Bitcoin Investors: The Money Made And Lessons Learned

Bitcoin is a highly volatile cryptocurrency, with its value changing daily, and sometimes by hundreds of dollars. It is a risky investment, but it can be profitable. For example, if you had invested $1000 in Bitcoin 10 years ago, it would have grown by 7644% and be worth around $77,443 as of February 14, 2024. On the other hand, if you bought Bitcoin at its peak of nearly $69,000 in November 2021, you would have made a sizable loss, as it is currently valued at around $24,000.

Bitcoin's value over time

Bitcoin's value has fluctuated since its launch in 2009. The cryptocurrency's first significant price increase occurred in October 2010, when its value rose from less than $0.10 to $0.20. Before the year ended, it had reached $0.30. In 2011, it started growing past $1, reaching a peak of $29.60 in June; however, a sharp recession in the cryptocurrency markets followed, and Bitcoin's price dropped, closing the year at about $5.

Bitcoin's price continued to fluctuate over the next few years, with rallies and crashes along the way. In 2013, it began the year trading at $13, crossed $100 by April, and then $200 by October. The cryptocurrency market experienced a historic gain when Bitcoin crossed $1,000 in November 2013 and closed the year at $732.

Bitcoin's price hovered around $1,000 for a few years until it broke $2,000 in mid-May 2017 and then skyrocketed to close at $19,188 on December 16. Mainstream investors, governments, economists, and scientists took notice, and other entities began developing cryptocurrencies to compete with Bitcoin.

Bitcoin's price moved sideways in 2018 and 2019, with small bursts of activity. For example, there was a resurgence in price and trading volume in June 2019, with the price surpassing $10,000. However, it fell to a closing price of $6,612 by mid-December.

The year 2020 saw another burst in Bitcoin's price due to the economic shutdown caused by the COVID-19 pandemic. The cryptocurrency opened the year at $7,161 and closed at $28,993 on December 31, 2020, increasing 416% from the start of that year.

In 2021, Bitcoin's price surpassed $40,000 by January 7 and reached new all-time highs of over $60,000 in mid-April as Coinbase, a cryptocurrency exchange, went public. The price continued to be propelled upward by institutional interest, and Bitcoin reached a peak of $69,000 in November 2021 before closing at $64,921.

However, uncertainty about inflation and the emergence of a new COVID-19 variant, Omicron, spooked investors, and Bitcoin's price started to fluctuate more widely. Between January and May 2022, Bitcoin's price gradually declined, falling to $29,000 on May 11. This was the first time since July 2021 that Bitcoin closed under $30,000. Crypto prices plunged further in June 2022, with Bitcoin dropping below $23,000 and ending the year below $20,000.

Fortunes changed for Bitcoin in 2023, which saw a stellar rise in the cryptocurrency's price. It opened the year at $16,530 and rose consistently throughout the year, ending at $42,258.

In January 2024, the long fight for Bitcoin Spot ETFs came to a close, and the market settled somewhat. Bitcoin's price climbed quickly after the fund approvals—breaching $60,000 again in late February and early March and setting a new all-time high of $75,830 on March 14, 2024. As of August 13, 2024, the price of Bitcoin is $60,683.20, with a 24-hour trading volume of $32.97 billion.

How much money people made from Bitcoin

Bitcoin is a highly volatile cryptocurrency, and its value changes daily. This makes it difficult to determine how much money people have made from investing in Bitcoin. However, here is some information on the profits people have made from Bitcoin investments.

Bitcoin's value hit an all-time high of nearly $69,000 in November 2021. If you had invested $1,000 in Bitcoin five years ago, your investment would have grown by 1,352% and be worth around $14,524 as of February 14, 2024. If you had invested $1,000 in Bitcoin ten years ago, your investment would have grown by 7,644% and be worth around $77,443 as of February 14, 2024.

Bitcoin's value can also decrease significantly. For example, in November 2022, the currency lost more than 75% of its value following the collapse of FTX, the largest cryptocurrency exchange at the time. This shows that Bitcoin investments can result in substantial gains or losses depending on market conditions and timing.

It's important to note that past performance does not guarantee future results, and financial experts generally advise against investing more than you are willing to lose due to the high volatility of cryptocurrencies.

Additionally, Bitcoin's percentage of all money is much lower than expected. As of April 10, 2024, the value of all Bitcoins was approximately $1.39 trillion, which is only about 0.3% of the estimated total value of global wealth.

