Every day more and more people become investors. And since there are many fields where you can invest it can be hard to follow all trends. At the moment, cryptocurrency has become popular all over the world and can be considered an essential part of the financial market. You can buy or mine it and use it for payments, or you can invest in cryptocurrencies. In this article, we will discuss how you can invest in cryptocurrency, namely Bitcoin, and review the advantages and disadvantages of each option.
The first way of getting bitcoins on our list is by buying them on a cryptocurrency exchange. When choosing an exchange platform, take into account its authority, fame, and stability. If your goal is to trade cryptocurrency and use it for frequent various transactions, then we advise you to store the purchased tokens on the exchange. This way you will be able to access your cryptocurrency easily and conveniently. This option is suitable for people with a high budget and can invest in something this expensive. However, even if you don’t possess big sums of money, you can invest in bitcoin by buying only a part of it. We will discuss it later on.
The next option we will discuss is a direct way of obtaining bitcoin – mining. It works like that: you provide the computing power of your computer to service the network and you get cryptocurrency as a reward. Usually, for that purpose people buy mining hardware and start collecting cryptocurrency over time. This way of investing in bitcoin is much riskier than simply buying bitcoin since it takes time to pay off. Mining is perfect for investors that can buy a mining farm and want to start earning bitcoin and not trading.
And the last way of investing in bitcoin is indirect mining. Some companies provide investors with an opportunity to get bitcoin by using cloud mining or host mining strategy. For a certain sum of money, they lend you their computing power to mine a cryptocurrency, while they take care of the hardware. It is much easier than mining on your own since you don’t have to worry about hardware and the cost of such investment will be lower. It is the most optimal, eco-friendly, and cheap way of mining bitcoin. We will review this method of investment in cryptocurrencies further in this article.
Buying cryptocurrency on marketplaces
Let’s start our review with the first way of investment – the direct purchase.
- To buy cryptocurrency you need to find an exchange. There are many of them and they are different by many parameters: accepted cryptocurrencies, fees, conditions, account types, etc. Other parameters of a cryptocurrency trading platform to consider are reliability and stability.
- After you have chosen a trading service, you need to connect your payment method to your exchange account. This is required to fund your account and buy bitcoin. This process will require submitting certain documents, which depend on where you live and the laws of your land. After the identity verification is successful you can connect your bank account or credit/debit card to an exchange account. However, note that not all banks allow deposits to websites related to cryptocurrency. Also, exchange platforms charge fees for deposits, which vary on what payment method you use, and transaction fees which depend on the amount of a transaction.
- Next, after you connect a payment method, you can buy bitcoin. Since cryptocurrency trading services have evolved for a long time already, they are almost the same as other trading platforms with similar features and possibilities. Many exchanges also provide people with guides on trading and give them a demo account where they can test everything with their own hands before trading for real money.
- The last step in our trading sequence is storing your bitcoin. After purchasing cryptocurrency, you can safely store your digital assets in special wallets. Such wallets come in a great variety – from online to offline with different levels of security and accessibility. Whatever wallet you choose depends on your tastes and goals. Online wallets are less secure than offline, since in theory they can be hacked, but they are much more convenient if you are planning to trade frequently. On the other hand, offline wallets are impossible to hack, but they are less convenient for trading all the time, and if you lose the key to your wallet, it would be impossible to restore the access.
Advantages of buying cryptocurrency on trading platforms
There are a couple of advantages of this method of investing. The first one is the opportunity to use the purchased bitcoins for trading since you can keep cryptocurrency on the exchange account. Since most of the largest crypto exchanges operate within the legal field investors are protected, which is another benefit to this method. In case quotes begin to decline, investors can transfer bitcoins to stablecoins at any time. Stablecoins are specially designed digital assets that will maintain a stable value relative to a national currency or other reference assets. And the biggest advantage of buying cryptocurrency on crypto exchanges is incredibly easy. Even those of you who ask “How to invest in cryptocurrency?” will be able to learn the process and begin trading within 10 minutes. You don’t have to learn how cryptocurrency works or get into details of every mechanism behind it – it is as easy as any other broker activity. And compared to other methods we will review it doesn’t require time – you can buy digital currency and do with it as you please.
Disadvantages of buying cryptocurrency on trading platforms
Now, let’s review the negative side of this method. The first and foremost is that with this approach, an investor is tied to the rate at which the bitcoin was purchased, which complicates the process of recoupment and profitability. Also, you will have to pay fees for deposits and transactions. The amount of fee may vary from 1% to 4% depending on the payment method and the amount of transaction. Another big disadvantage is the possibility of hackers’ attacks. Everything on the internet is exposed to the chance of being hacked, and crypto exchanges are no exception. However, trading platforms do everything to reduce such risks and use up-to-date technologies and software to prevent potential damage. So, when choosing a method of investing in cryptocurrency, consider these positive and negative sides to find the most suitable for you.
