Are Digital Currencies A Good Investment? – Knowing The Basics
Investments are an excellent way to earn some money. You can do many ways to start investing, but how do you choose where to invest? With the recent rise of different digital currencies, a lot of people are asking, are digital currencies a good investment? There is a lot of evidence that shows cryptocurrency investments can make you super-rich or make you lose all of your money. Let us find out and decide if cryptocurrencies are a good investment.
Investing in Cryptocurrencies
To answer the question, are digital currencies a good investment, we must figure out how we can invest in cryptocurrencies. Investing in crypto-assets can be done in different ways. You can buy them, mine or earn them, and you can also trade with them. Each of these ways can be profitable on its own. You just have to find what can be suitable for you. Let's look at how you can make cryptocurrency investments.
Buying and Trading Cryptocurrencies
First is buying cryptocurrencies. Through buying crypto, you can earn by selling it once the price surges again. It works like how you treat the stock market. Some crypto users hold the cryptocurrency instead of using them for transactions. They are called the Hodlers. Hodl, a slang in cryptocurrency, means to hold the currency instead of selling it.
It can be profitable if you can buy crypto assets at the right time. During its lowest value, then sell it during its peak moments. The volatility of the crypto market makes it a high risk, high reward type of investment. Getting into it takes a big risk, but when the time comes that you get rewarded, the gains are huge.
There are crypto exchange platforms that host crypto exchanges with support for most tokens. Other exchange platforms are also hosting cryptocurrency now. Even forex platforms support crypto trading. This shows that cryptocurrencies are really surging right now. But the volatility will still factor in making it risky to invest in crypto.
Mining cryptocurrency is a very tricky way to earn money in crypto. It's an investment in itself because you have to buy mining rigs just to participate in mining crypto. Mining crypto works by solving complex cryptography that builds the blockchain. So, if you’re wondering whether are digital currencies a good investment, there are plenty of factors to consider.
During the early days of crypto, mining was profitable even for individuals. To earn a digital currency, a miner has to solve complex encryptions in order to validate a transaction and solve a block. The authentication authorizes a transaction and adds it permanently to the blockchain. The first miner to solve a block gets rewarded with digital currency. So a blockchain serves as a digital list of transactions of a particular crypto coin.
As the blockchain gets longer, the process of authentication becomes tricky. New currencies have less complicated encryptions, but new coins usually have less number of transactions, meaning less opportunity to mine. This is why mining is a very competitive business. This means you'll need to upgrade your hardware in order to secure stable gains. Advanced computing hardware also uses more power, adding to your operations cost. With increasing difficulties in encryption, mining has become less profitable than before. Add to that, the mining companies that have lots of mining computers, an individual miner cannot compete with. However, human determination sure knows how to get around things. Here are some tips on how to get around these kinds of difficulties.
Tips To Get Around Crypto Mining Costs
- Join a mining pool to be able to volt-in with other miners and contribute to solving a block. This increases your chances of being the first one to authenticate a transaction.
- Transfer to a place with low power costs. So your resources can be focused on hardware upgrades and less on paying electricity bills.
- Invest in specialized computing hardware like ASICs (application-specific integrated circuit) to increase your computing capacity. There are second-hand devices sold at lower prices in good working condition. If you can get around all these things then you can better assess if are digital currencies a good investment.
So, are digital currencies a good investment? It is still up to you to decide. If you can risk some of your money, you can invest in crypto, and you may gain a good sum of profit. However, we don't recommend investing a lot into it because of its hyper-volatile nature. A lot of people have lost their life savings because of unsuitable investments. The important thing is to educate yourself before investing in anything, crypto or not. But with acquired experience and skills in trade, it is not impossible to profit from any kind of investment if you put your mind to it. Learn more about cryptocurrency investments here!
UPDATED April 5, 2021
By: Lance Richards
Cryptocurrency is a digital illustration of the cost that works as a medium of trade, a specific account unit, or a currency with value, but remember it does not have any legal value status.
UPDATED March 5, 2021
By: Hunter Shultz
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