If you are new to cryptocurrency, you’ll have probably been advised that the best starting point is Bitcoin. The reason for that is that the cryptocurrency is still the number one digital asset and the most stable. But what happens after you buy your first Bitcoin?
There are several ways you can invest with cryptocurrency, and we’ll take you through the main ones.
Buying and Holding (HODLing)
The first and easiest investment option is buying your Bitcoin and keeping it, something that is playfully misspelled as “HODLing.” The thinking behind this is that your assets will keep on growing as the Bitcoin price steadily increases. For example, if you bought Bitcoin worth $1000 in January 2015, you would have 3.177 bitcoins as the price was $314.25. In January 2020, your $1000 investment would be worth a whopping $22,836.52! Sure, the price went down in 2021, but it has continued to rise since.
The key thing will this type of investment is that you’ll need patience. Basically, buy and forget. Wait for the price to go up after months or even years, and you will then reap your rewards.
If you want to be more involved, you can do active trading. For this, you will need a crypto exchange, which is basically a marketplace where you can buy and sell various crypto assets. After creating an account with an exchange, you can use your Bitcoin to trade for other cryptos or even traditional fiat currency.
There are several types of orders here that you can place. The most common ones are market orders, limit orders, and stop orders. However, you should first ensure that you read up on how everything works and try to come up with a trading strategy.
Although it’s no longer as lucrative as it once was, you can still earn some Bitcoin through mining. Generally, this involves creating new Bitcoins, which will need you to have specialized hardware to create what is known as a mining rig. This rig will then be used to compete with other miners to try and solve the mathematical puzzles, which helps the Blockchain network validate transactions.
After assembling your mining rig, you can join a mining pool. This will let you combine your mining power with other users and therefore stand a better chance of finding a block. You’ll then share the rewards if you are successful. However, it’s important to keep in mind that mining uses a lot of power.
Bitcoin Futures and Derivatives
If you consider yourself to be a trader, you can also earn through Bitcoin futures and derivatives. This is a bit different from the regular Bitcoin investments in that you won’t need to have the Bitcoin itself. What you will need to do is speculate on how the asset is going to move in terms of the price.
When it comes to futures, you will have a contract that enables you to buy or sell when Bitcoin reaches a particular price. Here, you can also do some leveraging, which will allow you to amplify both potential gains and losses. In derivatives, you will have the option to buy or sell, but there’s no obligation.
Bitcoin Lending Platforms
If you want to earn some passive income with the Bitcoin you already hold, you can engage in lending. Yes, this is possible on the blockchain, and there are several platforms that facilitate it. They operate on a peer-to-peer model, where you can directly lend your Bitcoin to a borrower. The borrower will also deposit some digital assets that will act as collateral. Although it also has its risks, this investment option will allow you to earn interest while also benefiting from holding.