In a new market it is always a good idea to diversify across all areas, spreading any risk of capital investment which could play a factor in the future. In the emerging cryptocurrency industry two methods of supporting the industry have manifested themselves in the forms of investing and mining. Both of these methods have their own benefits and risks associated with them which should be considered before allocating capital to these processes.
If 2017 taught investors anything, it’s there is a significant amount of potential for growth in the cryptocurrency industry. This potential growth translates into profits for investors who can take advantage of this still relatively unknown market. With cryptocurrency prices hovering near their lowest prices in over a year, it could be a great time to invest in a market which is primed to take-off in the near future.
Cryptocurrency mining is painstaking, costly and only sporadically rewarding. Nonetheless, mining has a magnetic appeal for many investors interested in cryptocurrency because of the fact that miners are rewarded for their work with crypto tokens. This may be because entrepreneurial types see mining as pennies from heaven, like California gold prospectors in 1849. And if you are technologically inclined, why not do it?
However, before you invest the time and equipment, read this explainer to see whether mining is really for you. We will focus primarily on Bitcoin (throughout, we’ll use “Bitcoin” when referring to the network or the cryptocurrency as a concept, and “bitcoin” when we’re referring to a quantity of individual tokens).
The primary draw for many Bitcoin miners is the prospect of being rewarded with valuable bitcoin tokens.
Interest in cryptocurrencies has surged since 2015 as bitcoin has seen its value rise from about $300 per coin to a peak of about $20,000 per coin in December 2017, then dropping to about $8,000 per coin as of November 2019.
Other cryptocurrencies have seen similar surges and dips in value.
Nearly 3,000 cryptocurrencies are listed on investing.com, but two of the most popular alternatives to bitcoin include ethereum ($145 per coin, $15 billion market cap, as of Nov.
2019) and litecoin ($45, $2.9 billion).
While buying on an exchange like Coinbase is usually fairly simple and allows you to buy fractions of cryptocurrencies, there are those who prefer to mine their coins. The best option likely depends on individual circumstances.
Mining cryptocurrency seems like a no-brainer.
According to one report, the hardware market for mining cryptocurrencies is projected to reach US$2.2 billion by 2022.
While cryptocurrency mining stocks were met with challenges in 2018, it’s easy to forget that the industry has made a number of breakthroughs in 2019.
In terms of the cryptocurrency mining hardware market outlook alone, a Technavio report states that US$2.2 billion will be generated on a global scale.
As Research and Markets explains, mining is central to the very process of validating cryptocurrency and bitcoin transactions.
“Whenever a transaction takes place and is validated, miners collect these transactions and include them into the block they are currently solving,” the report says.
On that note, here we profile five cryptocurrency mining stocks that are publicly traded on North American exchanges.
The role of miners is to secure the network and to process every Bitcoin transaction.
Miners achieve this by solving a computational problem which allows them to chain together blocks of transactions (hence Bitcoin’s famous “blockchain”).
For this service, miners are rewarded with newly-created Bitcoins and transaction fees.
Miners are paid rewards for their service every 10 minutes in the form of new bitcoins.
What is the point of Bitcoin mining? This is something we’re asked everyday!
There are many aspects and functions of Bitcoin mining and we’ll go over them here. They are:
Traditional currencies–like the dollar or euro–are issued by central banks.
Bitcoin’s arrival into the mainstream was accompanied by massive evaluations of altcoins, a short-lived ICO craze, and many misunderstandings about the vision and potential of Bitcoin.
Over the last year, numerous developments have unfolded that give more access to investing in Bitcoin and interacting with the legacy cryptocurrency than ever before.
While access to Bitcoin is still far from being ideal, options for investing in it are significantly greater than they were only several years ago. From the proliferation of exchanges to alternative means of acquiring it, evaluating various ways to invest in Bitcoin is worth your time and effort.
Bitcoin’s price has been volatile since its inception.