There are two investment options that are most common to a newcomer — stock exchange trading and mining. In this article, we will objectively discuss the advantages and disadvantages of each option and learn why you should loan crypto.
What is trading and what is mining
Crypto trading is trading cryptocurrency on exchanges. It works the same way as regular trading — you buy cheaper, sell more expensive, pay a commission to exchanges and try to make a profit.
For now, the catalog on CoinMarketCap has information on more than 9,000 cryptocurrencies, all of which are listed on different exchanges. The most popular currency is Bitcoin, which has a 24-hour trading volume of more than $28 billion.
Mining is receiving rewards from the blockchain network for conducting transactions. To earn from mining, you need to buy and install equipment — asics that connect to the blockchain network, solve cryptographic problems and mine new coins.
The advantages of trading
- Low entry threshold. The minimum amount to place an order on the most popular exchange Binance is $10. With this money you can make transactions with any cryptocurrency.
- User-friendly exchange interfaces and infrastructure. You can trade from your PC or smartphone. Everything works the same as in classical trading — there is spot, margin and futures trading. Services for traders like TradingView also support cryptocurrencies with all available indicators.
- There are automatic strategies and bots. You can connect them in a couple of clicks on the exchange. Each strategy and bot has statistics. If you do not have desire to comprehend, you can follow the ready strategy, giving the commission to the author.
- Some coins make x100 and more. This point can be attributed to both pros and cons. The market is very volatile — you can make thousands of dollars in an hour or lose everything.
- A huge number of training materials and courses. From free videos on YouTube to paid courses.
Disadvantages of trading
- You should be cool about it and have a skill to manage risks. Sometimes it is necessary to sell a coin in time and not to be greedy, and sometimes, adhering to a strategy, to keep even at the lowest levels. This is true in any kind of trading, but especially in crypto, because of the high volatility.
- Many coins depend on the price of Bitcoin. If you analyze CoinMarketCup, you can see that on days when Bitcoin is falling, it pulls most coins with it. The same thing happens when Bitcoin goes up.
Now let’s talk about mining.
- Mining is closer to a stable, real business. The customer buys physical equipment, connects it to the network, and it steadily earns money. The owner sees every day how much crypto the equipment has brought in.
- The income from mining is easy to calculate. You can make a calculation in advance for all scenarios on whattomine.com — for positive, negative and neutral. Income from mining depends on several variables: the value of the cryptocurrency, the capacity of the equipment, the price of electricity, and so on. By controlling these variables, you can predict the return on investment and profitability.
- Income from mining does not depend on the quality of managers and the product. There is less of a human factor here. In contrast to investments in classic businesses, in mining it is impossible to make a mistake in hiring key people. In addition, the equipment does not burn out, and there are fewer force majeure events.
- Mining requires almost no time from the owner of the equipment. You can buy equipment and consumables, install it on a third-party hosting site, and trust the technicians to maintain it.
Disadvantages of investing in mining
- High entry threshold. You will have to invest from $8,000. In addition, you need to stock up on supplies and be prepared to pay the electric bill.
- The costs can be recouped for up to two years. Mining has a notion of complexity, which directly affects the investor’s income. Complexity is a parameter that shows how difficult it is to perform calculations to create a new block in the network. Correspondingly, how difficult it is to get the reward. Blockchain is designed in such a way that if many people are mining at the same time, the complexity of coin mining, the energy consumption of the equipment and the income of investors will decrease. Because Bitcoin is now falling and there are more and more miners, the income comes in slowly.
- There is a risk of equipment downtime due to old infrastructure. If you want to place an asic at your location, you need to solve a lot of issues: cooling system, cheap electricity, maintenance, stable internet access.
The benefit of crypto loans
As you can see, mining requires quite a serious investment, and if you want to get income without investing, you should focus on trading. Crypto loans can help you in trading — you can take the currency you want against another currency and go to the exchange. For example, you can take a BTC loan and use Bitcoin as collateral. It’s simple — as long as your collateral lies on the crypto-loan site and changes according to the rate, you can trade borrowed cryptocurrency and make a profit.