin’s environmental impact, it may harm the coin’s value, but it could lead to the value of shares in a company that’s pioneering green mining going up.

 

This allows you to be very strategical with your digital assets. It’s hard to tell which cryptocurrencies will go up and down, but you can look at a company’s business plan, technology, and vision to see whether it’s likely to be successful.

For companies that solve the nagging problems of cryptocurrency, there’s a lot of growth to be had.

ETFs [150]

Digital asset investors will approach their investments in different ways. Some will look to make a wide range of investments, others might be looking for something more targeted.

What’s important to remember is that any investments in crypto are speculative. This is why most financial experts will advise people to only invest a small fraction of their portfolio and spread their risk.

One way of spreading your risk is through an ETF. These funds track an index, sector, or commodity, allowing people to buy and sell shares much as they would with regular stocks. ETFs aren’t fully established within cryptocurrency just yet (the Purpose Bitcoin ETF is the first step, but it only tracks Bitcoin futures), but they are more established when it comes to Blockchain (the technology behind crypto).

These ETFs, such as Amplify Transformational Data Sharing ETF (BLOK) have holdings in big-name mining farms like Riot Blockchain Inc, Bitfarms LTD, Hut 8 MNG CORP, and many more.

Investing in these ETFs isn’t going to give you the massive growth investing in a single company could, but it also won’t give you the massive lows that are equally as likely. This allows you to invest in innovative mining companies while spreading your risk.

Conclusion: Digital Asset Investor

One thing that can put people off from investing in digital assets is the perceived lack of options available. Holding cryptocurrency isn’t for everyone, but mining farms and the technology they run on can be a good alternative option.

As crypto becomes more mainstream, there are more and more options for digital asset investors, and mining is one area they should be considering.

There are some highly publicized issues Bitcoin mining needs to overcome, but for the right companies, this should be seen as a big opportunity. Getting in on these digital assets early could be extremely beneficial.

 

Learn more about our crypto mining farms!