Argo Blockchain : How ASICs Are Valued & Fluctuate Over Time

ASIC miners are bought and sold in a marketplace just like any other asset. The price of an ASIC miner responds almost instantaneously to the same supply and demand relationship of all assets of value and utility. There are however a few additional unique influences that affect the market price of an ASIC at any given time.

An ASIC miners value changes over time as a result of the following factors:

1. Supply of new ASIC Miner available to be shipped at any given time or availability for purchase on the aftermarket.
2. Demand of ASIC miners is influenced by the current price of the underlying Cryptocurrency, the cost of the buyer's electricity, current network difficulty to earn a block reward, and current and future outlook of the crypto mining industry.
   

The Effect on ASIC Miner Value From Cryptocurrency Price & Network Difficulty

The reward for proof of work (POW) mining, a cryptographic proof in which one party proves to the other that a certain amount of a specific computational effort has been expended, is a "block reward ". For Bitcoin miners, the revenue generated by their operation is simply the number of Bitcoin rewarded multiplied by the current Bitcoin price.

Bitcoin's protocol includes a unique network difficulty adjustment that ensures that a block is rewarded roughly every 10 minutes. As a result, as mining becomes more profitable, market forces will attract more hash power into the system and the Bitcoin protocol will systematically adjust the difficulty level in earning a block reward higher. Thus, making an ASIC miners performance a strong influence on the current market price of the machine.

Network difficulty exerts downward pressure on the value of ASIC miners. The market participant evaluating the value of a miner at any given time will need to make an assessment of the current and future growth in network difficulty in order to make a reasonable assumption on the value of the machine today.

Deeper Dive into the Profitability of an ASIC Miner

Let's walk through a simple thought experiment of a potential buyer of an ASIC at any given time. Here are some questions that might be running through their head:

1. Is my cost of electricity going to increase?
2. Is my cost of operations going to increase?
3. Is the network difficulty going to increase?
4. Is the price of Bitcoin going up?

All of these factors play an important roll in deciding whether one should invest in purchasing an ASIC mining machine. However, there is also a flip side thinking exclusively about costs in the thought experiment. As referenced above, if certain supply and demand conditions are met, such as a limited supply of premium ASICs, some older less efficient ASICs may see appreciation.

If you had purchased or you are in custody of those older models that are now in demand, they could ultimately fetch a premium in the market. If timed correctly, an older model which has serviced your needs for some time already could be sold at, near, or even more than what you bought it for. In short, the return on investment would be amplified considerably.

Where to Buy and ASIC Miner?

If the results of your thought experiment lead you towards investing in an ASIC miner, there are many companies online that offer aftermarket options. Compass Mining, for example, is a large and well-known organization that offers a low-maintenance, all-encompassing suite of services in addition to an open marketplace for new and used ASIC miners. However, buying from a 3rd-party seller or secondhand carries its own risks, namely that it is difficult to ensure that what is shipped is what was ordered. Another risk to consider is the handling and maintenance of your ASIC when it's being hosted by a 3rd-party vendor.

If you're interested in buying a new ASIC miner, please note that buying directly from a manufacturer may be difficult, as machines are in very high demand and are usually sold to large, institutional buyers first. Only a few enterprise-scale suppliers of new ASIC miners are in consistent operation, so in order to get access to the newest and cutting-edge ASIC mining technology at scale and for the best price, relationships must be factored heavily into your assessment.

Alternatives to Buying an ASIC Mining Machine

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After working through this thought experiment, if your profitability assessment is not inline with your expectations, there are alternatives to investing in ASIC mining machines.

Bitcoin mining has matured as an industry and now offers investors simple and convenient ways to be able to buy shares in companies that mine Bitcoin. If you choose to purchase shares in a Cryptocurrency mining company, there are publicly listed companies such as: Argo Blockchain, Riot Blockchain, Marathon Digital Holdings.

Buying shares in a cryptocurrency mining company offers you the benefit of exposure to the crypto mining industry without bearing the direct costs of running your own mining operation, monitoring the prices of ASIC miners, or being subject to this nascent industry's macroeconomic and sociopolitical developments.

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