If you’ve got money lying around, usually the best thing to do is invest it, to turn it into even more money. In fact, maybe the reason you own bitcoins in the first place is because you expect their value to go up, so you invested in bitcoin.
You might think of your bitcoin wallet like your bank account. You can access it from your computer or phone and send money with it. However, there is one key difference- interest. At least before the 2008 financial crisis, receiving interest on your bank savings was normal. Your bank was lending out your funds and sharing some of the profits with you.
Bitcoin can earn interest in the exact same way if you’re willing to let it out of your wallet.
The price of bitcoin more than doubled in 2016, and may well keep rising (on February 28th, you could trade 1 bitcoin for $1200 according to CEX.io exchange). But, you can earn even more by
investing and earning interest on your bitcoins. If the price does go up, you’ll have a nice double whammy investment with very high returns. Although, just like all investments, some are safe
and some are risky.
Here are some of the ways you can get started investing your cryptocurrency for profit.
Day Trading
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| Image Credits: 30btc.com |
Day trading is a very popular way of investing, and not just for bitcoin. The foreign exchange market is huge, and there are thousands of companies that specialize in profiting from
predicting if the prices will go up or down.
The idea is to buy low, sell high. You can do this by selling your bitcoins when you think they are overvalued. Then, you just buy them back at a profit when the price comes down. As the price
of bitcoin is influenced by various factors, you need some experience to make predictions. If you can spot the trend and guess when it will pop, you can make a lot of money.
Some people are hugely successful at this and can double or triple their money very quickly. They do this by borrowing more money than they actually have to invest, amplifying their potential returns (and potential losses). But, unfortunately, most newbie traders aren’t successful. You need to get experience to make consistent, accurate predictions.
It’s a risky way of investing your bitcoins, but it can be fun with amounts you can afford to lose.
Lending Out Your Bitcoins
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| Image credits: coinjournal.net |
I mentioned above that some traders borrow money to increase their potential profit from trading. Well, someone has to lend them that money.
That lender can be you. There are a few places you can do this easily, such as Magnr. You can store your coins with them, and share the interest they get from lending out the coins. A similar
service is bsave, who use the funds to help coinbase keep their daily trading operations running. These types of companies offer fairly low, but consistent returns.
If you want to be a bit more adventurous, you could try peer-to- peer financing on Bitfinex. It’s a feature that allows you to lend directly to traders. The loans are mostly high interest and short
duration, so there is a potential for good returns if you can lend consistently.
Be careful handing over large amounts of your bitcoins to any company. Make sure they have a good reputation and have some sort of guarantees you’ll see your money again.
Becoming a Local Bitcoin Broker
If you’ve got a bit more time on your hands, another option is to become a local bitcoin broker.
Ever notice that on a bitcoin exchange (or any currency exchange for that matter), the price to buy is slightly different than the price to sell?
This is called the ‘spread’, and it’s how brokers earn their money. They don’t hold any currency for very long, but keep trading it back and forth, earning a small margin of profit from every
transaction.
To do it yourself, you’ll need to find someone who wants to buy bitcoins in your area. Then, rather than sell to them at the market price, you sell to them at slightly above the market price
(say, an extra 5-10%). Now, try to do the same in the other direction - finding someone wanting to sell bitcoins, allowing you to buy them back at a lower price. Congrats, you just made a profit!
Of course, the volatility of the bitcoin price can make this risky, but there are many people making money this way.
Cloud Mining
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| Image credits: coinstaker.com |
Bitcoin mining used to be one of the most profitable ways to spend your computing power. Many of the early bitcoin miners are now millionaires.
Since then it has become much more difficult. These days, you need overpriced bitcoin mining hardware, an extremely cheap electricity bill, and strong technical knowledge just to get started.
And, as the best place to get cheap hardware and electricity is China, that’s where you’ll find most of the profitable bitcoin mines.
There is a way to get a piece of the action, however, no matter where you are. Bitcoin miners need a lot of upfront investment to buy the land and computing power to get started. This opens
up an opportunity for you to lend your bitcoins to one of these mines, in exchange for a percentage of future profits.
Some of the options include genesis mining and hashflare. Be careful, though. Make sure you are going to actually make a profit on your investment, and that your coins are safe. Things change quickly in the blockchain world, so do your research.
Managing Risk
Any interest you earn is always a reward for taking a risk. As we learned in 2008, even putting money in a bank account is a risk.
The safest place for you bitcoins is in your own personal wallet or cold storage. But, if you are feeling lucky, you can try some of these methods to earn even more profit from your bitcoin
investment.
Got a more cooler way to earn through Bitcoin? Drop your thoughts in comments below!
Credits:
Mary Ann Callahan (Guest Post)
1 comments :
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