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Is It Achievable To Apply Compound Growth To Investing In Bitcoin?

January 26th, 2017 | by BTC News
Is It Achievable To Apply Compound Growth To Investing In Bitcoin?
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by vmax137

Is It Achievable To Apply Compound Growth To Investing In Bitcoin?

Can I get compound growth when I invest in Bitcoin?

Einstein – ‘Compund interest is the eighth wonder of the world; he who understands it earns it and he who doesn’t pays it’

We hear many discussions around the future of Bitcoin, can it increase in popularity? Will the worth increase? How safe do you find it as a possible investment?

I have heard many discussions on whether or not to trade, mine and perhaps cloud-mining nonetheless have not heard any discussion of professional investing or at-least utilizing the theory of professional investing to Bitcoin. Now lets suppose that were to take the view point that you’ve got a good future for Bitcoin, it will eventually rise in popularity, the value holds and if anything it will increase in value because we understand fundamentally it has better value to fiat currency.

If this is my viewpoint, I made the decision that I must be approaching this as a professional investor; I can afford to invest as an example 1000 GBP (approx 1600 USD), but I want to think about how to invest this into Bitcoin into the safest and most effective way.

The most important rule for anybody who sees themselves as a professional investor is to use the rule of compound growth, if you are intending to treat your account or wallet as a current account you aren’t likely to see anywhere near your potential.

A quick example:

Andrew would like to see compound growth on his shares which averages 1% growth a month; (1% seems quite lame, but we would like our example to be conservative plus demonstrate the potency of this) he deposits 10, 000 GBP with each year he reinvests his interest. His account would look like this;

Year 1: 11,200, Year 2: 12,544, Year 3: 14,049.28, Year 4: 15,735.19, Year 5: 17,623.42, Year 6: 19,738.23, Year 7: 22,106.81, Year 8: 24,759.63, Year 9: 27,730.79, Year 10: 31,058.48


Whereas if Mark decides to take 1200 near the end of December to treat himself for Christmas, we don’t even need to do the maths, he will stay at 10,000 and if he keeps drawing on bad years or decides to use more he may even loose money, whereas Andrew more than triples his.

Now later on this page I am going to show how using very conservative figures, actually improve on this massively and pay attention to why Einstein called Compound growth the eight wonder of the world.
Returning to the mining; If you decided to calculate the profitability of using your very own hardware this can be done online, by merely using Google and looking out for Bitcoin mining profitability calculator you’ll discover lots of websites, make sure that you input the correct difficulty and exchange rate, you will be fine only one thing that most bitcoin profitability calculators don’t take into account is the surge in mining difficulty.

Now lets assume that we have decided to go for the least expensive method of mining, due to living in England the running and maintenance costs on the Cloudmining warehouses is going to be under half the cost of an average electricity bill, and we save on space as-well.

For 1000 GBP we are able to buy 3 x 1000Ghs Cloudmining contracts as well as have 100 left which we could use to acquire 5 x 50Ghs Cloud mining contracts, that can leave us with 3250Ghs or 3.25Th.
Essentially, I’ve taken the newest and relevant data for the mining difficulty over the past 3 months, as you can see the difficulty increases about two times a month to be more exact it’s every 11.7 days. Therefore, I will work on the basis that the difficulty will increase 4.80% every 12 days, there is not any point fussing over 0.3 of a day every 12 days as we are operating with averages anyway, plus what we are doing is just increasing our existing accuracy, so I don’t wish to be criticised because of this.
To work through our earnings potential I’m going to decide our earnings after we have deduced the expenses and add the difficulty to the next session. And then by adding the new hashing power bought with the earnings. I am working on the average increasing difficulty 4.98% as well as the average decreasing cost of 10% for the hashing power.

Now the fact is it’s not going to serve as smoothly as this, the hashing power won’t decrease by 10% every twelfth day, but it’ll have to go in this particular direction to become viable to the buyers. Over a year ago it was seen with CEX, the hashing power wasn’t economically viable for anyone so it needed to be brought down to a sensible level.

I have found the end result of the average increasing amount of difficulty to the average lessing of price in hashing power.

It has shown that even by conservative estimates you EASILY beak even within six months and can potentially double your earnings within the year.

Admittedly the difficulty rate is increasing at a high rate but the hashing power is too as well as becoming cheaper at a steeper rate. So whatever your approach is likely to be, if you use the principal of reinvesting your earnings or atleast a large amount of your earnings at a time when the hashing price falls (the price per Ghs hasn’t ever increased) then you will generate a a small fortune.

What I am showing is when you treat mining just like you would with any proper business and not a gimmick you will certainly reap the rewards from it. You might want to take the attitude that 6 months, a year or perhaps a few years isn’t really a considerable amount of time (especially if you are earning money whilst you sleep) and I think you must spend a couple of hours on excel and online to make sure you take a proper approach.
If you think about that Bitcoin remains to be in its infancy and fundamentally undervalued, it is certainly possible to earn a proper income with Bitcoin Mining and therefore it isn’t too late to get involved with as many would love you to believe.

Please get in contact with us for those who have any questions.

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