How To Make Money from Bitcoin in 2015

By Dean Walsh

Source:http://www.salon.com/2013/04/03/bitcoins_crazy_day...

Is It Too Late to Make Money from Bitcoin in 2014?

Investing in Bitcoin, a new peer to peer, decentralized digital currency, made a lot of people a hell of a lot of money in 2013. The price of a the coins rocketed from $60 to over $1000 in just a few months, although it has now fallen back down into the $900s. Not only that - but some of those people didn't even need to buy their BITCOINS. Because the coins can be 'mined' using the processing power of a computer, many coin holders got their currency for the cost of their computer and the electricity to run it.

The days of becoming a Bitcoin millionaire virtually overnight with little or no investment is almost certainly over now, but doesn't mean that there isn't still a lot of money to be made.

Investing in Bitcoin in 2014 is a very risky business, so you should definitely only do it with a relatively small amount of capital that you can afford to lose entirely if things to badly. But these high risks could also come with high rewards.

See: Bitcoin Investment and Trading News for more insights

You can still make money from mining Bitcoins, from buying and holding them, or from trading them on the financial markets.I will explain these different methods in more detail further down the page. Before you begin doing any of these things, however, you should make sure that you have taken the time to really understand both the challenges that the currency will face in 2014, and also the opportunities for further growth and profit. Here is a brief overview of some of the main issues:

Main Challenges for Bitcoin in 2014

• Currently the currency is largely unregulated. Any changes to this situation, or any crackdowns on trading by governments or large organisations, could make a big dent in the current value. This has already been seen once, when the price dropped overnight after the Chinese government introduced trading restrictions, and could easily happen again - multiple times or on a larger scale.
• After a year of meteoric price rises for a commodity which is impossible to accurately value at the moment, there is a strong chance that the market has over-priced Bitcoins, meaning that it would already be due a correction.
• Although enthusiastically adopted by geeks and speculators, the currency has yet to convince the general public to adopt on a large scale. The ecosystem of apps and services surrounding the currency will have to demonstrate some movement towards making it more user-friendly for the not so technically adept over the course of 2014 to justify its valuation.
• A wide range of alternative digital currencies have already been launched - this competition has not proved to be a major challenge to far, but it could be in the future.
• There are a lot of hackers with a big interest in BITCOIN. Stolen wallets as a result of such activities is already something of a threat for owners of the currency, and the possibility of something called a '51% attack' in which members of powerful mining pool successfully 'double spend' their coins cannot be totally discounted. A major security breach or widespread virus targeting people's digital wallets could dent confidence and send the price tumbling.

The Main Opportunities for Bitcoin in 2014

• The launch of a so-called 'killer app' which engages the general public and begins the transition from niche interest user to mass adoption would send the price of the coins rocketing - potentially increasing their value even more dramatically than we saw in 2013.
• Mining continues to be profitable, and is now starting to become more of an option for people who do not have powerful computers themselves, through cloud mining services (see below).
• Mainstream investors have shown a lot of interest in BITCOINS, but most have held back due to the high volatility. Any stabilization of price, if combined with continued incremental improvements in services, could trigger an increase in investors buying into the currency - driving up the price.
• If major internet retailers were to start accepting the currency for payments, then this would provide a powerful driver for increased adoption as well as increasing investor confidence. We could easily see some dramatic overnight price surges through 2014 on the back of such retailer announcements (since writing this Overstock started accepting Bitcoins, and there was indeed a small surge as a result - eBay is now considering integrating it as a payment option, which would have a much more dramatic effect).
• Emerging Market Currency Devaluation: Emerging markets such as India, Turkey and others are feeling the pinch as the US cuts its stimulus measures, leading to capital outflows from emerging markets as banks have less to invest, especially as home markets are starting to look more profitable at the same time. One of the major risks to emerging economies as a result of this is currency devaluation (inflation); this is already happening now and if it continues an increasing number of those countries' more wealthy citizens and will be looking to hold as little of their national currency as possible - and the deflationary nature of Bitcoin may well make it seem like an attractive alternative.

