Bitcoin continues to be one of those mysteries that most people seem to have heard about but don’t understand. Simply Bitcoin is a form of digital currency, created and held electronically. Unlike dollars or euros which are printed, Bitcoins are mined. What the heck does that mean? Well just like the traditional mining of natural resources, Bitcoins are mined electronically with computers. I’m guessing you’ve stumbled across this post because you’re seeing how high Bitcoin have gotten these days and want to know how you can profit from it. You’ve come to the right place! Continue on to see how to profit from bitcoin.
First, Why was Bitcoin Created?
In 2009, a software developer called Satoshi Nakamoto (no one can really confirm this) created Bitcoin. The idea was to produce a currency independent of any central authority, transferable electronically, more or less instantly, with very low transaction fees.
However, bitcoin’s most important characteristic, and the thing that makes it different to conventional money, is that it is decentralized. No single institution controls the Bitcoin network. This puts some people at ease because it means that a large bank can’t control their money.
How To Profit From Bitcoin – A few options
Around the world, people are using software programs that follow a mathematical formula to mine Bitcoins. The scripts that calculate the mathematical formula is freely available so that anyone can get in on the action. The software is also open-source which means that there are many people looking at the blockchain to make sure nothing fishy is being done. One of the beauties of Bitcoin is that it has a finite number. The formula only allows a limit of 21 million Bitcoins to be mined and so far 16,141,163 Bitcoins have been mined. Once we hit 21 million, that’s it!
One of the beauties of Bitcoin is that it has a finite number. The formula only allows a limit of 21 million Bitcoins to be mined and so far 16,141,163 Bitcoins have been mined. Once we hit 21 million, that’s it!
You might be thinking that the last 5 million will go fast, well yes and no. Another genius thing that the creator of Bitcoin did was to make the formula’s difficulty linear with the total compute power. That means the more people that are mining Bitcoin, the harder it is to solve the formula. So that means the last 4 million will take anywhere from 5-10 years while the last million itself might take another 10-20 years. But once all 21 million gets mined, that’s it. No more will Bitcoin will ever be created.
Early on, anyone with a computer can be mining Bitcoin and get plenty of it (since they were worth nothing). After mining became popular and CPUs could no longer keep up, people moved mining to powerful graphic cards called GPUs. Then when those were no longer cost effective, specialized companies came out with special processors called ASICs with the sole purpose of mining Bitcoin. Soon cloud miners came out but they were short lived.
These days a hobbyist could not mine Bitcoin itself with profitability. But with the rise of other digital coins, it is profitable to build mining rigs for digital currency such as Ethereum and Litecoin and convert them to Bitcoin afterward. Check out Growing Your Own Money (Bitcoin) Tree | Build Your Own GPU Mining Rig for Ethereum and Litecoin. Ethereum, in fact, has been growing faster than Bitcoin within the last year.
Buying and Selling Bitcoin
Besides mining, the other way to profit from Bitcoin is to buy low and sell high (trading). But even with Bitcoin trading, there are two ways to make money. First is the safer method which is to play the long game and buy and hold. Second is to play the short game and do a lot of buys and sells almost like day trading. Let me go over both options.
The long game of buy and hold is for people who believe Bitcoin has a lot more room to grow. This is how a lot of folks are investing and even billionaires have come out and said they have at least 10% of their investments into Bitcoin. Since 2016, Bitcoin has risen from $250 dollars to over $2200 dollars (as of May 2017). Because of the limit cap of 21 million Bitcoins, there is very real chance that once we approach that last Bitcoin, the value of Bitcoin skyrockets to something we can’t even fathom today. Some are predicting Bitcoin to be around $500,000 by end of 2030. At this point, it’s anyone’s guess.
The short game would be to buy and sell Bitcoins daily or weekly. Just like any other kind of investment such as stocks, bonds or currency, you want to buy low and sell high. There are weeks where Bitcoins has wild fluctuations and if you time it correctly, you could make as much as 20% profit within a few days. Even without the wild fluctuations, there are still highs and lows and you can profit from.
You might be asking, “why are there wild fractionation with Bitcoin?” Good question and it mostly have to do with fear. Since people now have access to Bitcoin anywhere in the world, whenever there is any news about inflation, currency devaluations, war, trade issues, etc… people usually bulk up on Bitcoin. Since the total market cap in Bitcoin is still relatively small, these buying sprees and selling sprees can result in these fluctuations.
How to Buy Bitcoin
So how does one get started with buying Bitcoin? There are a lot of Bitcoin exchanges around the world but there are a few things you need to consider before selecting who you want to go with. Each has their own exchange rate, the service fee, their own verification process and how much you can purchase before verification. Based on all of those things, my favorite exchanges is Coinmama.
Coinmama is has been around for over 4 years and it is where I buy and sell my Bitcoin. Coinmana has built up a well-known reputation among the Bitcoin community and continues to be one of the top Bitcoin exchanges out there. The interface is super easy to use and new users are allowed to buy $150 dollars (with credit card) of Bitcoin without verification. And for those who do want to verify, you simply have to upload your ID and provide a few basic info.
Coinmama’s exchange rate is very reasonable compared to some of the other exchanges out there. On the website, you simply buy using a predefined amount or a custom amount you enter at the bottom. Then away you go.
The last time this post was updated was back in Feb 2017, since then Bitcoin has jumped from $1200 to $2400 (May 2017). As high ss it may seem, this price can be peanuts compared to where it might be at by year end. And in 3-5 years, Bitcoin can be in the 5 digits.
To sum up, you really have three ways to profit from Bitcoin. The first option is to mine alt coins and convert to Bitcoins afterward. The second option is to buy and sell Bitcoins for short term plays such as day or week trading. And the third and final option is to buy and hold Bitcoin for the long haul. All three methods can make you a lot of money if done right. Depending on how fast and how much you want to make, you’ll have to decide which method is right for you. One thing is for sure, Bitcoin is here to stay so take advantage while you still can.