How does Bitcoin earn profit?

How does Bitcoin earn profit?

New Bitcoins are created as part of the Bitcoin mining process, in which they are offered as a lucrative reward to people who operate computer systems that help to validate transactions. Bitcoin miners — also known as “nodes” — are the owners of high speed computers which independently confirm each transaction, and add a completed “block” of transactions to the ever-growing “chain.” The resulting blockchain is a complete, public and permanent record of every Bitcoin transaction.

 

Miners are then paid in Bitcoin for their efforts, which incentivizes the decentralized network to independently verify each transaction. This independent network of miners also decreases the chance for fraud or false information to be recorded, as the majority of miners need to confirm the authenticity of each block of data before it’s added to the blockchain in a process known as proof-of-work.

Making money with Bitcoin (BTC) has become increasingly difficult. Prices have tumbled amid a widespread crypto crash. Promises of free Bitcoin are often scams. Bitcoin mining, once accessible to individual investors, is now so competitive that it’s rarely a profitable venture for those with small setups.

 

However, it’s still possible to make money with Bitcoin. You can trade it, lend it, hold it or earn 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. But Bitcoin’s growth since launching makes some crypto investors bullish about its future: In 2010, 1 Bitcoin was worth about 9 cents, and as of this writing, each coin is worth around $16,000.

 

Holding Bitcoin

Buying and holding Bitcoin as a long-term investment — or, as some crypto enthusiasts call it, HODLing — can be a low-effort way to make money in the long term, as long as its price when you finally sell it is higher than the price at which you bought it. Historically, the price of Bitcoin has reached as high as $65,000 per coin, so it’s possible to imagine that it could reach a similar figure in the future.

 

Bitcoin was originally conceived as a cryptocurrency that could be used for day-to-day transactions, but as its value increased, many investors have started to view Bitcoin as a long-term investment. As with any investment, holding for a longer period of time means you’ll have to endure ups and downs in pricing without being tempted to buy or sell. 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.

 

Using a credit card with Bitcoin rewards

There are many crypto credit cards that will allow you to earn rewards in cryptocurrency. Similar to traditional cash-back programs, you can earn a small percentage of the purchases you make 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 might 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 certain platform; when the issuer of a crypto credit card has one that applies to rewards, it means you’ll get a slightly less favorable exchange rate when both earning and selling those crypto rewards.

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