Cryptocurrency Mining vs Buying: Which Gives Better Returns?

If you had US$1,000 to spare, would you choose to buy or mine crypto?

When Bitcoin first arrived, the early miners made a handsome profit. Back then there were very few reliable exchanges, so most profits made on Bitcoin were either through mining or buying and selling of the crypto. Today, it’s a very different scenario.

As hashrates continue to increase, so has mining difficulty. The profit margins continue to decline while taking longer for miners to see a profit after taking into account the operational costs of buying the mining rigs and energy consumption.

At the same time, the price of Bitcoin has increased considerably over the past few years. Buying and selling Bitcoin for profit is not as easy as it used to be, and the coin has proved to be extremely volatile.

Which begs the question, if you wanted to make money on cryptocurrency today, which will be a better option for you? Mining or trading crypto?

Option 1: Mine your Bitcoins

The creation of Bitcoin can only be made through mining, which is the process of bringing the coin into circulation. It involves verifying transactions on the blockchain and releasing newly minted Bitcoins as a reward to the miners for the verification process.

The process is difficult to achieve, which uses complex mathematics to sort, solve and decipher algorithms. After which, the reward goes to the first miner that manages to solve the blockchain puzzle that involves both the transactions fees and newly created Bitcoins.

Due to the decentralized nature of Bitcoin mining, anyone with a computer, suitable hardware, and an internet connection can participate in the mining process.

The hardware needed to mine can vary from a software to a powerful mining rig. This equipment, alongside the heavy power consumption and heat generation, often makes mining an expensive entry-point for crypto enthusiasts and investors. It’s estimated that it may take anywhere between one to two years for an Application Specific Integrated Circuits (ASIC) miner to realize profits.

 

Option 2: Buy your Bitcoins

Today, there are many options to buy Bitcoins. It can be bought from exchanges, peer-to-peer marketplaces like Remitano, Bitcoin ATMs, or even through in-person transactions.

You can buy Bitcoins through a variety of ways, depending on the jurisdiction and financial legislation of your country. It ranges from bank transfers, credit cards, debit cards, fiat, or other cryptocurrencies. The main difference between these methods is the transaction fees or peer-to-peer price negotiations.

There are a variety of exchanges and wallets that are competing in the Bitcoin business. Some include full-blown exchanges for institutional traders and other can include simple wallets with limited buying and selling capacities.

Advantages of buying Bitcoins over mining

  • Mining can get really expensive. Costs include buying the miner (a dedicated machine) itself, accounting for its storage, security, electricity costs and even internet costs, its maintenance and the long duration of time and efforts. Therefore, with the amount of initial investment, there are no extra profits.
  • The value of bitcoins can fluctuate while mining. Bitcoins can deflate in value and remain unstable in cases of technical glitches with the system or bitcoin exchange markets.
  • It’s instant — even the best bitcoin miners can take hours or days to mine their bitcoins. Buying on the other hand — is instant since you’re picking up pre-existing bitcoins.
  • The transaction fee is negligible compared to the costs for hardware, electricity etc. that you have to bear when mining your own coins.

Advantages of mining over buying Bitcoins

  • Bitcoin mining allows their users to keep a track of their transactions. The bitcoins are untainted.
  • There is no extra fee that is charged for acquiring the coin apart from the investment in hardware (this itself may be substantial though).

Conclusion

There are two sides for bitcoin; both buying and mining have their own pros and cons. Mining, however, is unsuitable for the vast majority of bitcoin users today. If you’re looking to buy some bitcoins, it’d be a good idea to get started on Remitano.