Mining or Trading Cryptocurrency?
There are two ways through which one can enter the world of cryptocurrencies: trading and mining. Each method has their own pros, cons, and levels of accessibility, therefore whether one is better than the other is somewhat subjective depending on each individual’s budget, goals, and experience. This article aims to educate by highlighting some key differences between the two.
For most, trading is the easiest, most accessible means of entry into the crypto space. Thanks to the rapid growth of centralized exchanges (CEXes) and other financial technology (Fintech) companies, nowadays anyone has the ability to easily purchase various cryptocurrencies using a credit card, debit card, and/or their bank account.
If cryptocurrency has been purchased through an exchange, the buyer has the option of either leaving it there in their hands or transferring it to their own personal wallet (which can be digital or physical). These wallets are essentially a secure application that stores owners’ crypto and gives them more freedom over their coins or tokens, allowing access to a plethora of decentralized apps (DApps) which can have a variety of different applications including decentralized exchanges (DEXes, also known as swaps), games, lending, staking, and more. Thus, for those who wish to buy crypto in hopes of selling it later down the line to make a profit, holding their coins or tokens in their own personal wallet (or a centralized exchange) and then trading them once an acceptable price target has been met is the ideal scenario.
On the flip side of trading is mining, which comes with a few major differences, primarily the higher barrier to entry in terms of cost. While popular Proof of Work (PoW)-modeled cryptocurrencies like Bitcoin could easily be mined with a consumer-grade home computer ten years ago, these days, it’s necessary to invest in a specialized high-powered computer capable of rapidly performing complex calculations called an ASIC (Application-Specific Integrated Circuit) miner in order to have a chance at gaining profits from successfully verifying blockchain transactions. On top of the cost of equipment, depending on your setup and where it’s located, there’s also the matter of electricity costs associated with mining as well as maintaining your equipment, both of which can quickly add up.
In terms of profits, mining cryptocurrencies is technically “safer” than trading in the sense that rewards are all but guaranteed for helping to verify transactions on each cryptocurrency’s network. This of course will depend on your mining setup and whether you’re mining PoW coins like Bitcoin and Dogecoin or Proof of Stake (PoS) tokens like Ether (2.0) or Cardano, which require a certain number of tokens to be held (another potentially high barrier to entry) and locked up in order to be randomly selected as validators and receive rewards.
Considerations for Both:
Whether you plan to hodl (hold) your crypto for an extended period of time, or you’re just trying to make a quick flip, an important facet to be aware of is their volatility. Global current events and general market conditions can have a massive impact on the price of cryptocurrencies of all sizes, so you should never invest more than you can afford to lose. Just to give a brief idea of how drastically their prices can change, in May of 2021 Bitcoin’s price plummeted from around $59,000 to about $35,000 in just two weeks, only recovering to the same $60K range five months later in October and shortly thereafter hitting its current all-time high of nearly $69,000 in early November.
For beginners, trading cryptocurrencies is the easiest way to dive in and get acquainted with the space. It’s not without its risks, but it’s a lot more inexpensive since you’re only paying for the initial crypto buy-in itself. As for mining, while its profits can offset the cost of its equipment and electricity usage over time, it’s a much more involving and complex process. In the end, you should go with what you feel is right for you based on your budget, level of experience, and first-hand research. Good luck!
Which is Better, Mining or Trading Cryptocurrency?
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Cloud Rush USA is a Southern California based cryptocurrency mining facilitator specializing in Filecoin mining plans. The views and opinions expressed on this Site are solely those of the author(s) and do not necessarily reflect the views of Cloud Rush USA or its employees. The content provided on this Site is for informational purposes only and should not be construed as investment, financial, or other advice.
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