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Do you want to earn money by investing in cryptocurrency? If so, the Midas.Investments team wants to help. In this article, youâll learn all about cryptocurrency investing, from learning about interest to assessing your risk tolerance. Cryptocurrency is unlike other forms of currency or investing. Before you start buying Bitcoin, youâll need a good understanding of how this new monetary system works. Letâs get started.Â
What is Bitcoin? How Does it Work?
Bitcoin is what is known as a cryptocurrency or digital currency. Unlike gold or cash, it is entirely virtual. It works like cash, in that you can use it to buy things. The difference is that, aside from some novelty tokens, there is no physical item representing bitcoin. A bitcoin, or any other digital currency (such as Dogecoin or Ethereum), is a digital file â a computer file â that a person stores on their computer or phone in what is known as a digital wallet.Â
Bitcoin, as well as parts of a bitcoin, can be sent and received through digital wallets. Each transaction is recorded in what is referred to as a blockchain. You can think of this as being a digital public ledger. It records and encrypts every transaction to prevent Bitcoins from being copied or having transactions undone. It also prevents people from spending bitcoin that is not theirs.
Is Bitcoin a Good Investment?
Bitcoin is volatile, and that volatility could easily cause losses instead of gains when the price plummets. As a short-term investment, it requires knowledge of the market to make good choices. However, as a long-term investment, this unstable quality can be less of an issue. Yes, Bitcoin spiked much higher than where it is now, but in the long view, someone who bought Bitcoin 10 years ago would earn a tidy profit if they cashed out now.Â
Cryptocurrency is still a speculative investment – the hope is that it will increase in value, but no one can be sure right now, as past gains arenât an indication of future gains.Â
As a way to diversify your portfolio, Bitcoin can be a good, if somewhat risky, investment.
Is Investing in Bitcoin Risky?
Investing in Bitcoin, or any cryptocurrency, has a high level of risk associated with it. The price of a single Bitcoin went from $20,000 in December 2020 to $63,000 in April 2021 before falling to $31,000 in May and then rising slightly in June. It could rise again to unseen heights or flounder to new depths. Itâs hard to say.Â
Bitcoin is not backed by a government or issued by a central bank. Bitcoin is not a company, either – itâs a piece of computer code. The result is that things that typically affect the value of a currency, like inflation and monetary policy, do not affect the value of Bitcoin. Instead, its value is determined by its supply, market demand, and other competing cryptocurrencies.Â
No matter how you look at it, Bitcoin is a high-risk investment, especially when compared to more traditional forms of investments.Â
Mark Cuban, a billionaire, and investor, has invested in Bitcoin and other cryptocurrencies despite saying that investing in Bitcoin is âa gamble.â And like a gamble, investing in Bitcoin should only be done with money youâre prepared to lose, he says.
How to Make Money with Bitcoin
Even with wild price fluctuations, it is still possible to make money with Bitcoin. Unlike regular money, you can âmineâ Bitcoin on your computer. It involves solving complex math problems using computers. This method requires a powerful computer and has become increasingly difficult as more people get into mining Bitcoin. While joining a mining pool will increase your chances of making money, mining is still considered a slow and difficult way to make money with Bitcoin.Â
If youâre not in a hurry, you could play the long game. Like other long-term investments, the strategy is simple: buy Bitcoin, then wait. The idea, or hope, is that Bitcoin will increase in value over time. This process is simple but slow.Â
For a faster, but similar, approach, you could try trading. Like stock market trading, it requires knowing the market. In this case, the market is Bitcoin. Day traders make short, quick trades for small profits. The idea is that over time these small profits will add up. Swing traders hold their buys for a little longer, then sell when they see a price rise that they like. Both styles follow the age-old wisdom of âbuy low, sell high.â
Where to Buy Bitcoin?
Most people acquire Bitcoin by buying rather than mining it. This is done on cryptocurrency exchanges. These exchanges act as a go-between for cryptocurrency buyers and sellers. These exchanges require a registration and verification process, after which approved users can make transactions for a fee.
What is an Interest Rate?
An interest rate is an amount a lender charges a borrower for their debt. This amount is a percentage of the principal. When earning an interest rate, such as with investments, you can think of it as the fee for renting out your money. In the case of a savings account at a bank, the bank borrows, or rents, your money. They pay you a fee for doing this – thatâs the interest rate – while lending out that money to somebody else for a higher interest rate.Â
This same method is used by Bitcoin investment companies. You place your Bitcoin in their system, and they pay you an interest rate. In the meantime, they are also making money from your Bitcoin, which is how the whole system is able to keep running.
Investing Bitcoin for profit
Midas.Investments pays you an interest rate of up to 17% annual percentage yield (APY) on Bitcoin.Â
For Bitcoin holders playing the long game, this is a great way to earn additional income from their Bitcoin while waiting for the right time to sell. The platform has several types of cryptocurrency that you can invest in.Â
The company has a simple 3-step process to begin investing. First, set up an account. Then pick the cryptocurrency you wish to invest in. Lastly, send your Bitcoins to an address Midas sends you.Â
To make it even easier, the company rates each currency to help you make an informed decision.
Top 3 Exchanges to Buy Bitcoin
Midas isnât the only crypto exchange. In fact, there are several. Here are three of the top exchanges:
Binance focuses on altcoin, which is the term used to refer to cryptocurrencies that arenât Bitcoin. It was started in 2017 and has become one of the most well-known exchanges. Users of the platform can trade in 500-plus cryptocurrencies and virtual tokens, including well-known ones like Dogecoin and Ethereum, as well as plenty of lesser-known ones.
Founded in 2012, Coinbase is considered one of the leading cryptocurrency exchanges. Its popularity and name recognition have resulted in it being commonplace for people to get into cryptocurrency trading. In the United States, it is fully regulated and licensed. It supports the most popular cryptocurrencies.Â
Based in San Francisco, California, Kraken works similar to a traditional stock exchange. Users are able to buy and sell using cash, such as the US dollar or Japanese Yen. This makes it different from most other crypto exchanges that only accept digital currencies.Â
The Pros of Bitcoin Investing
- Potential for high returns. Bitcoin was trading at $13.40 in 2013. In January of 2021, it was trading at $40,000. By any standard, thatâs a high return.Â
- Protection from payment fraud. The blockchain behind Bitcoin makes it incredibly difficult to do a fraudulent transaction.
- Transparency. All Bitcoin transactions are recorded in the blockchain, a public ledger. Transactions are verified and are immune to hacking or scams.
The Cons of Bitcoin Investing
- Potential for large losses. Bitcoinâs value is subject to wild variations and has been known to lose 25% of its value in a single day.Â
- Difficult to understand. The decentralized structure and purely digital existence of cryptocurrencies can be a tough concept to wrap your head around when first learning about them.Â
- Vulnerable to hacking. The transactions made using Bitcoin are secure, but the digital wallets that store a personâs Bitcoins are susceptible to theft and hacking.
Conclusion
By now, you should have a pretty good idea of whether or not you want to invest in Bitcoin. If you have a high tolerance for risk, cryptocurrency is worth learning more about. To get started investing, you could try buying a small amount of cryptocurrency to test it out.
