Investing in cryptocurrency
There are several ways to invest in cryptocurrency:
- Crypto Mining – mining electronic money
- Trading cryptocurrency on exchanges
- Direct purchases
Each of the named options has its own characteristics. Some methods require a fairly serious investment of capital, others are suitable even for beginners with a minimum amount for investment.
Investing in cryptocurrency, on the one hand, is too risky a tool for investment, but on the other hand, the role of cryptocurrencies should not be underestimated, because they have caused a great interest of people in investing as a process. Undoubtedly, the risks that cryptocurrencies carry are quite large.
However, there is such an indicator as volatility, which is a measure of how the price of an asset changes. By comparison, conservative instruments have a small range of price changes, while cryptocurrencies change in price significantly. The most popular cryptocurrency, bitcoin, was once worth more than $60,000, and today it is about $45,000.
What is cryptocurrency?
Cryptocurrency is digital assets that are exchanged online on exchanges such as Coinbase (the largest U.S. cryptocurrency exchange) and Gemini, or through online brokers such as Robinhood and SoFi Invest. One of the largest official cryptocurrency websites is Ergo mining.
Cryptocurrency is now a familiar concept to many people, especially one of its types, bitcoin, as it is the first and most popular type of cryptocurrency by market capitalization, it was created in 2009 with the subsequent formation of over 7,700 other types of cryptocurrency. While some people invest with speculative purposes in mind, others look at cryptocurrency as a way to preserve value or protect against inflation.
Cryptocurrency mining – takes place using special computer equipment. You also need a special program that allows you to choose what you will “have” and where. This all needs to be set up and learn the subject matter, there are special forums for this.
“Mining” is the basis of the network’s activities. “Miners” compute the same blocks that are included in the transactions of the same bitcoin. Without this, the process is impossible. “Miners” get rewarded for finding those blocks plus get another commission for the transactions they attribute to the block.
You don’t have to invest large sums to make money from cryptocurrency, but it does increase your earnings and its probability.
Bitcoin is very difficult to mine right now because bitcoin mining equipment is highly specialized and expensive. Ordinary users successfully mine other cryptocurrencies on ordinary video cards of home computers or build farms where you can put several cards.
There are 2 variants of cryptocurrency mining: classic and cloud.
- The traditional variant of cryptocurrency mining requires a huge investment. The fact is that the equipment for it is quite expensive. Moreover, it is not enough to buy video cards, power supplies, and other devices. You will have to connect the equipment and set it up. Profit will have to wait long enough because the farm will pay off in at least 12 months.
- Cloud mining is a co-investment in mining facilities. In other words, a miner invests in a large enterprise, which has a sufficiently large number of professional farms. The profitability of such investments is much higher (often by hundreds or even thousands of times) than that of individual mining. The mining process can be automatic or semi-automatic.
What then is the advantage of bitcoin?
There is no regulator and no inflation. Bitcoin is decentralized. No government or central bank can artificially change its value. Only two factors influence bitcoin’s rate: supply and demand. Only the market determines the value of this crypto asset In addition, bitcoin issuance is programmatically limited. A total of 21 million BTC will be issued and not a single Santosh more.
After that, the number of bitcoins in circulation will steadily decrease. To date, about 18 million BTC have been mined and, according to various estimates, 4 to 6 million of them have already been lost. That is, they are there, but no one can use them. Therefore, if bitcoin establishes itself as a capital saver, its price will inevitably rise and the number of coins in circulation will decrease.
Benefits of investing in cryptocurrency
There are a number of advantages of investing in cryptocurrency:
- cryptocurrencies are transferred between counterparties on the principles of Peer2Peer, that is, without the use of intermediaries, which in the case of traditional money are financial institutions and payment systems;
- cryptocurrency transfer fees are set at a very low level – this advantage follows from the first one;
- electronic money is an international means of payment, that is, it can be used in any state if there is the Internet;
- Cryptocurrency wallets cannot be controlled from the outside, so no one has the right to freeze it, as well as to impose restrictions on the number of transfers;
- The rate of electronic money is growing steadily. Over the previous year, the value of bitcoin increased by more than 4 times, while etherium in just four months increased in price by almost 300%.