Mining, Trading or Holding - What to Choose for Capital Growth

People interested in cryptocurrency are constantly thinking about which type of digital asset acquisition to choose. We looked at the advantages and disadvantages of each cryptocurrency strategy.

Mining

To mine cryptocurrencies, an investor uses mining equipment (GPU, ASIC, FPGA) and expects to be rewarded for validating blocks. There is a choice of the most profitable blockchains for the time being.

Benefits:

• mining is more profitable with low or zero electricity costs rather than buying cryptocurrency on an exchange;

• you can flexibly scale up or down capacities depending on your needs;

• mining contributes to the blockchain's functioning and helps in maintaining the project.

Downsides:

• requires solid initial investment (for Proof-of-work cryptocurrencies);

• dependence of profit on the rate of cryptocurrency, available capacity, electricity costs, network complexity, etc;

• the need to maintain the farm.

Trading

The goal of any trader is to buy an asset at a low price and sell it at the highest possible price. If successful, the trader can make a significant net profit.

Benefits:

• you can buy any amount of cryptocurrency, depending on the available funds;

• a chance to make very good money by playing on the exchange rate differences;

• having mastered the tools of cryptocurrency trading, you can safely manage other assets and conduct large transactions on the exchange.

Downsides:

• it will be difficult for beginners to master trading, its techniques and market "signals";
• high risk of losing most of your own or borrowed funds;
• Dependence on stock exchanges and the conditions they impose.

Holding

Holders, or HODLers, expect the value of an acquired asset to only go up in the long run. So far, most of the assets (if the project is still running) are indeed only increasing in value.

Benefits:

• you can buy any amount of any cryptocurrency and hold it for as long as you want;

• in the long run, it is likely to guarantee passive profits;

• simple approach and no worries during the entire holding period.

Downsides:

• there is always a risk that an unappealing project will turn out to be a scam or will cease to exist;

• income can be minimal;

• not a popular method among experienced traders.

So, mining will require a substantial and sometimes irrevocable investment, but you can get a solid reward. Efficient trading will be difficult for newcomers and may lead to losses, though it can provide huge profits. Holding does not promise a fabulous income, but it is very simple and associated with minimal risk.