The Difference between Bitcoin Mining and Trading

Bitcoin continues to grow in stature every day. 

The pioneer crypto has come a long way. Still, certain concepts need more elaboration. Many people get distracted by the shining light that is Bitcoin prices. This statistic is pretty much all that casual enthusiasts care about. 

That said, Bitcoin is a multifaceted asset with different concepts therein. Trading and mining are two defining concepts in this industry. Both activities have the objective of profiting from Bitcoin. Needless to say, the actual returns can fluctuate depending on various variables. 

Exploring Bitcoin Trading 

Bitcoin trading essentially entails purchasing and selling the coin. The trading can either be long-term or short-term. 

Long-term trading involves purchasing and holding Bitcoin until prices are impressive enough to sell. This strategy’s common term is to ‘hodl.’ It is pretty straightforward: buy when low, sell when high.

Day trading is a significant fixture in the Bitcoin landscape. These trades aim to take advantage of momentary price movements. Notably day trading incurs more risk but provides leverage and the possibility of larger returns. It is vital to choose a reliable broker or exchange that offers seamless trade execution, security, and strong liquidity. In day trading, time is of the essence. 

To trade, one has to deposit funds and formulate a profitable trading strategy. Trading allows an investor to shuffle between several cryptocurrencies. Regardless, trading involves significant risk, and a trader has to be conscious of impulse trading. Trading calls for analysis and regular involvement to check trends. This analysis is pivotal before funding your account and making the trade. 

Cryptocurrency is synonymous with volatility. The volatility can be lucrative when a trader correctly predicts trends. Some forms of Bitcoin trading involve speculating on prices purely without holding the underlying asset. This form of derivatives trading became possible after CME listed Bitcoin futures in December 2017.

Advantages and Disadvantages 

Pros: 

• The possibility of exponential profits. 
• Accessible from a smartphone or laptop at home. 
• A reliable broker offers efficient services. 

Cons 

• Time-consuming as it requires constant analysis and research. 
• The significant risk of losses, especially in day trading. 
• It requires skill and discipline. 

Trading is a diverse and sophisticated field. A trader’s fortunes can range to both extremes. Traders must take the analytical part seriously to learn how to manage risk and maximize opportunities. 

Notably, trading is a capital investment. A trader makes a profit subject to capital gains tax. This fact is because the IRS classes Bitcoin as property for tax purposes. For mining, it is more like a business. A miner can use some of the initial purchase costs in mining to get tax write-offs. 

About Bitcoin Mining 

Bitcoin mining is a crucial aspect of Bitcoin operation and security. See, Bitcoin has no centralized supervising entity like regular money. The solution to that is Bitcoin community participation in securing the network. 

Bitcoin mining is a process that entails computer hardware participating in confirming transactions. The computers verify transactions in a decentralized manner by lumping them in a block of transactions to be added to the blockchain. 

These computers crunch mathematical sums in a competitive setting to battle other computers for the right to earn Bitcoin on the blockchain.  The process is competitive because the reward of 6.25 BTC is enough incentive for miners. 

Today, Bitcoin mining is an arms-race. Elite mining manufacturers like Bitmain are releasing mining rigs with a processing power of above 100 TH/s. Such rigs are thousands of times more powerful than any ordinary computer, and are designed to do nothing else but crunch numbers. 

Therefore, participating in Bitcoin mining is mostly about getting the equipment right. At the moment, sourcing quality mining equipment is difficult. The cryptocurrency market is booming, and institutional miners have scooped most equipment from manufacturers for the rest of the year. Mining using older equipment can be frustrating because the more efficient rigs scoop up most of the new BTC.  

Analyzing the Upsides and Downsides of Bitcoin Mining 

Pros

• Lower risk of loss than trading.
• It is constant. 
• It requires less market analysis. 
• A person can delegate mining to a hosting service to reduce involvement. 

Cons:

• Significant investment in initial equipment purchase.
• Mining at home can be unsustainable with power costs. 

Mining Bitcoin needs investment, but it can more than make-up for this cost within a few months. There is no guarantee of fast returns because mining difficulty is always changing. Nonetheless, it calls for consistent application and the right conditions to be on the right side. 

Bitcoin Mining Is Better Than Trading 

As a general disclaimer, it will always be up to an individual to pick their preferred channel to get involved in Bitcoin. Trading will always have a lower entry threshold because it has little initial costs. 

That said, trading to the top is no walk in the park. In this sense, mining is safer. Trading requires sharpness and constant analysis to keep going. The risk of losses when trading is generally higher, especially for a person conducting leveraged position trading. 

For mining, once the equipment is set up, it only needs maintenance and few adjustments. A person without much knowledge in finance and prevailing trends can mine Bitcoin. For trading, you will have to rely on luck if you are unskilled at analysis. 

It is advisable to buy and hold if you fall in the latter category. Losses in day trading can be sweeping and devastating.  Mining does not promise to be a bed of roses. However, it is a more predictable sector overall. 

Advanced Mining: Spearheading Sustainable Green Bitcoin Mining 

Advanced Mining is taking Bitcoin mining a notch higher.  

By combining the efficiency of high-quality mining equipment with the sustainability of renewable energy, our operations are geared to favor retailers. 

We are optimizing Bitcoin mining and making Advanced Mining a trendsetter in green mining.  The use of the latest mining equipment like the Bitmain Antminer s19 allows us to mine Bitcoin competitively.  

The order of $8 million of the latest Antminer S19 series from Bitmain in December 2020 gives us an edge. Besides, our data centers in the U.S use cheap hydroelectricity that can power efficient mining. 

We are not only mining Bitcoin sustainably but also reducing our operational costs substantially. Electricity costs have a serious drag effect on Bitcoin mining profits. 

Last but not least, our experienced team of Bitcoin mining professionals provides the insight and expertise necessary to take Advanced Mining through its roadmap. 

Join our Mining community today to learn more about our Bitcoin mining operations!