Publicação
A miner for everyone? Valuing a bitcoin mining option
| Resumo: | The world of cryptocurrencies began in 2008 when the pseudonym Satoshi Nakamoto released the Bitcoin whitepaper and registered the domain bitcoin.org. On the 3rd of January 2009 Nakamoto created the first block of the Bitcoin blockchain and started mining the first ever Bitcoins on a computer central processing unit. This paper takes a deeper look at the world of Bitcoin mining. The real option of having the possibility to start mining at any point in time is valued using the net present values of such an operation and applying the Longstaff and Schwartz method. The analysis extends over Portugal, Germany, Poland, Hungary and Turkey, while considering three different miners and assessing whether the operations is to be considered profitable. Importantly, the research is framed from the viewpoint of an individual, who is thinking about acquiring a single Bitcoin miner to start operations from home and hereby creating passive income. Bitcoin, electricity prices and the total Hash Rate have been forecasted using different approaches such as the Monte Carlo simulation and Exponential Smoothing. The results show that even though the option has a positive value in all cases, the level of electricity prices is a decisive factor for probability of option exercise. While in Germany and Portugal only a few of the 10,000 forecasted paths lead to exercise with a needed Bitcoin price of several millions, in Türkiye several hundreds of exercises can be obtained at a much lower necessary Bitcoin price, representing a significantly more valuable real option. |
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| Autores principais: | Grumer, Moritz |
| Assunto: | Cryptocurrency Bitcoin mining Real Option Theory |
| Ano: | 2024 |
| País: | Portugal |
| Tipo de documento: | dissertação de mestrado |
| Tipo de acesso: | acesso aberto |
| Instituição associada: | Universidade de Lisboa |
| Idioma: | inglês |
| Origem: | Repositório da Universidade de Lisboa |
| Resumo: | The world of cryptocurrencies began in 2008 when the pseudonym Satoshi Nakamoto released the Bitcoin whitepaper and registered the domain bitcoin.org. On the 3rd of January 2009 Nakamoto created the first block of the Bitcoin blockchain and started mining the first ever Bitcoins on a computer central processing unit. This paper takes a deeper look at the world of Bitcoin mining. The real option of having the possibility to start mining at any point in time is valued using the net present values of such an operation and applying the Longstaff and Schwartz method. The analysis extends over Portugal, Germany, Poland, Hungary and Turkey, while considering three different miners and assessing whether the operations is to be considered profitable. Importantly, the research is framed from the viewpoint of an individual, who is thinking about acquiring a single Bitcoin miner to start operations from home and hereby creating passive income. Bitcoin, electricity prices and the total Hash Rate have been forecasted using different approaches such as the Monte Carlo simulation and Exponential Smoothing. The results show that even though the option has a positive value in all cases, the level of electricity prices is a decisive factor for probability of option exercise. While in Germany and Portugal only a few of the 10,000 forecasted paths lead to exercise with a needed Bitcoin price of several millions, in Türkiye several hundreds of exercises can be obtained at a much lower necessary Bitcoin price, representing a significantly more valuable real option. |
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