Strategic Bitcoin Investments: Making Profits With Crypto

Bitcoin is a very risky asset type. It is extremely volatile, and even the most solid Bitcoin investment should be treated as a high-risk investment. For example, in the past, Bitcoin’s price fell over 80% in the course of several months. The safest way to invest in Bitcoin is to buy and hold the actual coins in your personal wallet. If you do decide to buy and hold, the most important rule of thumb is to never invest more than you are willing or able to lose.

Bitcoin ETFs provide an easy way for investors to gain exposure to crypto in a retirement account, but they come with some downsides. You can't spend the Bitcoin or store it in a cold wallet, and they may be subject to just as much volatility as Bitcoin itself.

One way to make money with Bitcoin is by trading it, lending it, holding it or earning it. Returns aren’t guaranteed on this volatile asset; just as you can make money as the price goes up, it’s also possible you could lose money if the price goes down.

If you choose to buy and hold Bitcoin, you’ll want to make sure you’re not over-exposed to any one asset and that you’re not investing money you can’t afford to lose. One guideline is to invest no more than 10% of your portfolio into risky assets like Bitcoin.

Buying and holding Bitcoin

Bitcoin is a highly volatile investment, and its value can fluctuate significantly. As such, buying and holding Bitcoin is a long-term investment strategy.

How to Buy Bitcoin

To buy Bitcoin, you need an account with a cryptocurrency exchange or service, such as Coinbase, PayPal, or Robinhood. You will also need a way to store your purchases safely, such as a digital wallet. Here are the steps to buying Bitcoin:

• Choose a crypto-trading service or venue: Select a cryptocurrency exchange, such as Coinbase, Kraken, Gemini, or Binance, or a payment service like PayPal.
• Connect your exchange to a payment option: You may need to provide personal identification and link your bank account, debit or credit card.
• Place an order: Decide how much Bitcoin you want to buy, keeping in mind that it can be a risky investment.
• Ensure safe storage: Store your Bitcoin in a hot wallet or a cold wallet. A hot wallet is connected to the internet and is typically provided by the exchange, while a cold wallet is offline and considered more secure.

Benefits of Buying and Holding Bitcoin

• Potential for high returns: Bitcoin's price has appreciated dramatically at times, and buying and holding can allow investors to capture those gains.
• Long-term investment strategy: By holding Bitcoin for the long term, you remove the need to time the market and can benefit from potential price increases over time.
• Diversification: Adding Bitcoin to your investment portfolio can provide diversification and exposure to the cryptocurrency market.

Risks of Buying and Holding Bitcoin

• Volatility: Bitcoin's price can be highly volatile, and there is a risk of significant losses if the price drops.
• Unregulated market: The cryptocurrency market is largely unregulated, and investments in Bitcoin are not insured by the Securities Investor Protection Corporation.
• Security concerns: Bitcoin wallets and exchanges can be targeted by hackers, leading to potential losses.

When considering buying and holding Bitcoin, it is essential to carefully assess your risk tolerance, conduct thorough research, and only invest what you can afford to lose.

Bitcoin ETFs

Here's how they work:

How Bitcoin ETFs Work

The ETF then issues shares corresponding to the number of Bitcoins it holds. These shares are traded on traditional stock exchanges, and the share price reflects the prevailing market price of Bitcoin. The ETF occasionally rebalances its holdings by buying or selling tokens to ensure the share price tracks the price of Bitcoin as closely as possible.

Advantages of Bitcoin ETFs

One of the main advantages of Bitcoin ETFs is their convenience and accessibility. They lower the barriers to entry into the crypto market by removing the technical complexities associated with managing a cryptocurrency wallet and private keys. This makes Bitcoin investing more similar to investing in traditional stocks or ETFs, which is more intuitive for mainstream investors.

Another advantage is liquidity. Bitcoin ETFs make buying and selling Bitcoins easier through familiar brokerage accounts, and the efficient market-making process ensures that investors can easily buy or sell ETF shares when needed.

Additionally, Bitcoin ETFs provide regulatory oversight, transparency, and standardised rules that protect investors. The tax treatment of ETFs is also well-established, providing clarity to investors.

Disadvantages and Risks of Bitcoin ETFs

Despite their benefits, Bitcoin ETFs carry several risks and disadvantages. The most significant risk is the volatility of Bitcoin prices, which could lead to substantial financial losses. While the ETF structure simplifies ownership and storage, it doesn't eliminate the inherent risks of the cryptocurrency market.

