Coin speculation, coin hoarding, and mining are three different behaviors in the field of digital currency, and they have many differences in purpose, operation methods, risks, etc.
First, the conclusion: mining > coin hoarding > coin speculation
I. Purpose
1. Coin speculation
o The main purpose of coin speculation is to obtain short-term price differences by frequently buying and selling digital currencies. Coin speculators try to take advantage of market volatility, buy when the price rises and sell when the price is higher, or short when the price falls (if the market allows shorting) to make a profit. For example, seeing that the price of Bitcoin has risen by 10% in a day, coin speculators will quickly buy it, expecting the price to continue to rise in the next few hours or days, so that they can sell it at the right time for profit.
2. Coin hoarding
o Coin hoarders pay more attention to the long-term value appreciation of digital currencies. They expect the value of digital currencies to increase over time, such as due to the development of its technology, the expansion of application scenarios, and the improvement of market recognition. For example, some coin hoarders believe that Ethereum, as the leader of smart contract platforms, will continue to rise in value as blockchain technology is applied in more fields such as finance and supply chain, so they hold Ethereum for a long time and do not care about short-term price fluctuations.
3. Mining
o The purpose of mining is mainly to obtain digital currency rewards. In the consensus mechanism of digital currency (such as Bitcoin’s proof of work mechanism), miners use computer hardware to solve complex mathematical problems to obtain newly generated digital currency and transaction fees. For example, Bitcoin miners use powerful computing power to compete for bookkeeping rights, and successful miners can get a certain number of Bitcoins as rewards. This is a way to obtain digital currency by contributing computing resources.
2. Operation method
1. Coin speculation
o Coin speculators need to pay close attention to the real-time price dynamics of the digital currency market. They will use various trading platforms to conduct buying and selling operations through trading instructions such as limit orders and market orders. For example, on a large digital currency trading platform, coin speculators can set a limit order to automatically buy when the price of Bitcoin reaches US$50,000, or directly use a market order to buy at the current market price. At the same time, speculators will also use technical analysis (such as analyzing K-line charts, moving averages, etc.) and fundamental analysis (such as paying attention to the development trends of digital currency projects, market news, etc.) to guide their trading decisions.
2. Hoarding coins
o Hoarding coins is relatively simple. After purchasing a certain amount of digital currency, hoarders will store it in a secure digital wallet and then hold it for a long time. Digital wallets are divided into hot wallets (connected to the Internet, convenient to use but slightly less secure) and cold wallets (not connected to the Internet, high security). For example, after a hoarder buys Ethereum, he stores it in a hardware cold wallet and basically does not check the price frequently, but only regularly pays attention to some major developments in the digital currency industry, such as Ethereum’s technical upgrades and the landing of new application scenarios.
3. Mining
o Mining requires certain hardware equipment and software environment. For Bitcoin mining, ordinary CPUs can be used for mining at first, but as the difficulty increases, professional ASIC mining machines are now required. Miners need to build mining equipment, connect to the mining pool (to increase the probability of receiving rewards) or mine independently, and need to install the corresponding mining software to perform mining operations. For example, Ethereum miners need to configure the graphics card mining machine, install the Ethereum mining software, set the parameters of the mining pool, etc., and then let the mining machine run continuously to participate in the mining process.
III. Risks
1. Speculation in cryptocurrencies
o The risk of speculation in cryptocurrencies mainly comes from the high volatility of the market. Prices may rise or fall sharply in a short period of time, and speculators can easily buy or sell at the wrong time. For example, due to a false market news that causes the price of a digital currency to rise instantly, speculators follow suit and buy, and the news is confirmed to be false, and the price falls rapidly, resulting in losses. In addition, the security of the trading platform is also a risk factor. If the trading platform is attacked by hackers or technical failures occur, the assets of speculators may be lost.
2. Hoarding of coins
o Although hoarding coins does not face the price volatility risk of short-term transactions, it still faces long-term price uncertainty. As mentioned earlier, the value of digital currencies may show a long-term downward trend due to factors such as technological changes and regulatory policies. For example, if a country completely bans digital currency, the value of the assets in the hands of the coin hoarders will shrink significantly. At the same time, the security of digital wallets is also crucial. If the wallet private key is lost or stolen by hackers, the assets of the coin hoarders will not be recovered.
3. Mining
o The main risks faced by mining are hardware equipment costs and electricity costs. Purchasing professional mining machines requires a lot of capital investment, and the mining machines depreciate rapidly. At the same time, a lot of electricity is consumed during the mining process. As the difficulty of digital currency mining increases, the electricity cost may exceed the mining income. For example, Bitcoin mining in some areas with high electricity costs may result in losses because the income cannot cover the cost. In addition, mining also faces policy risks. Some areas may ban mining activities to reduce energy consumption and financial risks.
According to data statistics from people around me and people in the same industry, people who speculate in coins are the most likely to lose money, especially if some people like to play contracts with leverage, which is easy to explode. There are even some very rich and experienced people who copy contracts, and their assets worth tens of millions of US dollars are all exploded, and they still owe more than 1 million US dollars to the outside world.
People who hoard coins generally make money, but due to the large market fluctuations, hoarding coins too little feels unprofitable, and hoarding coins too much takes up a lot of funds. Sometimes there may be a tragedy of cutting meat in a bear market when money is urgently needed. Or after the bull market comes, a large number of coins are sold in the early stage of the bull market, which will also lose part of the income.
Miners are generally the most profitable, especially early miners. Many miner friends drive luxury cars such as Bentley and G-Class, and have long been financially free.
For example, around June 2022, buy 20pcs Antminer L7 9050M miners. How much money can you make today?
At that time, the equipment was purchased for about 600,000 RMB (about 83,000 USDT), and the payback time was about 18 months. If all the coins mined are converted into DOGE and held until now, there will be a 7-fold return (0.06u→0.42u), and the price of the mining machine in the second-hand market is 1.8 million RMB (249,000 Usdt), which means that this investment can theoretically earn about 10 times (83,000 usdt->830,000 usdt)
b. Can it outperform buying spot DOGE directly?
It is highly likely that if you buy 600,000 RMB (83,000 usdt) of DOGE, you will sell it at about 1.2 million RMB ((166,000 usdt)) (0.06u→0.12u, this is human nature, no need to discuss it, most people dare not hold a large position in meme coins, nor dare to hold them for a long time)
c. Can it outperform buying spot coins directly BTC?
Yes, if you buy 600,000 RMB (83,000 USDT) of BTC, you will sell it at about 1.8 million RMB (249,000 USDT) (30,000 U → 90,000 U, everyone’s psychological expectation is 100,000 U, and you may hold it for a year and a half)
Conclusions of the past 18 months:
a. 600,000 RMB (83,000 USDT) is invested in Dogecoin mining machines and held, and the total assets may have become 6 million RMB (830,000 USDT);
b. 600,000 RMB (83,000 USDT) is invested in DOGE spot, and the total assets may become 1.2 million RMB (166,000 USDT);
c. 600,000 RMB (83,000 USDT) is invested in BTC spot, and the total assets may become 1.8 million RMB (249,000 USDT).
If you need to buy a mining machine or hosting, please contact us. I will tell you what problems you may encounter, what precautions you should take, what leverage you can use, and so on.
1usdt=1usd=1u=7.2RMB. About.
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