Bitcoin's volatility

Bitcoin is considered a volatile asset, and its volatility is measured by how much its price fluctuates relative to its average price over a period of time. The volatility of an asset is synonymous with risk, and the more volatile an asset, the more people will want to limit their exposure to it. Volatility also increases the cost of hedging, which is a major contributor to the price of merchant services.

Bitcoin's low volatility in early 2024, combined with other factors, has been seen as a precursor to a potential price increase. This has been observed in the past, where low volatility has preceded steep rises in Bitcoin's price.

Despite its volatility, Bitcoin has the potential to reach a price of $250,000 in the coming years, according to analysts. This is due to various factors, including the approval of Bitcoin exchange-traded funds (ETFs) by the U.S. Securities and Exchange Commission (SEC), institutional adoption by major Wall Street players, and surging political interest in Bitcoin.

How to invest in Bitcoin

Investing in Bitcoin can be a risky endeavour, so it's important to do your research and understand the process before getting started. Here's a step-by-step guide on how to invest in Bitcoin:

• Choose a Cryptocurrency Exchange: Select a reputable and well-known cryptocurrency exchange that offers a wide range of currencies, such as Gemini, Kraken, Coinbase, or Crypto.com.
• Create an Account: You will need to provide personal information and verify your identity to register on the chosen cryptocurrency exchange.
• Fund Your Account: Before buying any Bitcoin, you need to deposit funds into your exchange account. You can use fiat money, such as US dollars, to fund your account.
• Decide on the Amount: Determine how much Bitcoin you want to purchase. You can invest in one or multiple cryptocurrencies, so research your options thoroughly.
• Place a Buy Order: Follow the steps provided by the exchange to submit and complete your buy order for Bitcoin.
• Store Your Bitcoin: Once you've made your purchase, store your Bitcoin in a digital wallet. You can choose between a hot wallet, which is cloud-based and offers faster transactions, or a cold wallet, which is a portable device that provides additional security.
• Understand the Risks: Cryptocurrency is a highly volatile and unregulated market. The prices of cryptocurrencies can fluctuate wildly, and regulatory changes can significantly impact their value. Always invest an amount you are willing to lose.
• Review and Rebalance: Periodically review your investment portfolio to assess whether you need to adjust your crypto holdings. Depending on your investment goals and financial situation, you may need to increase or decrease your exposure to crypto assets.
• Tax Implications: Understand the tax consequences of buying, selling, or using cryptocurrencies. Consult with a qualified professional to ensure you are complying with the relevant tax regulations.
• Diversify Your Investments: Consider diversifying your portfolio by investing in other cryptocurrencies or crypto-related assets, such as crypto stocks or exchange-traded funds (ETFs). This can help reduce the risk associated with investing in a single cryptocurrency.

Bitcoin's legality

The legality of Bitcoin varies across the world. In many countries, Bitcoin is legal, but some countries have banned cryptocurrencies completely. As of March 2024, Bitcoin was legal in the US, Japan, the UK, and most other developed countries. However, in emerging markets and other areas, its legal status has varied dramatically.

In the US, the Internal Revenue Service (IRS) has classified Bitcoin as property for taxation purposes. The Treasury has defined Bitcoin as a convertible currency with an equivalent value in real currency or one that can act as a substitute. Under US law, any entity that administers or exchanges Bitcoin is subject to the Bank Secrecy Act and must register with the US Treasury and file reports on transactions over $10,000.

Other countries where Bitcoin is legal include Canada, Australia, the European Union, Mexico, and Japan. In the EU, the Markets in Crypto-Assets (MiCA) Regulation defines services and assets that fall under regulatory controls. Bitcoin is taxed as a property in the US, Canada, and Australia.

Some countries where Bitcoin is illegal include China, Saudi Arabia, Qatar, India, Nepal, and Bolivia. China, which used to account for the majority of the world's Bitcoin mining, has now outlawed cryptocurrencies altogether. India has banned banks from dealing in Bitcoin, and the Reserve Bank of India (RBI) announced a ban on the sale or purchase of cryptocurrency for entities regulated by the RBI in 2018. However, the Supreme Court of India revoked this ban in 2020.

The legislative landscape surrounding cryptocurrency is expected to continue evolving as it gains wider use and acceptance.

Frequently asked questions