Although Bitcoin was the first cryptocurrency, it has a relatively brief history, having been founded in 2009. Interest in Bitcoin and other cryptocurrencies peaked in 2020 and 2021 when prices surged and crypto, in general, became a popular news issue.
If you’re familiar with Bitcoin, you’ve probably heard stories about how people who possess the cryptocurrency have made and lost fortunes. But how can one make or lose money in Bitcoin?
How to Make Money with Bitcoin
Although some Bitcoin owners keep the cryptocurrency purely for payment purposes, many others do so in order to profit. There are three main ways to make money with Bitcoin.
Bitcoin, like other cryptocurrencies, is one of the most volatile asset classes. This makes it difficult for long-term holders to keep their positions since the cryptocurrency sometimes makes double-digit percentage changes in a single day.
This type of volatility, on the other hand, is perfect for traders. By aggressively moving in and out of Bitcoin, you can quickly record profits and exit before the trend reverses. If you’re a quick trader and can make a 5% gain per week, you’ll have a year-to-year return of more than 250 percent.
Although holding a position in Bitcoin might be emotionally difficult in the long haul, these are the types of investors that have generated the most significant results. For example, if you had invested just $1 in 2010 when Bitcoin was trading about $0.0008, you could have purchased approximately 1,250 Bitcoin.
Over ten years later, your initial $1 investment would be worth almost $41.7 million at Bitcoin’s July 10 price of around $33,374. If you had been able to sell at Bitcoin’s all-time high of approximately $65,000, you could have made $81.25 million. While these types of stratospheric increases should not be expected, Bitcoin has historically awarded long-term holders with remarkable rewards.
If you’d rather work for your Bitcoin than invest or trade it, Bitcoin mining may be for you. Although the technicalities can become a little complicated, the bottom fact is that Bitcoin miners are the ones that generate new Bitcoin by recording transactions in the blockchain database.
They are compensated with Bitcoin each time they solve the difficult algorithm that unlocks blockchain ledger transactions. Currently, the award is 6.25 Bitcoin, however, this figure is halved every four years. Understand that successfully mining Bitcoin usually necessitates the use of big computer server farms and massive quantities of electricity, thus it is not for everyone.
Ways To Lose Money in Bitcoin
Bitcoin investors can gain money, but they can also lose money. Here are a few of the most typical methods to lose money in Bitcoin.
Trading in Bitcoin can result in large gains, but it is not without danger. In reality, the price fluctuations of Bitcoin are so large that even experienced traders can get whipsawed and lose a lot of money.
Poor Bitcoin trading is thus perhaps the simplest way to lose money in Bitcoin. If you decide to go this path, you should do some practice runs on websites that provide simulated trading, or start with a little amount at first.
Financial frauds are getting increasingly widespread, and bitcoin is becoming a popular target. Scammers are targeting ordinary investors with growing aggressiveness as more of them seek to hold cryptocurrency. According to the Federal Trade Commission, since October 2020, individuals have reported losing more than $80 million to cryptocurrency frauds, a tenfold rise year over year.
To preserve your cryptocurrency in the future, you’ll need to be extra-vigilant with your security, just like you would with any digital asset, such as your bank accounts.
Hackers may pose the greatest risk to Bitcoin holders, particularly as the money gains popularity. When you own Bitcoin, it is stored in an electronic wallet that only you have access to, at least theoretically.
However, hackers have demonstrated the capacity to access Bitcoin wallets, and they will only get more skilled in the coming years. A hacker with access to your Bitcoin wallet can drain you of all your cryptocurrency, just as someone with access to your debit card might drain you of all your cash. However, if you lose your cryptocurrency to a hacker, no bank will replace it for you.