Mining cryptocurrency on your own hardware
The next investing option we will review is much more self-sustained. Cryptocurrency mining is a very popular method of obtaining digital assets. Just like buying bitcoin on exchanges, it has advantages and disadvantages, which we will highlight later on. Now let’s review the process step by step.
- The first step will be buying hardware. To be able to earn cryptocurrency you need to have powerful hardware. It is required since the process of mining essentially is sharing with the network your computational power to solve complex mathematical tasks. Back in 2012, it was possible to efficiently mine bitcoin with low-powered computers, but now it takes more and more computational power and more time to obtain bitcoin. That is why miners usually use Graphical Processing Units, or GPUs for short, and Application-Specific Integrated Circuit, or ASIC.
- Next, you need to set up a cooling system. Mining farms use a lot of energy and as a result, emit a lot of heat, which must be dispersed. There are various cooling systems, like simple air fans and complicated water cooling.
- After the hardware is settled, you need to download mining software. This software is present in a wide variety on the internet, both free and paid versions. Be careful when choosing the software since there are scam versions of it, and it is recommended to use legitimate software.
- Once again, you need to create a crypto wallet where your cryptocurrency will go. You can use online or offline wallets that we discussed earlier, or you can use an exchange account as a wallet to collect mined bitcoins.
- The last step to start mining is joining a mining pool. Mining pools are people that share their computational power, greatly increasing the speed and efficiency of mining. This is required since at the present moment mining popular and old cryptocurrencies is increasingly difficult. Only new cryptocurrencies can be mined with your hardware. This is due to the continuously increasing difficulty and complexity of mathematical tasks. The rewards are shared among the members of the mining pool and how it is distributed is specified in the rules by which it exists. Slush Pool, AntPool, and BTC.com are the most popular mining pool at the moment. After you have joined a mining pool, follow the instructions indicated in the software and start to mine.
Advantages of mining cryptocurrency on your hardware
Among the main advantages of this method is complete control. Since it all depends solely on you, only you will decide what currency you want to mine, in what amounts. This option is also relatively secure since you don’t risk anything except your initial investment. Another advantage is that if quotes are going up – miners will earn much more than those who buy cryptocurrency. Also, mining the digital currencies method is much easier than buying and selling cryptocurrency since you don’t have to monitor the price and hardware will do the job for you. This way of investing in cryptocurrency is very popular at the moment and now you can even buy pre-made mining farms on different platforms. And even though it is so popular, it still has its drawbacks related to the technical part.
Disadvantages of mining cryptocurrency on your hardware
Now, we will review the negative side of mining digital assets. One of the disadvantages is a high initial investment since efficient hardware will cost a lot. This leads us to other financial aspects, like cooling or electricity. On top of that, you will need an area where you will set your hardware, which also can be inconvenient. Also, since the mining farm will consume a lot of electricity, you need to check if you are getting enough cryptocurrency to cover the regular cost of sustaining your farm
and that you earn something on top to recoup your investment. The recoupment is also tied with an initial investment, so it also influences whether such investment will be financially beneficial or not. Also, because GPUs are incredibly suitable for mining, crypto miners caused a GPU crisis in the gaming market. Also, because of huge heat generation, mining cryptocurrency is far from eco-friendly. As you can see, this option is less complicated but much more expensive than buying bitcoins.
Alternative ways of mining cryptocurrency
Apart from the ways of obtaining digital currency that we mentioned before there is an alternative solution. Cloud mining can be called an improved version of the usual mining method. Here you lease or purchase mining equipment from a third-party hardware provider, which takes responsibility for maintaining and supporting the hardware. This method is much easier and less expensive than mining with your equipment. Cryptocurrency cloud mining comprises a couple of different models with different approaches: leased hash power and hosted mining.
The leased hash power approach means that you lease a part of the overall computing power of a specialized mining farm. In this model, the investor gains the overall part of cryptocurrency produced by a farm. Also, in this model, the provider is responsible for maintaining the farm. To start cloud mining with leased hash power you need to go to the cloud mining company, create an account and make a contract by selecting a contract period and the amount of rented hash power.
Cryptocurrency hosting mining is the second and the most popular cloud mining model. Following this approach, the investor leases or purchases mining equipment that is located in a special facility. Here, the miner is responsible for maintaining and supporting farm performance. The main benefit of this model is full and direct control over one’s cryptocurrency. Also, due to the scale of a mining farm, they usually manage all costs, like electricity and the area required for a farm.
