Bitcoin has been in existence now for over a decade, but its value as an investment and its role in the economy are still up for debate. As the world’s first cryptocurrency, Bitcoin has passionate adherents who see it as the leader of a global economic revolution, but it has gained detractors as well, particularly since the burst of the Bitcoin bubble in November of 2018 when the price of Bitcoin fell by 80%.
Recently, Bitcoin has been drawing attention from economists and financial experts because its price is starting to rise again. In fact, some experts predict that it could once again reach its 2018 peak value of $20,000. One possible explanation for the growth in demand is that investors all over the world are now looking at Bitcoin as a hedge against the inflation that will likely result from the COVID-19 pandemic.
If you’ve been considering buying Bitcoin, this may be the right time to do it. But it’s important to be aware of the risks and to choose the right ways to invest. The following is a guide to the best ways to make money from Bitcoin in 2020.
Bitcoin is a digital currency that exists in a network of computers that simultaneously record all transactions in a public ledger. New Bitcoin is created and “mined” by individuals who use their own computing power to process transactions, but the number of bitcoins that can be mined is capped at 21 million, and the rate at which they can be mined decreases over time. Bitcoin serves two primary functions, as a currency and as a store of value.
Bitcoin As A Currency
Bitcoin is a currency in the sense that owners can exchange it for goods and services and use it to pay off debts. Although not all merchants accept Bitcoin, many large corporations (including Microsoft, AT&T, and Burger King) as well as a growing number of small- to medium-sized businesses all over the world now take Bitcoin as a form of payment. Some governments even allow citizens to pay taxes using Bitcoin.
Bitcoin As A Store Of Wealth
Some investors also see Bitcoin as a potential store of value or wealth. A store of value is something that maintains its value over time, like gold and precious metals. Despite Bitcoin’s volatility in the market, its limited quantity of 21 million bitcoins ensures that it will always hold some value. However, it’s worth noting that many financial experts consider cryptocurrencies to be too speculative to serve as a long-term store of wealth.
Ways To Acquire Bitcoin
The first step in making money from Bitcoin is to acquire it, and there are several ways to do this. One approach is to mine bitcoins using a digital miner. Another more common way to get Bitcoin is to buy it directly from an exchange or through a secured cryptocurrency loan provider like xCoins.io. Some people also acquire Bitcoin as payment for their work.
One way to acquire Bitcoin is to contribute to maintaining the blockchain. Miners verify transactions and add new blocks to the chain by being the first to generate a 64-digit number than is less than or equal to a specific target. Generating this number involves solving complex mathematical problems that require an enormous amount of computing power.
Buying Or Building A Miner
The term “miner” can refer to the person who mines for Bitcoin, and it can also refer to the technology he or she implements. In the early days of Bitcoin, miners could use their own laptops or CPUs, but nowadays it’s necessary to use an application-specific integrated circuit or ASIC, a microchip designed specifically for high-speed mining.
If you’re considering buying a miner, make sure to look at the hash rate (how quickly the miner can perform calculations) and the power requirement. Often the combined cost of the equipment and the monthly power bill make this type of mining impractical. Some people save money by building their own, but they still have to be able to afford the electricity to run it.
An alternative to purchasing software is to rent a miner or even a share of one, but renting is also expensive in the long run. Companies that provide cloud mining services usually require a one- or two-year lease. Rent and fees can add up to so much that it’s difficult to make a profit.
Bitcoin miners should be aware that the difficulty of mining is increasing, and as Bitcoin’s price goes up, the competition will increase as more people try to mine. Besides that, mining is very time consuming, and there is no guarantee of a reward.
Buying Bitcoin Directly
Despite fluctuations in the market, buying Bitcoin is still seen as the most reliable way to acquire it. For most people, mining requires too high an investment for an unpredictable return. Buying directly gives people instant or near-immediate access to coins that, in 2020, are likely to grow in value.
People generally buy Bitcoin on exchanges, online platforms where buyers and sellers meet to exchange bitcoins for U.S. dollars or other currencies. Transactions usually take several days to process, and most exchanges only accept bank drafts. Buyers receive bitcoins directly in their Bitcoin wallet, which they access with an encrypted key.
At xCoins.io, our peer-to-peer platform is similar to an exchange, but it allows Bitcoin owners to make instant loans to borrowers for a low-interest fee. You can pay for a loan with a credit card, a debit card, PayPal, or a bank draft. You will just need to register for an account and have your identity verified before making your first transaction.
Getting Paid In Bitcoin
Some companies are now paying a percentage of their employees’ salaries in Bitcoin or another cryptocurrency, despite tax complications. If your employer isn’t offering this option, you can earn small amounts of Bitcoin by doing micro-tasks online. For example, some businesses will pay up to 20,000 satoshis (a tiny fraction of a bitcoin, named for the cryptocurrency’s pseudonymous inventor, Satoshi Nakamoto) for doing small tasks like watching a video or completing a survey.
Strategies For Earning Money With Bitcoin
Once you have acquired some Bitcoin, you can start making money from it. There are a lot of ways to do this, some more effective than others. The following are several recommended ways to make a profit from your Bitcoin investment.
Buying And Holding
The first strategy is the simplest, and it’s known as “buy and hold.” In other words, you can buy Bitcoin and hold on to it for years, trusting that it will rise in value. Most people who wait long enough will earn a profit when they finally decide to cash in their Bitcoin. However, they will be riding out many fluctuations in the price of the currency and passing up opportunities to make even more money. Buying and holding is a good strategy for people who are not interested in following the market and who can afford not to make much profit or even take a loss.
Playing The Market
Investors who have a higher tolerance for risk can track the price of Bitcoin daily and attempt to sell when the price goes up. However, the price of Bitcoin can rise or fall by up to 20% in a single trading session, creating an exciting but unstable market. Some traders make use of trading bots to track the market for them and to buy and sell as soon as the price hits a certain point; however, using a bot requires an in-depth understanding of investing in order to determine the right parameters.
Lending Bitcoin For Interest
Another way to make money from Bitcoin is to lend it and earn interest from the loan payments. Individual Bitcoin owners can send Bitcoin funds to a lender who will broker the loans and send interest payments. Some Bitcoin lenders report earning interest of up to 15%.
Since Bitcoin lending is not subject to federal regulations, anyone can set up an exchange, but there is more risk inherent in making a Bitcoin loan as there is little to no recourse if the borrower defaults.
Become A Bitcoin Consultant
If you become proficient at buying and selling Bitcoin, chances are your skill is the product of many hours of research and experience. By selling your services as a Bitcoin consultant, you can share your expertise with others and earn an income. If you develop a solid reputation, your services will be in high demand the next time a bubble forms.
The future of Bitcoin looks bright in 2020, but many factors can affect the price. We’re not recommending that you quit your day job tomorrow and put all of your savings into a Bitcoin wallet. However, chances are that Bitcoin and other cryptocurrencies are here to stay, and this may be a particularly good time to add some bitcoins to your portfolio and learn how to trade them. You can learn more about investing in Bitcoin from xCoins.io.