Why is Bitcoin more volatile than stocks? Bitcoin’s limited supply and lack of a centralized governing authority make it susceptible to significant price fluctuations. It is also a currency that is still relatively young in its price discovery phase. As speculation about its value increases, the commercial value of Bitcoin can change suddenly and significantly.
How to invest in Bitcoin? You can buy Bitcoin on many different cryptocurrency exchanges. All you have to do is create an account and choose how you will pay your Bitcoins. After purchasing it, you will store all the Bitcoin you own in your digital wallet. These transactions are all publicly recorded on the blockchain.
Interest in cryptocurrencies has increased since 2015, with Bitcoin seeing its value increase from around $300 per coin to a peak of around $20,000 per coin in December 2017, then dropped to about 8,000 USD per coin. . in October 2021.1 Other cryptocurrencies have seen similar increases and decreases in value.
While buying on an exchange like Coinbase is generally quite simple and allows you to buy a portion of cryptocurrency, some people prefer Bitcoin mining. The best choice probably depends on individual circumstances.
Mining profits
Cryptocurrency mining seems like a no-brainer. Set up a calculator to help you solve complex math puzzles and you’ll be rewarded with a coin or part of a coin. Early Bitcoin miners were able to make money relatively quickly just using whatever computing power they had at home.2
In 2019, cryptocurrency mining has become a bit more complicated. With Bitcoin, the reward is halved every four years.3
Congressional Research Service. “Bitcoin, Blockchain and the Energy Industry”, page 6.
On top of that, serious miners have built huge networks for mining, making it harder for smaller miners to compete. You can now join a Bitcoin mining pool to be more efficient, but this will incur fees, reducing your profits.4
Some cryptocurrency miners opt for other currencies instead. Some other cryptocurrencies are worth very little in US dollars, but you can take what you mine and convert it to a fraction of bitcoin on an exchange and then hope that the bitcoin goes up in price. treat.
Regardless of what you decide to run, you need to consider your installation costs, including, in some cases, graphics cards that can cost over $700 apiece. A basic rig for some less popular cryptocurrencies can be set up for around $3,000. However, some miners spend more than $10,000 on their rigs.56
In addition to building your rig, you also need to realize that you will be using a lot of energy. If you have high electricity prices, you may end up spending a lot of money mining coins, especially Bitcoin. The electricity costs associated with mining one bitcoin can be very high, even in the cheapest states.71 A less powerful rig for mining altcoins can save you money. Even so, it may take weeks or even months for you to recoup your initial investment and become profitable.
Cloud mining
Cloud mining involves buying time on someone else’s rig.8 Companies like Genesis Mining and HashFlare charge you based on what’s called “hash rate,” which is essentially your processing ability. If you buy a higher hash rate, you will get more coins for what you pay, but the cost will be higher. Depending on the company you choose, you may pay a monthly fee or based on the hash rate.9 Some companies also charge a maintenance fee. In general, cloud miners that allow you to access Bitcoin enjoy higher prices.
In some cases, you may be required to sign a one-year contract, which locks you in. If the value of your cryptocurrency drops, you could find yourself stuck in a losing contract.