Cloud mining providers
Cloud mining has also become popular and now many companies allow people to invest in cryptocurrency this way. One of such companies is Minery.
Minery is a company that was established by mining veterans in 2016. Their main goal is to provide a turn-key host mining to experienced digital currency miners. In such a short time Minery gathered the best experts, found the most efficient sources of renewable energy, combined it with the best management and software, put it under one roof with the optimal climate, and they did all that to deliver Minery’s Premium Managed Bitcoin Miner Hosting Service.
Another important aspect of Minery is transparency. Investors can check the billing and visit their servers at any moment by going to their website. Their trustworthiness is also supported by the network of partnerships with mining hardware and software developers. In just 5 years they build an incredible amount of trust, and they only continue to improve. Minery also has an advanced and extensive service center that will take care of maintaining your mining farm.
At Minery, IT and Operations teams use the best Data Center management practices, like ITIL, EN
50600, and ISO 27001, for architecture, infrastructure, processes, and training. They built the technology stack to be reliable and scalable. The cloud and on-site aspects are made with a proper level of redundancy for all critical components. They also use open-source DCIM and monitoring tools, such as NetBox, Prometheus, and Grafana, along with a proprietary software stack, like Java and Python. The Minery support team monitors each mining farm 24/7 and performs other tasks.
- Continuous monitoring of your hardware and supplement infrastructure
- Automatic outage detection and proactive alerting system
- Centralized issue management system
- Proactive resource utilization analysis
- Ongoing operations team education and certification
Advantages of cloud mining and hosting mining
This way of investing in cryptocurrency is far more convenient than mining on your hardware since there is no need in buying and setting up the mining farm. Also, it is less expensive than buying bitcoin or mining it on your own. Another benefit is that thanks to efficient process organization, cheap electricity, and favorable climatic conditions it is much easier and cheaper to mine 1 crypto coin. With cloud mining, it is much more convenient, less expensive, and far more efficient to invest in digital currency than in any other way. Cloud mining is also far more eco-friendly than mining with your hardware. Such farms are built specifically for mining at suitable places with effective cooling, which reduces the carbon footprint.
Disadvantages of cloud mining and hosting mining
And even such an efficient and profitable mining method has some disadvantages. One of them is scams. Because mining became so popular some people decided to make money through fraudulent projects. To avoid giving your money to scammers you should invest in cloud mining only through trusted and credible cloud mining providers, like Minery. Another negative aspect is possible diminishing profits due to the increasingly complicated mining process of bitcoin. Another disadvantage, for those who want to mine other digital currencies apart from bitcoin, is that alternative coins are tied with demand. This way in case people leasing hash power decreases – it would result in fewer profits. On top of that, cloud mining models promote the centralization of cryptocurrencies, which can lead to the creation of a decentralized ecosystem.
A final word on available methods of investing in cryptocurrency 2021
In this article, we review the most popular and common methods of investing in cryptocurrency in 2021. Each of these 3 methods has its advantages and disadvantages in comparison to others. Which investing option you will choose depends on many factors, like your budget, the situation you are in, goals of your investment, etc. To summarize all that we learned today, let’s make a short review of all 3 methods and what group of investors may be interested in each of them.
Buying digital currency on crypto exchanges is a low-cost solution that will not take much time and effort. All you need is a relatively small amount of money, 10-20 minutes of your time, and you will become a bitcoin investor. Such a low barrier to entry makes this method perfect for those who are new to cryptocurrency and don’t want to get into this stuff too deep – only to invest and get profits.
It is also the cheapest way of investing in bitcoin since you can buy only a part of cryptocurrency and already make a profit out of it.
Mining crypto coins on your hardware is a much more expensive investing method. It will also take more effort and time to gain profits since you need time to mine cryptocurrency. Of course, you can join mining pools and speed up the process. But you will have to take care of your hardware, pay electricity bills, maintain the cooling systems, etc. It is a high-cost, effort-requiring, and time-consuming process. It is suitable for people with a high budget and prospects for mining big amounts of cryptocurrency.
The last mining method is cloud mining. It is much cheaper than mining on your hardware, far less effort-requiring, and convenient as buying digital coins on crypto exchanges. You don’t need to look for facilities to store your mining farm, think about cooling and other infrastructure. Cloud mining companies will take care of all of that – you just pick the cloud mining model and harvest the profits. It is not only a much more convenient combination of the two previous methods but also a very secure one. Of course, as we mentioned before, scam projects exist in this branch of cryptocurrency investment. However, if you work with reliable companies, it won’t be a problem. For example, by working with Minery you will get the convenience of mining crypto coins at home, but also easy access to your cryptocurrency, low barrier to entry since it is also a low-cost investment, and security of the highest level.