NEW ZEALAND – Guest Writer –The fifth in the series of “How to Bitcoin” articles introducing you to Bitcoin and what you can do with the cryptocurrency. Here is an overview of how to make money with BTC.
Buying and Selling
A way to make money is to buy BTC/alt-coins at a low value and to sell at a higher value on an Exchange. Selling BTC as mentioned above can be done in any currency. Most large Exchanges allow users to trade back to US dollars.
Another method would be to buy BTC on one Exchange and to transfer that BTC to a different Exchange and take advantage on that Exchanges BTC rate, as it might be higher. For example, Bitstamp Exchange may be US$15650 and Bitfinex Exchange BTC rate might be US$15700.
The only considerations would be how long would it take for the BTC to confirm (example 10 mins or maybe 1 hour) as the market value would change over time.
Another consideration would be how much BTC you were buying or selling, as this would affect the value of BTC on that Exchange. This as a medium-high skill level transferring any cryptocurrency to other Exchanges unless you were familiar with confirmation time’s – if it were time critical.
Buying and selling of altcoins is a quick way to make a profit. Using BTC to purchase other alt-coins on Exchanges is a great way to diversify. Most people buy and sell alt-coins to make a profit. You will receive greater rewards with this method of trading rather than just trading or holding BTC. The level rating would range from easy-hard skill-level depending on your ability to analyse charts or depth of researched coins.
The three main points to take from this are:
- Buy and sell on an Exchange
- Buy on one Exchange and sell on a different Exchange (arbitrage)
- Buy and sell altcoins
Betting the price of BTC and altcoins will fall
Some Exchanges also offer the ability to trade with BTC falling (and other alt-coins) by trading ‘long’ or ‘shorting’ against BTC. This allows you to bet that if BTC (or other alt-coins) price is going to fall and you still make a profit.
The markets that allow you to trade provide this very powerful tool that can make great profits and losses quickly. When trading in these ‘margin trading’ accounts you are often allowed to borrow up to 2-5 times the amount you have to spend. For an example, Poloniex.com offers 2.5 X the amount. This type of trading is what they do in the share-market when someone ‘long or shorts’ shares.
It is very important to understand when trading in this market you are not actually buying coins. You are entering a contract to buy back or to sell at the end of a period that you control. Using this market is very easy to do so, and if you know how to buy and sell on Exchanges then you already know how to margin trade as the graphic user interface looks the same.
- The ability to make profit with price of BTC falling (and alt-coins)
- The ability to leverage
Buying and selling on Exchanges can be done manually where people watch the markets live and sell BTC at a higher price or can be done automatically with software called ‘Bots’. Different bots will have different reputations based on how easy it is programmed or what different variables can be programmed into it.
Bots can run 24 hours a day, 7 days a week, 365 days a year without interruption. Bots can be programmed with certain values that are inputted by the owner and will run on an Exchange. The software will automatically buy and sell BTC hopefully at a profit. The most common software Bot is available at https://www.haasonline.com. However, there are different Bots available that can be programmed. The points to be considered are:
- BTC bought or sold manually
- BTC bought or sold automatically
- Sophistication of the Bot
A high skill level is needed to set-up a Bot and to link the software to an Exchange so please consider this before setting up. I would not recommend this step unless you were advanced, not just with coding but financial formulas and how to apply them.
Another method for a company to make money would be to use BTC/altcoins to reduce company expenses as fees are often cheaper than money transfers or traditional banking methods. With the recent increase in BTC fees, other cryptocurrency transfers are an alternative.
Not only are fees involved but the time taken for International transfer of money may take up to days for it be available in bank accounts. The transferring of BTC is almost instant. See transaction fees
As each country views cryptocurrency differently and is regulated or not, this would change the tax perspective. For example, BTC in New Zealand is not regulated and not seen as legal currency and is not subjected to tax. This would mean any profits you would make trading with cryptocurrency is tax-free and do not need to be reported.
Some countries are in the process of formulating their guidelines – it is wise to research your country’s tax position.
- Reduce bank fees
- International transfers are almost instant (and costs less)
- No Tax for some countries
The reason for the complex issues surrounding law with BTC is the ability to monitor transactions and the freedom of transferring funds. It would take a lot of money for a government to set up an organisation for such operations
Some Exchanges and businesses lend your BTC to other people. The lending rate can vary up to or exceed 10%. Services will lend your BTC to others. There are many other businesses that can do so, but the business reputation for each of these sites needs to be investigated as legitimate businesses and the risk of lending BTC.
A word of warning though, recently, due to regulation many loan platforms are shutting down. in 2017, a popular loan platform announced on their website:
“BTCJam began with one mission: To provide people around the world with access to fair credit.
In the past four years, we have serviced more than 20,600 loans in 122 countries, totaling more than 64,000 Bitcoin loaned. We have helped thousands of people around the world and are proud that we changed lives for the better.
We firmly believe that programmatic money and cryptocurrencies are here to stay and that there is still room for innovation in this space. That said, we have made the difficult decision to close BTCJam. The regulatory challenges around Bitcoin and the difficulties we faced in introducing Bitcoin technology to poor communities around the world are simply beyond our capacity.”
There are other platforms that can lend BTC on your behalf including Exchanges. The Exchanges lock the BTC within their website not allowing people to run away with your BTC.
People borrow BTC by Margin Trading where they can borrow more BTC than they have and can trade with or against BTC/altcoins. When someone borrows BTC to trade (which is automatic) they will automatically borrow from someone who is lending.
You can set your own lending rate (paid daily) and the duration of time. Poloniex.com as an example offers this and their rates can exceed 75% returns, at times. Poloniex does take a 15% fee from your profit, however, the returns can be very good.
- Lending BTC at an interest rate
- Business/Exchange reputation to be considered
Lending could see the growth of your investments and once set-up little input is required.
The ecosystem around BTC continues to grow as start-up businesses emerge. Wallet providers, mobile apps, hardware devices, smartphones, exchanges, mining pools and even blockchain/crypto banks have and are being developed. BTC mining overview is covered separately. With increasing innovation and improving technology, the Digital Economy is growing at a rapid pace. This gives an enormous opportunity for entrepreneurs to develop or even existing businesses to integrate BTC or other utility altcoins.
- New Business Opportunities in the Digital Economy
- Entrepreneurial abilities emerging
- Less reliant on the price movement of BTC
Do you have a good idea?
Jobs and Career
As mentioned under Building Businesses, this dynamic market is creating many job opportunities for people with the matching skills set. As this area is developing very rapidly, there is a huge skills shortage leaving a gap in the market for anyone wishing to pursue a career in the Digital Economy. Some Universities and colleges have started courses, and the number of these will surely increase over time. People with the correct skills set are commanding high salaries or they are building businesses. As an example, one of the programmers on the BTC team co-founded Ethereum, the second largest crypto in terms of market cap. Vitalik Buterin, a 19-year-old programmer from Toronto, came up with this new platform in an effort to transform the internet entirely.
- New job offers listed daily on job seekers websites
- Change of career direction possible
- Education in this field increasing
Conclusion: Do not be left behind – the Digital Economy is booming and yet it has only just begun. Now is the time to get involved, however, small your start. Starting is the operative word!
More in the “How to Bitcoin” series:-
Electronically Processing BTC- Mining
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