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|What if you could own the best performing asset class of the last decade, at a substantial discount to current prices? |
I’m talking about Bitcoin. Specifically, mining Bitcoin with cost-advantaged, clean-burning natural gas. Over the last few months, I (Laura) have been hard at work putting together this opportunity for Yield Fund I investors. The goal: invest in a wellsite mining project that will produce Bitcoins for approximately $30,000 per coin.
After months of planning, the project is now coming together. Just last week, we officially placed the first order for mining equipment, and started designing the onsite layout. Over the next several months, we hope to have all the pieces in place to begin churning out Bitcoins for $30,000 per coin.
(Note: this $30,000 projected Bitcoin cost reflects the estimated all-in costs for the life of the project. This estimate is subject to change at any time. Click here to speak with someone on our team regarding the detailed economic projections.)
So what does this mean for Yield Fund I investors? Our current estimates suggest that this Bitcoin mining project could achieve IRRs in the triple-digit range.
After speaking with many current and potential investors in recent weeks, we know many Bitcoin enthusiasts are excited about this project. But today, I’d like to provide some basic background information for those new to Bitcoin. Let’s start from square one: why Bitcoin, and more importantly, why now?
An Unprecedented Economic Environment
As you know, the COVID-19 outbreak delivered a crushing blow to the economy. But only 18 months later, we’re now living through a full blown economic boom. Record retail sales, record corporate earnings and record high asset prices across stocks, real estate and commodities.
What happened? The largest monetary and fiscal expansion of all time.
Specifically, the Federal Reserve expanded the U.S. M2 money supply by over 30%, from $15.5 trillion in March of 2020 to $20.6 trillion today. That means roughly one-third of U.S. base money supply was created in the last 18 months alone.
Meanwhile, the largest fiscal stimulus package of all time pushed the federal deficit to over $3 trillion last year. That’s more than twice the deficit spending deployed to fight the previous recession in 2009, which itself was unprecedented at the time.
Clearly, these efforts helped jumpstart economic growth. But here’s where things get tricky…
The Bill Comes Due
We’ve all been taught that there’s no such thing as a free lunch in life, and economics is no different. After all, why should anyone work or pay taxes if the government can simply borrow and print our way to prosperity? One of the potential costs of record deficit spending and money creation is rising prices, and that bill is now coming due.
U.S. consumer prices are currently increasing at over 5% per year – the fastest rate in over a decade. And current evidence suggests more pain for the consumer is in store. That’s because producer prices, the key cost input feeding into consumer prices, are increasing at over 10% per year – the fastest pace in over 40 years:
|Meanwhile, policymakers claim that today’s inflation is “transitory”. But the chart below shows that economist expectations for consumer prices have only moved higher with each passing month:|
|Even if today’s inflation does turn out to be “transitory”, that’s little consolation for consumers. There’s a reason inflation is known as the “silent thief” – by making your money less valuable, it’s no different than a wealth confiscation in practice. If your bank confiscated 10% of the money in your account, would you not worry simply because it was a one-time event? |
Bitcoin Solves This
Bitcoin is a decentralized, digital monetary network that offers a superior currency alternative. Unlike traditional currencies, Bitcoin is controlled by software – not central bankers and governments. The Bitcoin protocol ensures that only 21 million coins will ever be created, which means no more silent theft through endless inflation.
Each transaction is digitally encrypted onto a decentralized network, run by computers all around the world. Some have called it the “internet of money”, because you can seamlessly transact with anyone around the world at the click of a button. No intermediaries or central authorities getting in the way – it’s the people’s money.
Beyond offering inflation protection, the Bitcoin network was designed to be super secure and self-regulating. That’s where Bitcoin mining comes in. Here’s how it works…
The self-regulating Bitcoin network is maintained through a network of thousands of “nodes”. At each node, high-powered computers – known as miners – keep track of every Bitcoin transaction. These miners compile real-time Bitcoin transactions into data blocks. When a given data block fills up, the miner adds it to the pre-existing block series. These linked blocks form a chain, known as the “blockchain”. So, the blockchain is simply a continuously-updated public ledger, which contains every single Bitcoin transaction of all time.
The Bitcoin protocol uses several mechanisms to ensure security and integrity of the blockchain. This includes the fact that 50% of the network nodes must approve each data block before adding it onto the blockchain. This prevents a bad actor from creating false transactions in real-time. Meanwhile, rewriting blockchain history is even more difficult, as explained in the following graphic:
|In exchange for lending their computing power to the Bitcoin network, miners get rewarded with a certain amount of Bitcoin per each data block they create. The number falls over time, by design, as the total number of Bitcoins approaches 21 million. Currently, miners receive just over 6 Bitcoins for each data block. |
Now, here’s where we get back to why it all matters for Yield Fund I investors…
How To Buy Bitcoin at $30,000 Today
Sure, you could bet on the future of digital currencies by simply buying Bitcoin. But why pay $42,000 per coin, when you could instead pay $30,000? That’s the opportunity we see today, thanks to the rise of mobile Bitcoin mining units. Let me explain…
You see, Bitcoin mining can be thought of as simply converting electricity into digital currency. So electricity becomes one of the biggest variables driving the mining economics. Over the last few months, we’ve put together a plan for converting wellhead natural gas into electrical power, via gas-fired commercial generators located at the wellsite. The generators then power the mobile Bitcoin mining units, also located onsite near the wellhead.
We believe the economics speak for themselves. For roughly $2 million in upfront capital cost, we believe we can produce roughly 6 Bitcoins per month initially for an operating cost of just over $60,000. The end result – a payback period in less than one year, and a project IRR exceeding 100%.
(Note: these project economics are estimates, and subject to change at any time. Click here to speak with someone on our team regarding the detailed economic projections.)
We’re excited to be offering this opportunity to Yield Fund I investors today, and look forward to updating you on the progress as we start receiving equipment at the mining site. This is a truly unique opportunity, and I am pleased to be offering the chance to democratize Bitcoin mining.