Which is better, bitcoin mining or bitcoin trading? 

by Josh Biggs in Blockchain, Finance on 9th September 2021

Almost everybody who’s active in the social media world must have heard about the word “Bitcoin”. In case one has heard about Bitcoin but never bothered to check out what it really is then, this article is for them. Although people use Bitcoin in different ways, originally it was designed as an internet money that works on a peer to peer network for transactions without involving intermediaries like a bank. Having said that, in terms of usage, Bitcoin has positioned itself as an emerging and attractive asset class. 

The price of crypto currencies, especially Bitcoin, has skyrocketed in recent years. It has become a potential investment vehicle for retail and institutional investors all over the world. If one is looking to catch some of the action, then there are primarily two ways people usually go about – bitcoin trading and bitcoin mining. In this article we talk about both at a high level bypassing the nitty-gritty of it, allowing one to choose a path that aligns with their financial goals.

What is Bitcoin Mining? 

Fundamentally, all cryptocurrencies function based on a technology called Blockchain. The transactions that we mentioned earlier in the definition of bitcoin will be stored on the blockchain in the form of blocks. But these transactions need to be verified. Here’s where miners come in the picture. Basically, a miner is someone with a special computer who tries to verify these transactions and a lot of miners around the world compete to verify it first. Why because you get rewarded bitcoin for verifying those transactions first. This process is called mining and this is how bitcoins get added to circulation until all the 21 million bitcoins are mined. 

The concept behind mining is called the proof of work (POW) and was pioneered by Satoshi Nakamoto. Every miner, in some sense, gives a proof for his work by consuming electricity to secure the bitcoin network overall. So, POW in simple terms, means a decentralized consensus mechanism that requires members of a network to expend effort solving an arbitrary mathematical puzzle to prevent anybody from gaming the system. The size of the reward keeps halving after a period of time through an event called Bitcoin halving. 

What is the cost for Bitcoin Mining?

To successfully mine cryptocurrency one needs a mining rig with a high GPU to solve multiple puzzles in seconds. More rigs means higher chances of solving problems first, thereby more rewards. In order to be able to mine, you need to invest in a mining rig, appliances like air conditioners unless you are in a place like siberia, high electricity bills consistently. Since the costs of bitcoin mining are high, and on top of that the compensation is also declining, miners unify their efforts in mining pools and mining farms to make a profit. 

What is Bitcoin Trading?

Building wealth is about patience as much as it is about timing the entry. Crypto assets follow cycles and compound over time. In the crypto world, long term investors are more likely to accumulate wealth than short-term traders. Traders use technical analysis to predict future patterns of a coin depending on its historical performance, trade volumes and other indicators. These indicators, however, serve as a compass rather than as the holy grail. Until the market hits a particular maturity, when for example a tweet from an influencer doesn’t swing momentum, timing the market with short trades is mostly harmful. ‘Invest and forget’ is a better strategy than worrying about daily patterns.

The entry point

A proven method of managing entry points is to do Dollar Cost Averaging (DCA). DCA is a proven and yet straightforward investment strategy that works irrespective of the current price of an asset. Investors following DCA split the investment pool and buy assets at regular intervals of time. This strategy minimizes volatility risk as it would prevent an entry at a single price point.

Timing the exit

While entry points provide opportunities to grow the portfolio, exits are when profits get realized. Each investor should be prudent to take out their principal and some profits along the way once a particular price target is achieved in future. If the market proceeds into a bear phase (a period of declining prices), consider entry again to realize future gains.

Buying Bitcoin through an Exchange:

At last, the final step towards starting your crypto journey is identifying a cryptocurrency exchange that provides the best rates on bitcoin and other cryptocurrencies if you are interested. Giottus is the best cryptocurrency exchange in India. Giottus offers a user-friendly app for buying bitcoin in India. Convert INR and perform a KYC process in 10 minutes before you start trading.

  • Monitor your assets everyday.
  • Set limits. 
  • Decide Long term or short term

FAQ

Can I profit from Bitcoin Trading?

Yes, provided you understand the volatility of the market, you can always capitalize on the trends of cryptocurrency to make gains. 

Where do I start Trading?

Download Giottus Trading App on Playstore/appstore. They provide the best rates on Bitcoin and 100 other crypto currencies. You can download Giottus app here and start trading – https://giottus.onelink.me/YWFR/giottusblog 

Categories: Blockchain Finance

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