How to Make Money with Bitcoin

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Contributor, Benzinga
Updated: July 27, 2021

Bitcoin is experiencing an explosive bull market, its first since the record-breaking mania of 2017 that drove it to highs of nearly $20,000 per coin. The market as a whole follows wherever bitcoin goes, which right now is up.

For many people, bitcoin and other crypto is more than a store of value. It represents decentralized finance, a new way of thinking about money — a world where everyone could literally be a bank. Bitcoin and other crypto are driving innovations that could disrupt finance, law, gaming and many other industries. All of this new opportunity naturally comes with new ways to get rich.

Let’s take a closer look at how to make money from bitcoin.

Mine Bitcoin

Bitcoin and many other cryptocurrencies come into existence through a process known as mining. With bitcoin specifically, if your computer serves as part of the network that validates bitcoin transactions, you are rewarded for adding your resources to the network. Peer-to-peer validation is ideally what keeps bitcoin decentralized — you don’t need any 3rd party like a bank to say “this transaction just took place.” The network records it for everyone to see.

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Unfortunately, bitcoin mining is becoming more difficult and possibly prohibitively expensive for some people. There will only be 21 million bitcoin in existence, ever. With each passing day, some of that remaining bitcoin is mined. Because there is less to mine and more miners chasing that reward, you need more computer power to help the network and you get less for it. The energy used to mine bitcoin is also quite substantial. Unless you are willing to spend at least $10,000 on a powerful setup, move to a country with low energy costs and you have experience with computer programming, you are likely better off choosing one of the other ways to make money with bitcoin.

Trade Bitcoin

The $357 billion crypto market trades around $93 billion worth of crypto every 24 hours. If you know how to follow a candlestick chart, you may be able to trade your way into riches with bitcoin. Like the forex market, cryptocurrency trading is very loosely regulated. This provides traders with the freedom to seek out great deals, but it also affords those traders little to no protection for lost funds or against fraud. If you lose your bitcoin in a trade on an unregulated decentralized exchange (DEX), there is no government to appeal to.

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Alternatively, there are centralized exchanges (CEXs) that come accredited through financial authorities like the U.S. Securities and Exchange Commission (SEC). These exchanges offer more liquidity, some protection against loss (not insurance) and lower fees. However, traders give up most or all of their anonymity. The great information debate is what created crypto, but if you don’t care about revealing your identity, then trading bitcoin on a CEX may be for you.

Best Cryptocurrency Brokers

If you are looking to trade cryptocurrency, it is important to do business with a broker you trust. 

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Bitcoin Faucets

If you like playing online games, completing surveys or you don’t care about giving away personal information, you can earn bitcoin through a faucet. In most cases, the bitcoin from these faucets is denominated in satoshis. The satoshi is named after Bitcoin creator Satoshi Nakamoto and is equal to 100 millionth of 1 bitcoin. Needless to say, you’ll be at the faucet for a while before you accumulate any substantial value.

Before you start giving away your information, be aware of bitcoin faucet scams. In some cases, the website you perform actions for will simply never pay you. In the more sophisticated version, the website may require you to deposit funds or refuse to release funds until you hit a certain level. You may keep playing for as long as you like, but the game is programmed to release satoshi at a rate that will never allow you to reach the minimum withdrawal amount.

Buy and Hold

You can trade your fiat currency for bitcoin on a trading platform like Coinbase or through DEXs. You may also negotiate an in-person transaction to buy bitcoin. In the U.S., trading fiat for crypto is highly regulated. Most exchanges will require you to provide personal information to meet what is known as a Know Your Customer (KYC) standard. The KYC standard is administered through the Financial Industry Regulatory Authority (FINRA). FINRA Rule 2090 and FINRA Rule 2111 provide the official guidelines for KYC.

Many studies have found the majority of bitcoin purchasers are buy-and-hold investors. The location of 60% of bitcoin in circulation, which can be tracked thanks to the blockchain, has not changed in over 1 year. Why? Although bitcoin had a great bull run in Q2 2020, most people are expecting more from it, it seems. Bitcoin can be used to purchase almost anything you can imagine from hundreds of stores, but most investors in crypto see it as something more — a political statement, a financial gamechanger, a hedge against a debased dollar.

I’m Digitally Rich… But it Buys Real Stuff

With all of the different ways to make money from bitcoin, you have only to choose what best suits you. Keep in mind that cryptocurrency as a whole is still considered quite volatile. The value of the bitcoin that you earn can change drastically. That may be why such a large portion of bitcoin holders are doing just that — holding. In order to take full advantage of the digital currency, we may have to wait until the world catches up to it.

In the meantime, bitcoin buys just about anything that fiat currency can buy (and a few other things). Should you decide to join this part of the digital revolution, you will certainly have plenty of new financial avenues to explore.

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