Topic: Mining Hardware as a Hedge (Read 427 times)

I've begun to try and think of total return in BTC, as opposed to some mix of BTC and fiat. I know this is hard for a lot of individuals like myself that don't have very large stakes in BTC; however for this thought process to make any amount of sense total return has to be measured purely in BTC.

Say, for instance, that we have an ASIC that is currently selling at 5 btc, and produces 5 ghashes of mining power. At current difficulty that would produce approximately .0825 BTC/week.

Now, if the price of bitcoins were to crash then we would lose a lot of GPU miners and the like causing total hashing power to go down and subsequently lowering the difficulty. If we lost (to pull a number completely out of my ass) 30% of total difficulty due to unprofitable mining, then this same device that we paid 5 btc on will now be generating roughly 1.17BTC/week. This increase in btc generation will partially offset the losses in price and therefore serves as a reasonable hedge and even an opportunistic play when considering what may or may not happen after such a crash.

So in terms of a total btc return, it would almost benefit miners for the price to crash assuming that it does in fact stop others from mining and subsequently lowers the difficulty.

This isn't rocket science, so I'm sure most of you already understood this. The point is, are any of you actively hedging your positions by purchasing mining hardware?

Also there is no way to know this for sure, but it might in fact be better to buy hardware now in btc than it would to purchase after a crash. If people are trying to cash out of btc then they are obviously thinking of their return in fiat as compared to how much they paid in fiat. If the price of bitcoin is crashing then the fiat price of the miners will likely drop but the btc price of them will increase as people try to recover their investment of fiat.

So which would you do? Would you purchase now if you anticipated a crash, or would you wait and see how the dust settles?