Lately, we’ve been hearing a lot about this thing called Bitcoin. Through all the jargon and nonsense, one thing that keeps standing out is the fact that Bitcoin can make you rich.
At least, that’s what people are saying. Sure, some have made money from Bitcoin, but there are others who haven’t.
So what is the truth?
Can you get rich from Bitcoin? That would be a dream. But first, you need to know the realities of this cryptocurrency before rushing off to invest.
What Is Bitcoin?
Bitcoin was created in 2009 and is a form of cryptocurrency.
You know how when you buy things using dollars, the purchases can generally be traced back to you. Cryptocurrency solves that problem.
When you purchase things, typically online, using cryptocurrency, it’s secure enough for the purchase not to be traced back to who is selling or who is buying.
Therefore, cryptocurrency is very popular in the trading underworld.
Bitcoin is an online currency and is not usually accepted in typical businesses.
However, because of its boom in popularity, some major companies have also started to accept the use of Bitcoin for stocks and other purchases. Some of these companies are Burger King, Subway, and Twitch.
Microsoft even accepts Bitcoin to top up your account.
How Do You Make Money From It?
As Bitcoin is a form of currency, you make money from it by buying it and then selling it. But it’s not as simple as that.
Buying and selling currency just like that isn’t going to make you much money.
What happens in currency trading is that you typically buy a currency when it has a low value, and sell it at a higher value.
For example, say $1 is the same as having £0.74. A currency trader would buy the £0.74 using their dollar. Then they wait until the exchange rate goes up.
For example, $1 is now equal to £1.50, and then they sell. That’s a profit of about 84p. That’s how currency trading works, now let’s look at Bitcoin.
The principal is pretty much the same. You buy Bitcoin then sell them when their value goes up and make a profit.
There’s also another way to make money using Bitcoin and that’s called ‘mining’.
Mining is when you don’t actually buy Bitcoin, but you create new Bitcoin. This is a very complex process and probably best left to the very tech savvy.
What happens is that your computer solves computational puzzles to create the Bitcoin. Mining uses very complex machines for speeding up the process.
Sometimes it can be long and loud, and you’re at risk of overheating your machine.
Can It Make You Rich?
Alright, now it’s time for the interesting part. You can make money from Bitcoin, just like you can make money from currency trading. But will it make you filthy rich?
If you’ve ever tried to buy Bitcoin, then you’re aware of just how expensive it is. 1 Bitcoin has a value of over tens of thousands of dollars.
In case you didn’t know, that’s an insane exchange rate. Almost unheard of.
Bitcoin wasn’t always worth that much. When it first came out, 1 Bitcoin was the equivalent of a mere $0.0008.
That’s more than a 3000% increase. So how did it jump from less than a cent to enough money to buy a house? That happened in 2011.
In 2011 the value of Bitcoin jumped, and then jumped again, and then kept ongoing. It’s the people who bought Bitcoin pre-jump that turned into overnight millionaires.
The jump was so unexpected that no one quite knew what to do. If people had known, they would have invested before.
But that’s the thing about currency trading and exchange rates, they’re very tough to predict.
If you want to make money from Bitcoin, you have to be good at predicting its value tomorrow.
People thought that Bitcoin was only going to get more and more expensive. But remember that thing about unpredictability?
In 2017 Bitcoin came crashing down from $20,000 in value to about $12,000. It’s still a lot of value, but if you think of it in terms of losing $8,000 then it’s a heck of a lot of money to waste.
This was down to the fact that loads of investors were buying more and more Bitcoin and creating a huge financial bubble, which obviously burst hard when they sold the Bitcoin and flooded the market.
This actually happens fairly often in currency trading.
And it wasn’t the only time Bitcoin has crashed. In fact, the value of Bitcoin isn’t very secure.
Elon Musk was able to bring the price of Bitcoin down with a single tweet of dismay about the currency.
The ideal environment to become filthy rich from Bitcoin is during another boom. But as we said, currencies and their value are very unpredictable.
And the reason Bitcoin crashed in the first place, and boomed, was because of a flood of people buying it and selling it.
So all it would take for another crash or boom to happen would be a rise in popularity again. But that’s easier said than done.
Final Thoughts
Some would argue that Bitcoin has reached saturation. It’s as popular as it’s ever going to be, and it’s also way too expensive to buy.
This means any kind of profit you make would be very little.
To make a decent amount, you would have to invest a lot of money and time into trading, and the outcome is never guaranteed.
So, while you can become rich from Bitcoin, the likelihood of that happening is very dependent on the stability of Bitcoin.
Since 2011, Bitcoin has also seen a rise in competitive cryptocurrencies. Ethereum, Bitcoin’s biggest competitor, is fast catching up with Bitcoin and is now the 2nd largest cryptocurrency.
This is going to make it a lot harder to get rich quick from Bitcoin. Sorry about that.
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