How To Make (Or Lose) Money With Bitcoin, Explained In One Graphic

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Bitcoin was the first cryptocurrency, but its history is still relatively short, as it was first created in 2009. Interest in Bitcoin and other cryptocurrencies peaked in 2020 and 2021, as prices skyrocketed and crypto in general became a topic in mainstream news. If you are familiar with Bitcoin, you have probably heard stories of fortunes won and lost by those who own the cryptocurrency. But, how exactly do you make or lose money in Bitcoin?

Find out: What’s the next big cryptocurrency to explode in 2021? Consider: Is the Shiba Inu Coin the Cryptocurrency You Should Be Watching For?

Check out the table below for an overview and keep reading for more details:

Ways to make money in Bitcoin

While some Bitcoin holders use crypto primarily for payment purposes, many others own Bitcoin for profit. There are three main ways to make money in Bitcoin.

Trade

Bitcoin, along with other cryptocurrencies, is one of the most volatile asset classes available. This makes it difficult for long-term holders to maintain their positions, as the crypto often makes double-digit percentage moves in a single day. For traders, however, this type of volatility is ideal. By entering and exiting Bitcoin quickly, you can quickly record profit and jump before the trend reverses. If you are an agile trader and you can get a gain of just 5% per week, that equates to an annual return of over 250%.

See: 10 Best Cryptocurrencies To Invest In For 2021 Good To Know: What Is The Chain Link And Why Is It Important In The Cryptocurrency World?

Invest

While it can be emotionally difficult to hold a position in Bitcoin for the long term, these are the types of investors who have shown the most impressive gains. For example, if you only invested $ 1 in 2010 when Bitcoin was trading at around $ 0.0008, you could have bought around 1250 Bitcoin. Over 10 years later, at the Bitcoin price on July 10 of around $ 33,374, your initial investment of $ 1 would be worth around $ 41.7 million. If you had managed to sell Bitcoin at the highest level of nearly $ 65,000, you could have pocketed around $ 81.25 million. While you shouldn’t expect these kind of stratospheric gains, at least historically Bitcoin has so far provided long-term holders with dramatic gains.

The story continues

Learn more: where does cryptocurrency come from?

Mining

If you’d rather work for your Bitcoin than invest or trade in it, maybe Bitcoin mining is for you. While the details can get a bit complicated, the bottom line is that Bitcoin miners are the ones who produce additional Bitcoin by recording transactions in the blockchain ledger. Whenever they solve the complex algorithm that unlocks blockchain ledger transactions, they get paid with a specified amount of Bitcoin. Currently that reward is 6.25 Bitcoin, although that number is halved roughly every four years. Understand that successful Bitcoin mining typically requires the use of massive computer server farms and huge amounts of electricity, so it’s not for everyone.

See: If you invested $ 1,000 in these cryptocurrencies a year ago, here’s how many you have now

Ways to lose money in Bitcoin

Just as investors can make money in Bitcoin, so can they lose it. Here are some of the most common ways to lose money in Bitcoin.

Trade

Trading can lead to big gains in Bitcoin, but it is not without risk. In fact, Bitcoin’s price movements are so large that it is very easy for even experienced traders to get it wrong and lose a lot of money. Badly trading Bitcoin is therefore probably the easiest way to lose money in Bitcoin. If you decide to go this route, you might want to practice on websites that offer mock trades, or start with a small amount at the start.

Check Out: 10 Of The Most Private Cryptocurrencies To Invest In

Scams

Financial scams are more and more common and cryptocurrency is a growing target. As more and more mainstream investors start owning cryptos, scammers are targeting them with increasing ferocity. As of May 17, the Federal Trade Commission reported that since October 2020, consumers reported losing more than $ 80 million to cryptocurrency scams, a tenfold increase year over year. . Just like you would with any digital asset, like your bank accounts, you will need to be more diligent with your security to protect your crypto in the future.

Read more: Binance Coin (BNB): Why is it so interesting for the cryptocurrency world

The Pirates

Hackers may pose the greatest risk to Bitcoin holders, especially since cryptocurrency is widely accepted. When you own Bitcoin, you keep it in an electronic wallet that only you can access, at least in theory. But hackers have shown their ability to tap into Bitcoin wallets, and they will only become more proficient over the years. Once a hacker has access to your Bitcoin wallet, they can drain all of your cryptocurrency from you, just like someone with your debit card can take all of your money. However, if you lose your crypto to a hacker, no bank will replace it for you.

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Last updated: July 14, 2021

This article originally appeared on GOBankingRates.com: How To Make (Or Lose) Money With Bitcoin, Explained In One Graphic

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