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Cryptocurrency Mining vs. Trading: Which Is the Better Choice?

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November 22, 2021

According to a survey published in CNBC earlier this year, more than 1 in 10 Americans invested in cryptocurrency within the past 12 months, and more than 61% of these respondents started to explore decentralized financial assets in just the last 6 months. In part, the movement to get into crypto was spurred on by the significant increase in the price of Bitcoin, which went from USD 29,000 at the beginning of the year and sprang up to USD 63,000 by mid-April. At the same time, there has been plenty of publicity for various cryptocurrency communities in the past few months, from Coinbase going public to Tesla accepting BTC as payment for its electric vehicles.

Owning Cryptocurrencies: What Newbie Traders and Miners Need to Know

If you're thinking of seeing what the hype is all about, it's not yet too late for you. These days, it's much easier for regular consumers to purchase cryptocurrency coins, as there are plenty of exchanges where you can purchase Bitcoin, Ethereum, or other digital currencies and wallet solutions that you prefer.

Once you've acquired your desired currency—Monero, for example—you can store the coins in your Monero wallet and wait for their value to grow over time, follow the movement of the market and engage in trading, or use them to complete your transactions.

Alternatively, you can participate in the cryptocurrency community as a miner and get the opportunity to collect coins without necessarily putting down money for them. Cryptocurrency miners play an important role in decentralized financial systems, as they solve complex cryptographic equations to verify data blocks and add them to public ledgers. For their efforts, they are awarded tokens or coins from the blockchain system that they use.

Now, a cryptocurrency miner can be an active trader at the same time. However, not everyone has the time to devote to these activities, and it's common for newbie cryptocurrency users to pick one over the other. To understand which is the better option for you, it's a good idea to take a closer look at how to get started on these activities.

What Do You Need to Start Mining?

Cryptocurrency mining rigs are made up of software and hardware components, and the specifics of these depend on the currency that you want to mine. Bitcoin and other types of currencies, for example, require Application-Specific Integrated Circuit (ASIC) miners, which are high-powered hardware with microprocessors that are designed for the sole purpose of mining digital currency. Owning an ASIC miner can be a big investment in itself.

On the other end of the spectrum, there are also ASIC-resistant coins like Monero which enable miners to acquire them using only consumer-grade hardware. Their resistance to using specialized hardware makes these coins more accessible to beginner miners and those who are not yet too keen on investing money in their mining rig.

Once they have acquired the right hardware, would-be miners have to download the software that they'll use to mine the coin. After configuring the software, such as indicating where to send the tokens they mined in the process, miners are ready to start their operation.

The earnings that you can get from this activity, again, depend a lot on the type of coin that you want to mine. It should be noted that aside from purchasing the required hardware, you also need to set aside funds for the cost of electricity to operate your mining rig and prevent it from overheating, if necessary. You can keep the tokens you've earned as a reward for mining in your cryptocurrency wallet and hold on to them, trade them, or use them to complete purchases that accept the mined coin.

What Do You Need to Start Trading?

Trading in cryptocurrency requires you to have capital, a wallet, and an exchange. After setting up a wallet, you can acquire coins by paying for them in cryptocurrency exchanges. Trading in digital coins is much like trading stocks, though the former is considered riskier as cryptocurrencies tend to be volatile.

It's important to keep an eye on the movement of the market and be aware of the trends and developments that may affect the price of the coins you are holding on to. When the tide turns in your favor, you can exchange your coins with ones that offer you better prospects. Take note, however, that there may be a time difference between initiating a transaction and having it validated and completed. As such, crypto traders need to develop a keen sense of the possible changes in the prices of the coins that they have in their possession.

In a way, mining can be a more suitable option for people who want to acquire more cryptocurrency without necessarily keeping a close eye on the price of the coin. Trading can be an exciting prospect for people who want to have a hand at growing their cryptocurrency investment. If you want, you can also take a third option and set up a mining rig while using the coins you've acquired to support your trading activities.

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About the author

Monica Mendoza

Monica Mendoza is a content writer and marketing professional. She spends a lot of time studying how technology continues to transform lifestyles and communities. Outside the office, she keeps herself busy by staying up-to-date with the latest fashion trends and reading about the newest gadgets out on the market.

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