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. There are three most popular methods: mining, trading, and holding.

Miners earn freshly minted coins straight from the blockchain network, while cryptocurrency traders are actively buying and selling assets on exchanges. Holding means simply buying an asset, at a presumably right price, and keeping it long-term with minimal daily involvement.  

In the following article, we looked at the advantages and disadvantages of each cryptocurrency strategy.

Mining

Bitcoin mining involves powerful computers solving complex mathematical problems to secure a blockchain network and get rewarded with new coins. It has nothing to do with taking tools and going down a dark shaft to dig for gold. 

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.

Challenges:

• 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

Trading crypto is a different ball game. The ultimate goal is seemingly simple: 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. But in reality, it’s one of the toughest things to master, because it requires tools, analytical skills, risk management, patience, and psychological resilience. 

However, it doesn't have to be crypto mining vs trading as they can be combined. For instance, you can use Bitcoin mining to accumulate assets at a low cost and then use trading strategies to hedge against market drops.

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.

Challenges:

• 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 crypto exchanges and the rules they impose.

Holding crypto

Holders, or HODLers are relying on a long-term passive investment strategy. It involves buying and keeping the crypto stored in a wallet for months and up to decades. Holders expect the value of an acquired asset to only go up in the long run. They are prepared to withstand temporary losses for potential future gains.

Benefits:

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

• In the long run, this strategy is likely to generate passive profits, though it’s not guaranteed;

• The simplest approach that doesn’t require active involvement for the entire holding period.

Challenges:

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

• Resulting profits could be insignificant;

• An unpopular method among experienced traders.

Key differences between mining, trading, and holding crypto

To summarize, 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.

Which one to choose? 

Let’s be honest, there is no single best answer to whether mining Bitcoin is better than trading or holding. The choice depends on your goals, risk tolerance, available time, technical skills, and your current financial situation. 

Mining is great if you have access to very cheap or free electricity, prepared to make upfront investment in hardware, and devote time to setup management and optimization through custom firmware like one offered by BiXBiT. 

Trading is best for those with strong psychology and experience in technical analysis, risk management.  

Holding is ideal for beginners and people with limited time who prefer a buy and forget approach, and believe in long-term potential of specific crypto projects.  

Choose the method that fits your lifestyle and budget, stay informed, and let time and discipline do the rest.