Mining or Trading Crypto Currency, a comparison.
Bitcoin has had an extremely profitable 2017, with values rising nearly 20 times in one years. This means that there are a lot of opportunities to profit from Bitcoin, but none are risk-free. However, the question facing someone who wants to Profit off Bitcoin or any crypto currency is, how to do it?
How to profit from Cryptocurrency like Bitcoins?
There are two ways to profit from Bitcoins, they are either to mine for new currency, or to trade it. Think of it as buying Gold and waiting for its value to rise, or going out and mining gold instead. In one, you create new currency, in the other, you rely on the value of that currency increasing.
Bitcoins are mined using mining rigs, that help solve problems, that help uncover more and more Bitcoins. The faster a mining rig can solve a problem, the higher its hash rate. But as more coins are discovered, the required hash to solve a problem increases as there are fewer and fewer Bitcoins remaining.
As such, mining is the creation of new currency, just like how Nations practice Quantitative Easing to create more currency, when needed.
How mining works?
Miners work by solving complex mathematical problems, using the hashrate of a processor. These are then checked by the network, and a bitcoin unveiled as a reward.
For solving these algorithms, miners get Bitcoin. However, solving these algorithms costs power, it costs money, and not many people can afford the initial investment. However, if you can invest, then mining is a long term project, which gives you all the benefits of trading (As you can trade the bitcoins you earned smartly), while also giving you new currency.
Trading is for people who are good at reading the market. The prices of Bitcoin and Ethereum are rising continuously, however, they do tend to drop at intervals that seem random. However, someone who is good at knowing when this drop will happen can trade Bitcoin for Ethereum or vice versa at the right time to profit.
Why is trading risky?
Someone who has no idea how the market works could end up losing a lot. You invest in Bitcoins just as Bitcoin drops, then move your currency to Ethereum just as Bitcoin rises and Ethereum drops. This is a huge risk, but one you have to take if you’re trading.
This is why Mining is a much better alternative. You can trade what you mine, but also be assured that your mining rig will keep bringing in new currency for you to trade so that you’re never truly out of money