Crypto mining vs investing – a detailed comparison

Many people on social media view investing as the only way of being involved in the world of crypto. Not so many would say that cryptocurrency mining is still a really good way of turning a profit.

To answer some of these unclear perceptions on the crypto mining vs investing debate, I went through all the pros and cons of both mining and investing, as experienced on my own crypto journey. Here’s what I’ve learned so far.

crypto mining vs investing

Cryptocurrency mining

Crypto mining is not dead, despite what some people may think after hearing the recent news about China banning crypto miners or about the ETH 2.0 future update. The reason for this is simple: there are several cryptocurrencies that still rely on mining, and will continue to do so. Some of these are based on Proof-of-Work protocols, requiring graphic cards, processors, or specialized hardware (ASICs) to process transactions in exchange for coins.

Based on whattomine.com data, examples of Proof-of-Work coins that are still profitable to mine in 2021 include ETH, BTC, ETC, RVN, LTC, ZEC, XMR, DCR, DGB, BCH, DOGE, plus many others.

For Ethereum, the recent price action has also increased mining profitability. There are not many reasons why the ascending trend in profitability would reverse anytime soon. With the Ethereum 2.0 upgrade, the adoption rate will likely increase and more miners would be tempted to join.

ethereum mining profitability

Besides Proof-of-Work, there are a few more protocols for validating blockchain transactions. For example, there are also cryptocurrencies based on Proof-of-Capacity, that use disk space for validating transactions. These can be mined using a hard drive or SDD. The most profitable of these coins include STORJ, FIL, SC, BTT, and possibly others.

Is crypto mining still worth it?

In the past few years of mining both Proof-of-Work and Proof-of-Capacity cryptocurrencies, I got a good overview of the advantages and disadvantages of crypto mining. I will share them below:

Pros:

  • if done right, crypto mining can be a very good source of passive income. Mining Ethereum or other Proof-Of-Work cryptocurrency can still generate average profits between $2 and $7 per day per graphic card (depending on the model). It can be made even more profitable if multiple GPUs are used within a mining rig, or if you have access to a cheap electricity source.
  • it’s relatively easy to start – even for a beginner. Crypto mining is not as difficult as it may sound, all one has to do is to buy or assemble a computer. At least one good enough graphic card is recommended. A fast CPU or extra disk space will be a plus. Next step is to install the mining software – this will depend on which coin you choose to mine. Then, setting up a crypto wallet for mining revenue and joining a mining pool is all that’s left to do.
  • can be an educational experience – cryptocurrency mining can be a fun way to learn by doing about how cryptocurrency is actually created, about assembling a mining computer, installing the required software, joining a mining pool, or even more crazy stuff, like learning how to overclock a graphic card while maintaining it cool enough for mining.
  • revenues from mining crypto can increase in value overtime, if not sold immediately.
  • crypto mining can also be done using only low energy hardware, such as a hard drive connected to a Raspberry Pi.
is it worth mining crypto

Cons:

  • for GPU mining, hardware can be expensive – if you’re a gamer, you’re already painfully aware of this. One cryptocurrency mining rig (6 to 13 GPUs, 1 processor, RAM, 1 or 2 PSUs, an SSD, motherboard, risers, frame) can reach costs that could be recouped only after some months of mining.
  • GPU mining consumes quite a lot of power – you should first of all consider the price of electricity in your country/region before starting setting up a crypto mining rig.
  • requires proper space and ventilation – cryptocurrency mining is a way of generating a lot of heat, and might not be suitable for areas with high year-round temperatures or for improperly ventilated spaces.
crypto mining is it worth it

All in all, crypto mining is still worth it, and in my opinion, will keep being profitable at least for the next few years. It may not be for everyone, though, as it requires some technical skills not everyone might be familiar with. Also, same as with everything else in life, crypto mining involves certain risks, like hardware breaking down or even starting fires. As long as one is aware of all these, mining can be a fun experience and a nice way to earn passive income.

Investing in cryptocurrency

For people without the technical knowledge or budget required for mining cryptocurrency, investing is the best alternative. If you’re totally new to this topic, check out a detailed guide on how to start investing in crypto as a beginner.

Investing a portion of one’s net worth in cryptocurrency is one of the best ways to counterbalance the risk/returns ratios within the classic financial instruments (ETFs, stocks, bonds, commodities). With passive income generating features like staking, cryptocurrency investments are becoming more and more attractive, especially for younger generations. As it is still in its infancy compared to assets such as stocks or commodities, cryptocurrencies are seen today as a high-risk high-reward investment class. However, it has a lot of growth potential and with time, crypto can become mainstream and used on a daily basis by a vast majority.

crypto mining vs investing

Investing in cryptocurrencies in my opinion should always answer at least one big WHY question for the person willing to invest. “Why chose Bitcoin over gold?” or “Why should I invest in crypto?” or “Why risk X amount of my income?” or “Why should I start investing now?”. You get the point. Whatever your WHY question may be, you are the only person who can answer it. For me personally, investing a portion of my income in cryptocurrencies represents a hedge against an uncertain future and also a way to learn as much as I can about the latest fin-tech breakthroughs.

Same as with cryptocurrency mining, investing has its own pros and cons:

Pros:

  • investing in cryptocurrency does not require additional costs other than the cost of crypto assets. Okay, optionally one could get a Ledger wallet for better security, but that is nowhere near the price of a graphic card, for example.
  • if investment is done based on a solid strategy, it can be the best way to earn a passive income or to finance your early retirement.
  • well established cryptocurrencies like Bitcoin or Ethereum have a significant potential for price appreciation in the long run.
  • cryptocurrency investments are a way of hedging against hyperinflation or against oppressive regimes. Based on present day examples in countries like Venezuela or Myanmar, crypto is a working alternative for free trade and financial settlements in case of traditional currencies collapse or of totalitarianism.
  • investing is not that difficult, and same as for crypto mining, it can be a great learning experience.
  • full control over your assets – as long as you have access to your private keys, you are at all times the only user and administrator of your cryptocurrency.

Cons:

  • cryptocurrency investments are seen as high risk, as the crypto environment overall is still developing. There are risks associated with loss of crypto assets (sending funds to a wrong address, loss of private keys), with the underlying blockchains (51% attacks, hacks), with price (rug pulls, pump & dump schemes, debasing), etc. With time, some of these risks might be mitigated, but it is always useful to be aware of them, so you can learn to better protect your assets.
  • cryptocurrencies are not yet used on a large scale as means of payments – remains to be seen if this is going to change in the next few years.

No matter if you’re choosing cryptocurrency investing or mining, or even day trading, if that’s for you, I hope that this comparison offered you a clear overview and you will make a slightly more informed decision. Please feel free to subscribe to my newsletter or follow me on Twitter if you want to stay up to date with future articles.

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