Bitcoin and the underlying blockchain technology have captured the imagination of millions of people around the world. With rising prices, media attention, and adoption, the prospects of making money with Bitcoin can appear overwhelming, complicated, and risky, especially for newcomers. But what if you could generate income from Bitcoin-related opportunities today without buying or holding any Bitcoin? This article will explore how beginners can make money with Bitcoin by understanding bitcoin supply and demand. You’ll discover practical and accessible strategies for generating income from Bitcoin without purchasing or holding BTC.
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Bitcoin Well-Positioned to Hit $100K by January 2025 - 10X Research
Current market trends and upcoming global events may spike the market price of Bitcoin to $100,000 by January 2025, research firm 10x Research said. The 10x Research prediction for the $100,000 Bitcoin price target is based on its model that recently triggered two buy signals, the most recent being on Oct. 14. According to 10x Research, its prediction model has a track record of 86.7% accuracy based on the last 15 signals.
The researchers explained their reasoning for the optimistic Bitcoin prediction: “When Bitcoin sets a new six-month high for the first time in 6 months like it did recently, we typically see a median return of 40% over the next 3 months.” Considering these calculations, a 40% jump from the current market price of $73,000 will push BTC above $101,000 by Jan. 27, 2025.
The Bitcoin Black Hole Effect
Another factor supporting the theory is the “Bitcoin black hole effect,” implying that increasing Bitcoin dominance removes value from altcoins.
Institutional Investors to Support Bitcoin Bull Run
Institutional investors like BlackRock now perceive BTC as a long-term stable asset or digital gold. The 10x Research report stated: “Gold has always been seen as a safe haven asset, so if Bitcoin is the new digital gold, it makes sense that institutions would be interested.”
The spot Bitcoin exchange-traded funds (ETF) market brought in $4.1 billion worth of BTC in October alone. The general Bitcoin investor also sees value in holding BTC for the long term. Substantial investments in BTC have lifted stock prices of Bitcoin mining companies, a correlation previously predicted by 10x Research.
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How to Make Money With Bitcoin for Beginners Without Owning BTC
Forget everything you think you know about derivatives. When you hear terms like:
- exchange-traded funds (ETFs)
- Trusts
- Options
- Futures
They sound complex and off-putting. But don’t panic. Derivatives are essentially tradable contracts or shares that track the price of an underlying asset, in this case, bitcoin. Instead of going out and buying bitcoin directly on an unregulated BTC exchange, you can effectively trade paper that represents it instead.
Contracts or shares can be settled in either cash (cash-settled) or actual bitcoin (physically delivered.) These financial products benefit from regulation, meaning several consumer protections safeguard investors. Tax guidance on regulated instruments is far clearer than when dealing directly with BTC, and there’s no need to set up a Bitcoin wallet or navigate an unregulated exchange.
Bitcoin ETFs
A Bitcoin ETF is an investment vehicle that trades on the stock market. Shares in the ETF are proportional to the price of Bitcoin, which the ETF’s managers buy and sell. ETFs charge low fees and closely track the price of an underlying asset. The catch is that "spot" ETFs that track the current price of Bitcoin are only offered in a handful of countries, such as Canada and Brazil.
The U.S. Securities and Exchange Commission (SEC) has repeatedly denied applications for spot ETFs because the bitcoin market is inherently manipulable, although some applications are outstanding. The SEC has, however, greenlighted several bitcoin futures ETFs, which track the value of short-term bets on the future price of bitcoin. The main reason given by SEC Chairman Gary Gensler for the preference of futures-based ETFs over spot ETFs is that the former can be structured using the Investments Company Act 1940, which gives consumers greater protection.
Bitcoin Closed-End Funds or Trusts
Since bitcoin spot ETFs aren’t legal in the U.S., the next best thing is a closed-end trust like the Grayscale Bitcoin Trust, which represents shares in a publicly traded fund. (Grayscale Investments manages the trust which also owns CoinDesk.)
Or it was the next best thing until the redemptions became tricky to exercise because of SEC charges in 2016, and shares started trading at a bitcoin discount. Trusts like these may only exist once the SEC approves a spot in Bitcoin ETF; Grayscale is among the many applicants.
Bitcoin Options and Futures
Derivative products let you trade claims on the price of bitcoin rather than buying bitcoin outright. A futures contract, for instance, lets you buy or sell bitcoin in the future at a price you decide today. It is a bet on the future price of Bitcoin. If your bet comes in, you could snag Bitcoin at a bargain price or sell it for more than the market price. If it goes wrong, you could pay far more for your Bitcoin or sell it at a loss when the contract expires. Some future Bitcoin contracts are settled in cash, like those on the Chicago Mercantile Exchange (CME), while those on Deribit are settled in Bitcoin.
Perpetual swap contracts (known as perps) are futures contracts that never expire and allow you to bet on bitcoin’s price forever. Another avenue is trading bitcoin options: This grants you the right, but not the obligation, to buy or sell bitcoin at the predetermined price (called a strike price) within a certain period. To have this right to buy or sell, investors must pay an upfront cost known as a “premium.” Futures and options contracts are complicated products in the U.S. and come with additional requirements and approvals before you can start buying calls or puts.