Regulatory uncertainty is another concern. The lack of a comprehensive regulatory framework means there is uncertainty about how risks like fraud, manipulation, and loss of assets will be addressed. Future regulations and changes in tax laws could also impact the performance of Bitcoin ETFs.

Security risks are also a significant issue. The large number of coins held by Bitcoin ETFs makes them attractive targets for cybercriminals. While ETF managers employ multiple security measures, no system is entirely impenetrable. A successful breach could result in the theft of millions of dollars worth of Bitcoin, severely damaging investor confidence.

Additionally, Bitcoin ETFs charge management fees or expense ratios, which can be higher than those of traditional equity ETFs due to the additional costs of exchanging and securing Bitcoins.

Crypto credit cards

How Crypto Credit Cards Work

Examples of Crypto Credit Cards

• Brex Card: This card is targeted towards startups and offers a baseline rate of 1 point per $1 spent. However, if you make it your only company card, you can earn higher rates through its Exclusive rewards program, such as 7 points per dollar spent on rideshares and taxis, 4 points per dollar on travel, and 3 points per dollar on restaurants. Cardholders can redeem their rewards for cryptocurrencies like Bitcoin and Ethereum through Coinbase.
• Venmo Credit Card: The Venmo Credit Card offers a feature called Cash Back to Crypto, which allows users to automatically purchase cryptocurrency using their cash-back rewards. Users can choose from four cryptocurrencies: Bitcoin, Ethereum, Litecoin, or Bitcoin Cash. The auto-purchase feature can be turned off at any time.
• Gemini Credit Card: The Gemini Credit Card automatically earns crypto rewards in Bitcoin and over 50 other cryptocurrencies available on the Gemini exchange platform. Applications for this card are now open to the public in all 50 states.
• Crypto.com Visa Card: This card offers various benefits, including up to 5% back on all spending, airport lounge access, and free ATM withdrawals. It is important to note that this card needs to be topped up and cannot be directly loaded with cryptocurrency. Crypto.com also offers different card tiers with varying benefits and requirements.

Lending Bitcoin

Centralized exchanges make BTC lending easy. However, to lend BTC through DeFi, you can use "Wrapped" Bitcoin (WBTC), which can be traded on smart-contract networks like Ethereum, Arbitrum, Polygon, or Solana.

When you lend your Bitcoin, you will earn interest on it in the form of Annual Percentage Yield (APY). Crypto APYs are usually higher than APYs at traditional banks, largely due to the higher risk of crypto. Any time your Bitcoin is deposited with a lending service, APY will accrue. To maximize APY, some lending platforms require that your Bitcoin is locked up for a fixed period, during which you will be unable to use or withdraw your BTC tokens.

Your loaned Bitcoin is provided to Bitcoin borrowers. Crypto loans require borrowers to deposit collateral to guarantee that loans can always be repaid, so you won't need to worry about losing your funds if a borrower defaults.

There are several risks to lending BTC. Many lending platforms impose a lockup period on your crypto, meaning that when your assets are loaned out, they cannot be withdrawn or sold. This can be a disadvantage if you want to sell your crypto to realize gains. Platform risk is another issue, as the crypto space has seen numerous instances of platform hacks and insolvencies, with lenders even going bankrupt and taking client funds with them. Regulatory changes could also affect the viability of lending.

If you're considering lending Bitcoin, it's important to weigh these risks against the potential rewards.

Day trading Bitcoin

To start day trading, you will need to trade larger amounts, usually hundreds or thousands of dollars, to make a profit after trading fees. A deep understanding of crowd psychology and the ability to constantly monitor your coins' social media trends are also essential.

One strategy is to buy and sell Bitcoin or other cryptocurrencies based on the closing price at 4 pm Central Time on Fridays and the market reopening at 3 pm Central Time on Sundays. This strategy assumes that the gap in the futures market between Monday's opening and the previous Friday afternoon closing will be filled, which happens about 51 out of 52 weeks per year.

Another strategy is to aim for smaller, consistent gains, such as 1-2% per day, rather than trying to time the market for larger gains of 10-15%. This approach requires technical analysis skills and a good understanding of limit and market orders.

It is important to remember that day trading is challenging, and most retail day traders lose money in the long run. It is also crucial to consider the taxes on any profits, as these can vary by country. In the US, for example, the IRS treats cryptocurrencies as capital assets, and you must pay capital gains taxes when you sell Bitcoin for a profit.

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