Bitcoin, which now has a market capitalization of 755 Billion dollars, has become the best performing asset class of the decade with an annualized return of 230%. No hedge Fund manager worth his salt can afford to ignore an asset that delivers such returns.
Bitcoin is making it rain and delivering returns which are equivalent to ten times those of the Nasdaq. And since 2011, the cumulative gains of Bitcoin have exceeded 20 000 000%, a staggering figure. This means that what Peter Schiff and other very vocal critics thought was a complete scam and a bubble about to pop has, ironically, completely outpaced the cumulative gains of the Nasdaq 100 and US Large Caps, which delivered returns of 541% and 282% respectively.
Succumbing to customer and peer pressure, fund managers are now offering Bitcoin to their retail and institutional clients, sometimes as a hedge against inflation, which is a fantastic proposition given the rapid expansion of the money supply and its unintended effects, and sometimes as a way to diversify one’s portfolio, thanks to Bitcoin’s extremely low correlation with traditional assets and more specifically with Tech Stocks.
Perhaps the Geopolitical and Economic contexts - the perfect storm - have a lot to do with this ever increasing demand for Bitcoin.
Perhaps the advent of Industry 4.0, a new phase of the Industrial revolution that relies heavily on automation, Big Data, Machine Learning, AI and Robotics, which is precipitating the digitization of assets and of Life in general, demands a global, digital currency, a product of the sheer genius of a legendary, lone creator, Satoshi Nakamoto.
But we need not only be witnesses to the greatness of this brave new world created by the expansion of Bitcoin’s influence. We can also partake in it, in many ways.
There are quite a few ways one can make money with Bitcoin, and below we will review a few of them.
Cryptocurrency mining can be defined as the process thanks to which transactions are validated and added to new Blocks. This is a critical process and the security of a Blockchain depends on this mining activity - which can be quite profitable. Bitcoin mining, be it Solo mining, Pool Mining or Cloud Mining, can earn entrepreneurs a lot of money, but ultimately the rewards earned depend on a multitude of technical factors such as “Hash Power”, which is a measure of a mining rig’s computational power, cost of electricity, network difficulty, and so on.
The rewards make the adventure worth it: for validating transactions and generating new blocks, miners currently receive 6.25 Bitcoins per Block mined. This reward will be reduced by 50% after the next halving event, which is scheduled for Block 840000 (in approximately 1053 days).
Bitcoin Trading and Arbitrage
The Bitcoin Market never sleeps: unlike traditional assets, Bitcoin is exchanged 24 hours a day and 7 days a week - perhaps the perfect recipe for insomnia for traders. This is something retail traders and sharp institutional outfits have come to exploit, as price movements during the weekend, when very large trading firms are less active or closed, are typically different than during the week.
Our readers will already be familiar with trading and arbitrage. Bitcoin Trading requires one to engage in fundamental and technical analysis in order to take advantage of price movements.
I differentiate between two types of trading: day trading and swing trading.
Day traders do not let positions open for very long and almost never overnight. This trading style consists in opening and closing positions quickly, to take advantage of ephemeral price differentials.
Swing traders buy low and sell high, setting and forgetting their trades and letting them ride for days or months until the time is right.
Day trading and Swing trading can be spiced up by adding an extra component to the mix: DCA or Dollar Cost Averaging. DCA is a strategy in which day traders or swing traders divide their cash across predetermined price levels, in order to fend off the risk associated with trading and reduce the impact of volatility.
Arbitrage on the other hand leverages price differences across exchanges and countries. There are many different types of Arbitrage strategies, each with their own risk/reward profile: triangular arbitrage, statistical arbitrage, flash arbitrage and spatial arbitrage.
Trading and Arbitrage are excellent ways to make money however the risk of engaging in such practices should never be underestimated.
Bitcoin lending is perhaps the safest way to make money using one’s Bitcoin holdings. While it is not risk free, the risks associated with this practice are nothing compared to those associated with arbitrage and trading.
Bitcoin lending, which comes in two flavors, centralized and decentralized, entails making your holdings available to borrowers, for a fee. Excellent platforms, such as BlockFi, Celsius and Voyager allow users to lend their Bitcoin (and other assets) to borrowers and earn interest. Bitcoin lending constitutes a safe way to put idle assets to work.
More recently, it has become possible to wrap or issue “representations” of bitcoin on other Blockchains such as Ethereum, in order to engage in the lending and borrowing game while taking advantage of lower fees and confirmation times. This is a really exciting technological development in an industry that never ceases to impress.
Bitcoin Forks and Airdrops
Bitcoin forks such as Bitcoin Cash (BCH) and Bitcoin Satoshi Vision (BSV) are not very frequent, however they constitute an excellent way to make money. A fork happens when the software and vision of miners become misaligned. If this conflict is not resolved, two versions of a blockchain can emerge.
Sometimes, a fork can be followed by an airdrop. An airdrop can be defined as the mass-sending of tokens in order to promote awareness about a new currency. The most popular Bitcoin airdrop is without a doubt Bitcoin Cash: the first of August 2017, Bitcoin holders were given Bitcoin Cash (BCH) at a 1:1 rate to their Bitcoin holdings.
Writing about Bitcoin
Writing is not easy, however it is intellectually rewarding and an excellent way to get involved and go down the Crypto rabbit hole. Writing articles can be an excellent source of revenue. A knowledge of the history of cryptocurrencies is crucial, as is vast protocol knowledge. Writers can revel in the fact that they get remunerated to educate the public and raise awareness about critical issues specific to the Bitcoin Blockchain.
Writing is not for everyone, as it requires the utmost focus and preferably a little bit of experience. The focus should definitely be on quality as we live in an age of quantity first and foremost!
Bitcoin Affiliate Programs
Affiliates are individuals who promote brands, products and services and get rewarded when a member of their larger network makes a purchase thanks to their effort. It is a sine qua none requirement of affiliate marketing to possess and maintain a large enough network of followers. As a sales strategy, a plethora of Bitcoin exchanges have established strong affiliate programs. Once you join an affiliate program, you are provided an affiliate link which you can share on social media. When someone uses your affiliate link to purchase a product or service you get rewarded.