Invest in Companies That Hold or Trade Bitcoin
Another way to gain exposure to Bitcoin’s price is to purchase shares of publicly listed companies whose performance is tied to the price of BTC. Coinbase, a publicly traded BTC exchange, makes most of its money through trading fees, and people tend to trade more frequently when Bitcoin is performing well.
Tesla is the most well-known company that keeps Bitcoin on its books, but many others keep it in their portfolios. MicroStrategy has billions of dollars worth of bitcoin held in its treasury, causing some analysts to liken it to a quasi-bitcoin ETF. You can find a full list of companies holding Bitcoin reserves here. Mining stocks like Hut 8 Mining and Riot Blockchain slump when Bitcoin crashes and rise when it performs well. This is because many bitcoin mining companies hold onto their bitcoin instead of selling it or using their holdings to finance investments.
Invest in Companies That Support Bitcoin Infrastructure
A further step away, but still a good one to consider, is to invest in companies that create the chips and other key components required by mining operations to succeed. Bitcoin relies on ASIC mining machines and cloud computing power, so you can investigate where the chips are made and how the mining is powered and invest in those companies.
Trade Synthetic Bitcoin
One limitation of Bitcoin is that it is based on the Bitcoin blockchain, which isn’t interoperable with other blockchains. For example, you can’t trade Bitcoin directly on any other blockchain. However, trading synthetic bitcoin on these blockchains has become possible over the last few years. These tokens are minted on another blockchain and are pegged to Bitcoin’s price.
Bitcoin Mining
If you can’t trade Bitcoin directly, nothing’s stopping you from earning it. One way to earn bitcoin is to set up a bitcoin mining rig. This is far more likely to be lucrative if you spend a lot of money on mining hardware, and it might take a while until you earn your money back, and all the time, you’re exposed to Bitcoin’s volatility.
There are easier options for less technical users, such as Joining a Bitcoin mining pool or cloud mining. Some mining companies have market capitalizations in the billions of dollars. Read how to work out whether Bitcoin mining is profitable here.
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Is Bitcoin a Good Investment?
One of the most commonly asked questions about Bitcoin is whether it’s a good investment. The real answer is no investment is inherently “good,” or “bad.” It depends entirely on your risk tolerance, investment strategy, and financial goals.
Before considering Bitcoin as an investment, you should carefully consider your goals and determine what you want to accomplish in your investment activities. Do you want to develop a passive income? Become a full-time investor? Save for retirement? Answering these questions will help you determine whether Bitcoin is the right investment option.
The Pros of Bitcoin Investing
The main benefit of Bitcoin investing is that you may generate a huge return on profit, perhaps as high as 200% or more. Of course, that’s a challenging thing to accomplish, but it’s possible. If you purchase a large amount of Bitcoin, you may be able to capitalize on a market surge and sell your coins for a much higher value when there are lots of buyers.
There’s also a slight possibility that Bitcoin will truly become the currency of the future or a more popularly traded asset, and you could hopefully generate returns from long-term holdings. It should be noted, however, that Bitcoin values are generally decreasing every year.
Timing the Market for Maximum Returns with Bitcoin's High Liquidity
Your success may depend on adequately timing the market. In other words, you’ll buy coins at a low price and sell them when they’re at the highest possible price. High-risk investors who pay close attention to the market may be able to generate massive returns when employing that strategy.
They could generate returns that are highly improbable in the world of corporate stocks or government bonds. To that end, Bitcoin is incredibly liquid. According to Shaun Heng, VP of growth and operations at CoinMarketCap, “Bitcoin is one of the most liquid investment assets you can have and is more liquid than any other asset.” As a result, any realized can be realized almost immediately.
The Cons of Bitcoin Investing
The high volatility of Bitcoin makes it a hazardous investment, and you could lose money if you’re not careful. Depending on how much you’ve seen in recent months about Bitcoin, it may seem like one of the best investments to make. The crackdown on governmental policies is decreasing Bitcoin's value, especially now.
Bitcoin is at high risk of pump-and-dump schemes. Predatory investors will contact amateur or unassuming investors and convince them to pour a lot of money into Bitcoin. The resulting surge causes Bitcoin prices to increase rapidly.
Risks of Volatility and Legal Concerns in Bitcoin Investment
The predatory investors are smart and sell their holdings before the buying surge ends, making a huge profit. But when investors stop buying, the value of the coins falls to extremely low prices. A coin bought for $200 could have a valuation of just $30. Unknowing investors would throw their money away. You could always profit by selling your coins before the price collapses, but predicting when the buying surge will stop is impossible. Prices could fall 50% in only a matter of hours. That’s why volatile assets like BTC are considered high-risk investments.
You should also know that pump-and-dump schemes and pyramid schemes are illegal. While it’s not necessarily illegal to capitalize on a market surge, whether it’s natural or artificially created, you might not want to be associated with such practices. You could be the target of an IRS audit or a criminal investigation, even if you’ve done nothing wrong.
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