People may have heard the term Bitcoin in the news at some point but most are unfamiliar with exactly what it is. Bitcoin is one type of cryptocurrency. Cryptocurrency is a digital currency that uses advanced encryption techniques to control transactions and the number of additional units created.
In 2009, Bitcoin was the first cryptocurrency to become decentralized. Subsequently, other forms of cryptocurrency have been created which are called altcoins. In addition to Bitcoin, some of the most popular forms of cryptocurrency include Dash, Ethereum, Litecoin, and Zcash. Cryptocurrency mining profitability has been proven repeatedly when approached appropriately.
The mining involved in creating cryptocurrency requires a substantial amount of computer processing power. Some people install software onto their personal computer and attempt to mine their preferred cryptocurrency themselves. While this is possible, it is not exceptionally profitable. It typically works better for those who look at cryptocurrency mining as an interesting hobby that has the potential to pay for itself with enough time.
Cloud mining is another form of mining cryptocurrency which allows individuals to access a remote data center that has greater processing power for a set fee. This tends to be more effective for those who are considering cryptocurrency as an investment. However, it is important to note that investment in cryptocurrency isn’t regulated in the same way stocks are and it can be risky.
Investing in Bitcoin
There are people who say investing in Bitcoin is not a good choice. These are typically the risk averse who are prone to investing too much money they can’t afford to lose and expecting the stock market, or any other investment, to be as stable as the return on a certificate of deposit (CD). Investing in Bitcoin does come with a greater risk. It also comes with the possibility of a much greater return. In 2016 Bitcoin had a 100 percent return on investment. The value of one Bitcoin reached an all-time high of $1,165.89. That represents a staggering return on investment.
There are two ways to invest in Bitcoins. You can purchase it as a currency and then hold it until the currency value increases and you are able to sell it at a profit. Doing this puts the investor at risk of the currency losing value and being worth less than the purchase price. In many ways, this is like purchasing a stock. You can even try to buy and sell quickly in much the same way people short sell stocks, but this is even riskier.
The other option for Bitcoin investment is to invest in Bitcoin mining. However, to be truly profitable this requires large scale mining. Large scale mining requires expensive equipment and vast amounts of electricity. It is far more difficult to make a profit purchasing the equipment to use independently for Bitcoin especially.
For those who are sincerely interested in investing money into the mining process for Bitcoin, it makes more sense to work with a cloud mining company. They leverage the investments from all of their clients to pay for the equipment and the electricity required so that the cost associated with mining is distributed evenly and is more affordable for individual miners. However, it is extremely important to verify the reputation of any company that is offering this service.
Investing in Cryptocurrency
Investing in other forms of cryptocurrency is a good idea for anyone who has extra money they are willing to risk losing. This is essentially the same advice given to anyone not investing in blue-chip stocks. Investments are risky because of the volatile nature of the enterprise and the fact that new players can devalue existing cryptocurrencies. The other problem is, the profitability of a specific cryptocurrency depends significantly on its adoption as a form of currency by a large enough group of people to drive up the price.
Millennial investors are often considered one of the target demographics because they have more time to put into mining and to allow their investment to increase. They are also more likely to move away from Bitcoin, the blue-chip cryptocurrency, and towards one of the newer currencies that have the potential to grow in value more substantially over a quicker period of time. The only problem with the newer forms of currency is that the assurance of adoption by the general public is less solid.
Investing in any form of cryptocurrency is a bit like setting out to California during the gold rush era. You are going to devote a lot of time and resources into the mining, but you may strike gold.