Bitcoin has exploded in popularity over the past few years. This decentralized digital currency was once seen as something for computer nerds and speculators. However, today bitcoin has gone mainstream, and an increasing number of people are looking at how to invest in bitcoin and make money as a way to make money. But how exactly do you make money with bitcoin? Here are some tips for investing in bitcoin profitably.
Buy and Hold Bitcoin
The simplest way to how to invest in bitcoin and make money is to buy the cryptocurrency and hold onto it long-term. Bitcoin has shown tremendous growth over its short lifespan. Although extremely volatile, if you had purchased $100 worth of bitcoin in 2011, it would be worth millions of dollars today. While past performance does not guarantee future results, bitcoin has significant upside potential. Here are some things to consider when buying bitcoin to how to invest in bitcoin and make money:
- Use Dollar Cost Averaging. Bitcoin is volatile, so invest an equal amount at regular intervals to smooth out price fluctuations.
- Store Bitcoin Securely. Use a hardware wallet and safeguard your private keys to protect your investment.
- Hold Long-Term. Don’t panic sell when the price goes down. HODL and you could reap huge rewards years later.
Bitcoin mining involves using specialized computers to solve complex math problems and verify bitcoin transactions. Miners are rewarded with newly minted bitcoin. While mining used to be possible using regular CPUs and GPUs, today miners use specialized hardware called ASICs to mine bitcoin more efficiently and competitively. Here’s what you need to know about mining bitcoin for profit:
- Join a Mining Pool. Going solo means it could take years to mine a single block and receive the reward. Join a mining pool to share resources and split rewards.
- Research Hardware Costs. ASIC mining hardware is expensive, from $500 to $5,000+. Calculate costs versus potential rewards.
- Secure Cheap Electricity. Mining rigs require enormous amounts of electricity. Look for cheap power to maximize profitability.
- Consider Cloud Mining. With cloud mining you rent hardware and mine through the cloud, avoiding huge upfront costs.
- Factor in Difficulty. As more miners join the network, bitcoin mining becomes more difficult. Make sure your investment will still be profitable.
Invest in Bitcoin Companies
If directly owning bitcoin isn’t for you, consider investing in companies with exposure to the cryptocurrency. Publicly traded bitcoin companies operate in areas like mining, trading, and storing the digital assets. Some benefits of investing in bitcoin companies rather than buying the tokens include:
- Diversification – Spread out risk by investing in varied business models related to bitcoin.
- Ease – Trade stocks on regulated exchanges without needing to handle bitcoin directly.
- Upside – As bitcoin gains adoption, connected companies also stand to benefit.
Some well known publicly traded bitcoin companies include:
|Marathon Digital Holdings||Bitcoin mining company|
|Coinbase||Major cryptocurrency exchange|
|MicroStrategy||Business analytics firm holds bitcoin|
|Riot Blockchain||Another publicly traded mining company|
|Square||Payments company with bitcoin exposure|
Do thorough research before investing to find reputable companies operating successfully in the bitcoin sector.
Accept Bitcoin as Payment
If you own a business, accepting bitcoin as a payment method can open up new revenue streams. With bitcoin payments you can reach new domestic and international markets plus eliminate issues like chargebacks. Some benefits for merchants accepting bitcoin include:
- Low Fees – Cut down on processing costs by avoiding credit card fees.
- No Chargebacks – Bitcoin transactions are irreversible, so no lost revenue due to fraud.
- Free Marketing – Catering to the bitcoin community can drive brand awareness.
- Increase Sales – More payment options can lead to higher conversion rates.
Implementing bitcoin payments takes some technical know-how. But merchant processors like BitPay streamline the process making it easy to get started accepting bitcoin.
There are also various ways to earn free bitcoin online:
- Bitcoin faucets – Earn satoshis for completing captchas and other simple online tasks.
- Referral bonuses – Refer friends to bitcoin exchanges, wallets, etc and earn a commission.
- Airdrops – Get free tokens by supporting new cryptocurrency projects.
- Bitcoin blogging/videos – Create content and earn bitcoin through tips or advertisements.
- Gambling/gaming – Test your luck to win bitcoin playing games or wagering on sports.
These options won’t make you rich, but they can earn you some free crypto to expand your holdings.