Cloud Mining of Bitcoin

Although buying and running your own mining hardware for Bitcoins is both expensive and fraught with technical difficulties, it is still possible for ordinary people to make money from Bitcoin mining. You can do this buy hiring space on a specialist mining computer - or hiring the whole machine - in the same way that you would hire a server for website hosting.

This is simple to do and you can estimate your profits using one of the many mining profit calculators that are available online. Some firms are claiming, based on past results, that you can break even on your initial investment in 3 months using this method.

There is a good chance that you can make a profit over the cost of the hosting using this method, but it is far from guaranteed, as your profits will depend on both the value of bitcoins themselves and on the change in mining difficulty over time.

If you can afford to pay for a year in advance, and are willing to take the risks associated with that, the Cloud Hashing looks like the most profitable option to me. If you are looking for something with a lower up-front cost then you might want to take a look at Bit Miner instead.

The Bull Case For Bitcoin in 2014

Trading Mining Shares

A slightly different take on the cloud mining concept is provided by CEX. This is basically a TRADING PLATFORM for miners and investors to buy and sell shares in mining hardware. This means that in addition to generating an income from the computing power that you control, you can also choose to offer your shares for sale at any time. This is therefore a good option if you want to invest in Bitcoin mining but would like to retain the possibility of liquidating your assets whenever you wish.

Algorithmic Trading

Like any other currency, stock, or other financial product, money can be made by judicious buying and selling BITCOINS. You can try your hand at doing this yourself, but you would need to really have some great insight into the market to have any success. But just like those other financial products, some traders have created automated systems to buy and sell based on a mathematical algorithm.

Buy and Hold Bitcoin

Many people who owned Bitcoins made a large profit last year simply by holding the coins in their wallets. This is still the easiest way to invest in the cryptocurrency phenomenon.

As I mentioned in the first section, there are many opportunities for further growth and more price surges in the coming your. This means that there remains a distinct possibility that the coins will keep in increasing in value as fast (or even faster) as they have been up till now. If that happens then simply buying and holding would prove to be a very profitable investment opportunity indeed for 2014. But of course there is also a very real possibility that the price could crash and you could lose most of your money.

If you don't mind holding your money on an exchange rather than in a wallet on your own computer then a good tip is to hold your coins in an account on a site such as Bter, which pays a small amount of interest on all deposits. If you click the link in the line above to sign up you will also get a 6 month discount of 10% of any trading fees you incur - and if you do trade in any of your Btc for alt coins they also pay interest on some of those as well.

Bitcoin Arbitrage Fund

In my opinion one of - if not the most promising opportunity to make money from Bitcoin this year is arbitrage. if you aren't familiar with the concept of arbitrage it is actually quite simple - it is when you take advantage of a disparity in prices between different markets to buy at one price and instantly sell at a profit in another market.

Today there are huge differences between the price that BITCOINS sell for on the different exchanges. Mtgox, for example, is the most popular exchange in the world and regularly has prices as high as 10% over smaller exchanges.

The wide divergence of prices means that you can get involved in arbitrage yourself just by having accounts on multiple exchanges with a balance in multiple currencies in each one - so when an opportunity arises you can simple buy and sell immediately without having to transfer funds between accounts.

The risk in doing this, of course, is that the price will change between when you buy and when you sell. This makes arbitrage highly dependent on the speed at which you are able to make transactions. Also you need to be sat in front of a screen watching price feeds constantly to find an opportunity.

Short Selling Bitcoin

Most Bitcoin investments made in the hope that the currency will increase further in value over time. But if you are one of the substantial number of people who believe that it is already over-valued and pumped up by speculators then you can try your hand at short selling Bitcoins. Short selling allows you to profit from drops in the value of a commodity in the same way that you would profit from rising prices if you bought it.

Some traditional TRADING PLATFORMS, such as Plus500, offer you the option to do this. If you own Btc then you can also use this to hedge against loss during times of particular risk.