How to Make Money With Bitcoin in 2022

Making money with Bitcoin (BTC) has become increasingly difficult in 2022. Prices plummeted after a crypto crash. Promises of free bitcoins are often scams. Bitcoin mining, once accessible to individual investors, is now so competitive that it is rarely a profitable venture for those with small setups.

Nevertheless, you can make money with it Bitcoin. You can trade, lend, hold or earn it. Returns are not guaranteed on this volatile asset; Just as you can make money when the price goes up, you can also lose money when the price goes down. But bitcoin’s growth since its inception has some crypto investors optimistic about the future: in 2010, 1 bitcoin was worth about 9 cents, and now each coin is worth somewhere near $19,000.

hold bitcoin

To return: Depending on the amount of investment and price changes. In its last bull run of 2021, bitcoin price more than doubled.

Buy and hold bitcoin as a long-term investment – ​​or, as some crypto enthusiasts call it, HODLing – can be an inexpensive way to make money in the long run, as long as the final sale price is higher than the price you bought it for. In the past, Bitcoin’s price has reached as high as $65,000 per coin, so it is reasonable to assume that it could reach a similar number in the future.

Bitcoin was originally conceived as a cryptocurrency that could be used for everyday transactions, but as its value increased, many investors began to view Bitcoin as a long-term investment. As with any investment, holding it for long means you have to endure the ups and downs in prices without being tempted to buy or sell. If you decide to buy and hold Bitcoin, you should ensure that you are not overexposed to any single asset and that you are not investing money that you cannot afford to lose. A guideline is not to invest more than 10% of your portfolio in risky assets like Bitcoin.

Using a Credit Card with Bitcoin Rewards

To return: Generally 5% or less per dollar spent on certain categories and 1% on all other purchases.

There are many crypto credit cards that you can use to earn cryptocurrency rewards. Similar to traditional cash back programs, you can earn a small percentage of purchases made with the card, which can be paid out in bitcoin or other cryptocurrencies. Some offer sign-up bonuses that allow you to earn additional rewards if you meet certain criteria.

Keep in mind that your crypto rewards can be reduced by transaction fees or a spread added by the provider. A spread is the difference between the market price and the rate provided by a particular platform; If the issuer of a crypto credit card has one that applies to rewards, that means you’ll get a slightly less favorable exchange rate if you earn and sell those crypto rewards.

lend bitcoin

If you already own some Bitcoin, you can earn interest on your wealth by lending it to other investors or institutions. platforms like Twins and Cake DeFi allow users to lend fractional bitcoin with interest rates up to 5% APY.

However, each platform has provisions for lending. For example, with both Gemini Earn, Gemini’s interest-earning program, and Cake DeFi, you could lose some or all of your investment if the borrower you’re borrowing defaults.

Crypto lending is also a relatively new category and carries a high level of risk and uncertainty. Notably, several platforms have stopped offering lending services this year:

  • Celsius, one of the largest crypto lending platforms, froze payouts in June 2022 after a crypto crash and later filed for bankruptcy.

  • BlockFi suspended its lending product in accordance with an order from the U.S. Securities and Exchange Commission, which accused the company of failing to register offers and sales for its retail crypto lending product.

  • Nexo, a crypto platform that offered a lending product, is being sued by multiple states for misleading marketing and has voluntarily stopped offering its product to new customers in the US

Accepting payments or tips in Bitcoin

To return: Depends on the amount of payments in bitcoin and the price movement.

If you accept payments or tips for a side job or business, consider giving others the opportunity to do so pay in Bitcoin. You can do this with platforms with processing services like Coinbase or BitPay.

Setup is relatively easy, although the tax implications and risks associated with accepting Bitcoin payments can make navigating more complicated. The Coinbase self-managed account can be set up immediately. BitPay takes a few days to be approved, but you can accept multiple cryptocurrencies.

Something to keep in mind: if you want exposure to Bitcoin, be sure to use a service that allows you to accept funds in Bitcoin. While BitPay and Coinbase give you the option to receive money this way, some processors only allow you to accept money in fiat money.

Day trading bitcoin

To return: Depends on the size of the investment, trades and price changes.

It is technically possible to make money by buying and selling bitcoin over a short period of time and entering and exiting positions as the market changes. But similar to day trading stocks, you are much more likely to lose money this way.

Stock market day traders use macro and microeconomic data, market trends dating back to the early days of the stock market, and other tools at their disposal to make educated guesses about which stocks to buy or sell. And yet these active traders struggle to achieve the returns that can be achieved, for example, by buying and holding low-cost funds that track a broad market index.

Investors have far less data on Bitcoin’s behavior in specific economic conditions, so predicting its price movements can be even more difficult. For example, the price of 1 bitcoin was over $47,000 in early 2022, and as of September it is currently trading at just over $19,000 per coin. Additionally, trading cryptocurrency on a regular basis during tax season can quickly become a nightmare. You must keep careful records of what you have bought and sold and the various price points that come with it. If you’re thinking about becoming a frequent cryptocurrency trader, it’s a good idea to talk to your accountant and make sure you know what to keep an eye on before you start.

Some volatility is necessary to make money from day trading; Prices must rise or fall for a trader to make a profit. But bitcoin and crypto are more volatile than other assets, and that makes an already deceptively difficult notion of “buy low and sell high” even more challenging. If you intend to try this, start small and be careful.

What about bitcoin mining?

Bitcoin mining can be a lucrative way to make money from bitcoin, but not for retail investors. Due to the computing power required, upfront and ongoing costs can far exceed the mining rewards earned.

Bitcoin’s blockchain operates on a proof-of-work consensus mechanism, which means miners perform the essential job of validating transactions to keep the network secure. New blocks of transactions are added to the ledger every 10 minutes, and the miner who validates a new block is rewarded with 6.25 bitcoins, which is about $122,000 according to recent prices. Miners also earn transaction fees, which are paid by users who want their transactions to be validated faster, which can increase the reward by around $4,000 for each block.

But to have a chance of earning a bitcoin reward for validating a block of transactions, you need a powerful computer known as an ASIC (or Application Specific Integrated Circuit) and these can cost upwards of $10,000. They also have to spend thousands on electricity to compete with other miners and earnings are not guaranteed.

There are mining pools where investors can pool computing resources and share rewards for mining bitcoin. But setting it up isn’t easier. Pools charge their users, and the larger the pool, the smaller the reward.

Neither the author nor the publisher were involved in the above holdings at the time of publication.

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