Active traders look to profit from bitcoin’s price volatility. You can trade bitcoin via exchanges like Coinbase, Kraken, or Gemini. Or use derivatives platforms like CME for futures and options. Some tips for trading bitcoin successfully include:
- Analyze bitcoin’s historical price charts and trends.
- Choose your trading strategy – day trading, swing trading, or long-term holding.
- Learn technical analysis to identify buying and selling signals.
- Keep an eye on bitcoin news that may impact price movements.
- Use take profit and stop loss orders to minimize risks.
- Watch for support and resistance levels that may indicate potential breakouts or breakdowns.
In addition to exchanges, you can trade bitcoin peer-to-peer and potentially earn bigger returns.
Lend Out Bitcoin
Lending out bitcoin can generate passive income. Your coins continue earning while they are lent out, unlike traditional savings accounts. Some ways to lend bitcoin include:
- P2P lending – Connect directly with borrowers and agree to loan terms on sites like BicoinLoan.
- Margin lending – Lend to traders who leverage positions on exchanges.
- Interest accounts – Earn interest by lending to financial institutions like BlockFi.
- Lightning lending – Provide liquidity on Bitcoin’s Layer 2 Lightning Network.
Evaluate factors like interest rates, reputability of the borrower, and loan conditions. Do your due diligence to minimize default risks.
Bitcoin Investment Vehicles
In addition to buying bitcoin directly, investors now have access to more advanced bitcoin investment vehicles. A few options include:
- Bitcoin ETFs – Exchange traded funds that track bitcoin prices. Provide exposure without direct ownership.
- Bitcoin Futures – Legally trade bitcoin derivatives products on regulated exchanges.
- Grayscale Bitcoin Trust – The largest bitcoin fund with over $20 billion in assets under management. Trades OTC.
- Bitcoin IRAs – Open a self-directed IRA to invest in bitcoin tax-advantaged.
These products generally simplify investing in bitcoin while providing access to more sophisticated financial instruments.
Bitcoin Debit Cards
To increase bitcoin’s spending utility, you can get a debit card that converts your BTC to fiat currency seamlessly. Options include:
- Wirex Visa Card
- Crypto.com MCO Visa Card
- BlockFi Bitcoin Rewards Credit Card
- Coinbase Card
Use these cards to spend bitcoin anywhere major cards are accepted. This helps unlock bitcoin’s use as an everyday spending currency.
Should You Invest in Bitcoin?
With bitcoin’s price historically rising over time, it’s reasonable to predict the cryptocurrency will be worth more in the future than it is today. As bitcoin gains mainstream support, investing now could lead to impressive profits down the road. But nothing is guaranteed, so weigh the risks and analyze bitcoin’s investment potential for yourself. While how to invest in bitcoin and make money is certainly possible, prudent investors consider all opportunities costs and make informed decisions.
Diversify Your Crypto Portfolio
Rather than put all your funds into bitcoin, experts recommend diversifying to spread out risk. Some other cryptocurrencies to consider include:
- Ethereum – Programmable blockchain for decentralized apps and smart contracts.
- Litecoin – Speedy payments network aiming to be the “silver” to bitcoin’s “gold”.
- Cardano – Developing a proof-of-stake blockchain to challenge Ethereum.
- Polkadot – Connects public and private blockchains for cross-chain composability.
- Stellar – Facilitates fast, low-cost international payments.
Research top cryptoassets, analyze their long-term viability, and allocate a percentage of your investment portfolio accordingly. Diversification reduces the risk that any one coin underperforming will sink your entire savings.
Weigh the Risks and Consider Your Timeframe
Bitcoin investing certainly comes with risks. Some things to keep in mind include:
- Volatility – Large price swings can happen suddenly in both directions.
- Speculation – Some critics argue bitcoin is an asset bubble without inherent value.
- Cybersecurity – Exchanges and wallets remain vulnerable to hacking and theft.
And bitcoin investing often requires a long-term outlook measured in years rather than days or months. To deal with the risks and uncertainties, only invest what you can afford to lose and be ready to hold for extended periods.
By thoroughly researching bitcoin as an asset, judiciously choosing investment methods, and managing risks, it is possible for savvy investors to make significant money with bitcoin. But responsible investing also means paying attention to bitcoin’s weaknesses as well as its strengths. Although bitcoin has generated fantastic returns in the past, there are no guarantees it will continue to do so in the future.