With Bitcoin (BTC) reaching yet another all-time high in October 2021, I am sure that the number of people who know about its existence by now would have doubled. And credit to so many TV, print, and social media promotions happening around. And since its moves are unlike any other assets that we know when it comes to BTC, its price is always a very hot topic – and it could get anyone interested in the space.
Most people still have no clue whatsoever about it. And even those who do understand it a bit, I am sure have never read even a few sentences of the original Bitcoin whitepaper, that in the words of many, has set a revolution in motion.
What is Bitcoin?
Bitcoin is a purely digital asset created in 2009 by the mysterious Satoshi Nakamoto – someone whose identity still remains unknown. Unlike traditional forms of money, BTC has no paper bills or metal coins. It lives solely on the Internet and with the power of blockchain technology behind it, the real-use cases are limitless (though useful ones will be limited and the primary one for many seems to be the store-off-value). And with Bitcoin now being a little over 12 years old, people have found out that they can:
- Use it as a means of a store of value or wealth preservation – thereby storing money and protecting it against inflation (or as many predict, the coming hyperinflation).
- Send money faster and at cheaper rates compared to traditional means – without the hassles of intermediaries, extra charges, and the institutional operating hours. So its one use case is to utilize it as a means of remittance that allows people to send money to family and friends across the world without the need for a money transfer operator.
To this day, people are still finding new opportunities with this new kind of money and they’re paving the way for what hopefully will have a global adoption in near future. Just a few months back, El Salvador became the first country to adopt BTC as a legal tender.
Now, let’s talk about the elephant in the room. With BTC making headlines due to its high prices, it’s important that we talk about the volatility or how much the price fluctuates over time. And let me tell this upfront that it’s not for the weak-hearted.
In its early days, someone bought two pizzas with 10,000 BTC. Now, let’s just say it can buy a whole lot more than that. Since Bitcoin was created recently, we can consider it to be in its infancy stages – which is common with newer currencies, but with BTC, it’s taken to a different level.
Bitcoin’s volatility is one of the many reasons why people find this space so exciting and that is what is makes the risk-reward so asymmetric. It’s a double-edged sword that can either drastically harm you if you aren’t careful, but it’s also something that can make you a lot of money if you’ve done your homework.
Here is a real story of a friend who made a lot of money – do read (link) if interested.
Earning money with BTC
Now, you’re probably figuring out how to make money with Bitcoin. Volatility is the very reason investors are so interested in this space. If you bought Bitcoin 5 years ago, you’d probably be sitting on a lot of profits now. And there are many who plan to Hodl Bitcoin for 10 years (or forever!).
Back then, that was the main way of making money: buying and holding. However, as crypto evolved, the opportunities did as well. These days, there are marketplaces that provide opportunities no matter what the Bitcoin’s price is. These platforms give you the chance to find a ton of opportunities in the never-ending haystack of Bitcoin offers.
Now, let me be upfront that I am no expert in cryptocurrencies in general or Bitcoin in particular. But I know one thing. There is no surefire way to make money. And if you, somehow believe that BTC is a surefire way of making money, then you are wrong. For a moment, let’s remind ourselves what Warren Buffer once said (or said something similar) – Never invest in something you don’t understand. Investing a small amount for fun is fine. But if you want to invest larger amounts and you don’t put in the effort to understand your investment/asset, that is when trouble pops up.
Unlike other assets like equity, debt, real estate, and gold, this space of Bitcoin is so new, that it can be complicated for beginners. You would really need to dive in and learn more and more if you want to increase your allocation to this space. Some say 1% in Bitcoin is good for a start.
But if you want to go beyond that and want to maximize your earning potential and manage the risks, then you got to put in some effort. And once you begin, here are a few common mistakes to look out for avoid:
- Going in blind – In the cryptocurrency space, the more you know, the better it is. Fortunately, with Bitcoin being a little over 12 years old now, there are a ton of resources for you to learn from and forums to participate in if you have any questions. Always remember to do your research before spending a single Rupee.
- Not choosing the right platform – There are tons of exchanges and marketplaces now that allow you to buy and sell Bitcoin profit. However, many of them will have different audiences and trading styles in mind. Make sure to figure out what kind of trading you want to do, find a platform that’ll supplement that, and choose one that has a robust security system in place.
- Going all-in – With its recent price spikes, it could be a little enticing to put all your chips in for a high-risk, high-reward bet. Don’t do that. Please. Its very important to understand that this space is so volatile, that you should never put in money that you aren’t willing to lose. Plain and simple.
- Giving in to emotions – One thing many people don’t understand is that the Bitcoin space is a high-emotional environment, especially when there’s a lot of money on the line. Before you even start investing, set a goal for yourself and stick to it. Throughout the way, you’re probably going to experience Bitcoin FOMO (fear of missing out) and FUD (fear, uncertainty, and doubt), which can either be caused internally or by other investors. When you do, just remember your goal and keep a clear head. If you act purely on emotion, it may end up costing you a lot of money down the line.
That’s enough from me. Like any other asset, even Bitcoin requires you to spend time and effort to understand it well. Not doing so can end in a lot of pain for your Bitcoin wallet that I am sure, you nor anyone else would want to experience.
After all, who likes losses?
Note – This article is just for informational purposes only. Do not construe any of what is written above as legal, tax, investment, financial, or other advice.