Mining, Day Trading, or Hodling – Which One is More Lucrative to Earn with Cryptocurrencies?

Handy Tips / 23.06.2021

The cryptocurrency world has its share of success stories and tales of bankruptcy – including scams. However, for over a decade since cryptocurrencies became a reality, the sector has advanced rapidly to the present day solid, stand-alone market.

Knowing how to invest in cryptocurrency may seem complicated, especially for beginners in trading, but it can be a profitable venture with the correct information. In today’s guide, we will focus on mining vs. day trading vs. hodling; thus, read on to find out which would help curve a successful trajectory on one of today’s most popular trading markets.

Crypto Day Trading

Also referred to as intraday trading, it entails the buying and selling of cryptocurrencies during the day. Day traders aim at gaining profits amid price fluctuations of cryptocurrencies.

It is easy to earn cryptocurrencies in crypto day trading. However, there are both risks and rewards of crypto day trading. Knowing what these risks and rewards are is crucial, especially if you consider day trading a part of your crypto portfolio.

Rewards of Crypto Day Trading

  • High Returns

One significant benefit of day trading is the potential to gain high returns. The volatile nature of cryptocurrency, it turns out, is not just a bad thing. When day traders invest in specific crypto and increase in value, they may gain substantial profits. Cryptos can increase in value by over 10% in only a few hours.

  • Low Taxes and Fees

Exchanges that enable day trading usually charge low fees and taxes. Lower fees and taxes mean that the net return on investment increases.

  • Favors both Large and Average Investors

In crypto trading, both large and medium investors are favored, and the chances of success are equal. One, therefore, does not require a long-term view to define the potential for success while day trading.

  • Global Access

Day traders can trade from any part of the world without restriction, provided you have a good internet connection. It, therefore, possesses benefits over regular day trading, which has location limits.

Risks of Day Trading

Intraday trading, however profitable, has an array of risks that often discourage day traders. Here are some of the risks worth noting associated with intraday trading.

  • High Risks

It is common knowledge that the crypto market is highly volatile. The value can fluctuate at any given time, whether increasing or decreasing all of a sudden. If the price decreases, day traders selling these coins could realize significant losses.

It is also speculative. Day trading is mainly speculation as there is no assurance that a particular strategy will result in profits.

  • Risk of Getting hacked

While day trading, traders most probably keep their coins in a cryptocurrency exchange. However, when cryptos are exchanged, there lies a significant risk of loss of traders’ coins in case the exchanges are hacked.

What is HODLING?

Hodl is an intentional misspelling of “hold,” which means infers to holding on for one’s dear life during cryptos volatility. It is rock-solid advice, but it is in reality more difficult to pull off than the memes suggest.

It may be a great entry strategy for newbies; users buy coins and hold on in expectation of an increase in the prices of the coins. However, this strategy necessitates a vast deal of emotional strength.

Rewards of HODLING

  • Less Technical

Novice traders should opt for the HODL strategy as it is better than day trading. In addition, it is easy because one buys coins and puts them in wallets while observing the price movements. However, make no mistake as if HODL is implemented improperly, it could also lead to losses.

  • Less Effort in Trading

By buying cryptocurrencies in the long term, one does not have to worry about selling or often buying, paying fees, or any of the time-consuming activities other strategies could lead to.

  • Reduced Stress

The hodling strategy reduces the struggle and stress of buying and selling cryptos every often. This form of passive investing has worked for investors in crypto markets and traditional markets.

Cons of HODLING

  • Less Profitable

Active day trading may have better rewards on investments. Day traders are constantly studying the market; hence if they see the market reaching a peak, the best idea would be to sell close to those highs rather than holding.

  • Time-consuming

Holding may be a good strategy for long-term traders, but it may not work best for traders looking for fast profits. At times, it may take even years to recover an investment.

  • Risk of Loss of Investment

Some traders forget where they leave their funds or even forget their private keys to their wallets.

Crypto Mining

Mining is a strategy to earn money via solving a complex code that needs dedicated computer equipment. When Bitcoin was invented, mining was straightforward, and miners were able to gain more coins quickly. However, as more people became interested in Bitcoin, mining became more complicated.

To earn through mining, you require some skills to choose the appropriate PC parts and configuring software. In addition, the specialized equipment required costs more than GPU equipment, whereas trading and hodling do not require any equipment.

A step-by-step guide to begin mining:

  1. Equipment purchase
  2. Equipment installation and adjustment
  3. Software setup
  4. Use of a pool
  5. Process adjustments, system performance maintenance

Mining Pros and Cons

Pros:

  • Ability to withdraw profits daily
  • Control of Investment
  • Lowest Risks

Cons:

  • Requires expensive equipment 
  • Expensive to monitor and maintain equipment
  • Requires basic skills and knowledge about computer hardware

Conclusion

Mining vs. hodling returns is comparatively small, although the risks involved are minimal. Day trading risks are higher and thus higher possible return on investment, up to 100% on the initial investment. Mining is perhaps the least profitable. There is more to consider in crypto trading than just the strategies’ profitability, hence this guide.

There is no exact answer to the mining vs. day trading vs. hodling dilemma. However, every trader has to answer the fundamental question, does the investment strategy favor your lifestyle? To conduct due diligence and find a strategy that best fits your interests, from high rewards, investment time, skills required, and trading stress.

Adam is an outgoing young lad who likes adventures and discovering new things. Despite his boring life, he loves writing about cryptocurrencies and exploring what blockchain technology can do for the coming digital world where all adventures will be virtual.