Bitcoin (BTC) will be more difficult to profit from in 2022 than it has ever been. Following the Bitcoin crash, prices have decreased. The offer of free bitcoin is often a ruse. Because of the severe competition, bitcoin mining, which was originally open to ordinary investors, is seldom viable for people in tiny setups.

Nonetheless, bitcoins may be used to make money. Let's see what they are.

Keeping Bitcoins

Difficulty: Low.

Returns: Vary based on investment amount and market volatility. During the most recent bull market in 2021 llgo, bitcoin prices more than doubled.

As long as you sell bitcoin for more than you paid for it, purchasing and holding it as a long-term investment, or as some crypto aficionados call it, HODLing, might be a low point - a difficult method to generate money in the long run. It's possible to expect bitcoin to ultimately reach values comparable to the all-time high of $65,000 per token.

While many investors today see bitcoin as a long-term investment, it was initially intended as a cryptocurrency for daily transactions. That perception, however, has shifted as its value has increased. As with any investment, holding for a longer length of time requires the ability to tolerate price changes without feeling compelled to purchase or sell. If you decide to acquire and keep bitcoin, be sure you are not overexposed to any one asset and that you are not investing in what you cannot afford to lose. As a general guideline, invest no more than 10% of your portfolio to risky assets such as bitcoin.

Use a credit card that offers bitcoin incentives.

Difficulty: Low.

Payback: For certain costs, 5% or less per dollar, and 1% for all other purchases.

There are several bitcoin credit cards available that enable you to earn cryptocurrency rewards. Similar to standard cash back schemes, you may earn a tiny percentage of purchases made with the card and be reimbursed in bitcoin or other cryptocurrencies. Some businesses provide sign-up incentives that might provide you with extra perks if you satisfy certain criteria.

Keep in mind that the provider's transaction charges or spreads may lower your bitcoin returns. While the issuer of a crypto credit card adds a spread to the rewards, that implies you'll get a little lower exchange rate when earning and selling these crypto rewards. The spread is the difference in pricing between the market and the exchange rate supplied by a certain platform.

Bitcoin lending

Difficulty level: medium.

Payback: 5% annual percentage rate or less.

If you already have any bitcoins, you may earn money on them by lending them to other investors or institutions. On services like as Gemini and Cake DeFi, users may borrow part of their bitcoin for up to 5% APY.

However, lending rules vary per location. For example, if the borrower to whom you lend defaults, you may lose part or all of your investment as a result of Cake DeFi and Gemini Earn (Gemini's interest-bearing scheme).

Furthermore, being a relatively new market, crypto financing is riddled with danger and uncertainty. Since this year, some sites have ceased providing loan services.

Accepting bitcoin tips or payments

Difficulty level: medium.

The amount of bitcoin payments and price fluctuations are also factors.

Consider enabling consumers to pay in bitcoin if you take payments or tips for a side hustle or company. This may be accomplished by utilizing a site that provides processing services, such as Coinbase or BitPay.

While it is not difficult to get started, dealing with the tax consequences and hazards of taking bitcoin payments might be more complicated. A self-managed Coinbase account may be opened right now. While BitPay may take a few days to process, it enables you to accept a wide range of cryptocurrencies.

If you want to reach out to bitcoin users, make sure you choose a solution that allows you to accept bitcoin payments. While BitPay and Coinbase enable it, certain processors will only take fiat cash as payment.

Bitcoin Day Trading

Difficulty level: Difficult.

Returns: Variable based on investment size, transactions, and price volatility.

It is theoretically feasible to profit by buying and selling bitcoins quickly and altering your position depending on market movements. However, much like day trading in stocks, you are more likely to lose money this way.

Stock day traders employ macroeconomic and microeconomic data, market patterns stretching back to the start of the stock market, and other tools to make informed judgments about which stocks to purchase or sell. Even yet, these aggressive traders struggle to match the returns they might earn by, say, purchasing and keeping low-cost funds that track broad market indexes.

Investors know considerably less about how bitcoin performs in different economic environments, making projecting price fluctuations even more challenging. For example,1 the price of bitcoin hit $47,000 in early 2022, whereas it now trades at little more than $19,000 per coin as of September. Furthermore, trading bitcoins on a regular basis during tax season may quickly turn into a nightmare. You must exercise caution in keeping track of what you are purchasing and selling, as well as the different price ranges involved. Before you begin trading cryptocurrencies on a regular basis, consult with your accountant to ensure you understand what you're tracking.

What about bitcoin mining?

Individual investors should avoid bitcoin mining since it is not a profitable method to generate money with bitcoin. Because of the required computational power, the initial and continuing expenditures may be significantly more lucrative than mining.

Because the Bitcoin blockchain is controlled by a proof-of-work consensus mechanism, miners are responsible for fulfilling the important duty of validating transactions in order to ensure network security. New blocks of transactions are added to the ledger every 10 minutes. Miners that validate new blocks get 6.25 bitcoins, or around $122,000 at current exchange rates. Transaction fees, which are paid by users who wish to process transactions quickly and are another source of money for miners, may add up to $4,000 in incentives to each block.

However, in order to receive bitcoin rewards for validating transaction blocks, you must use a powerful computer known as an ASIC (or Application Specific Integrated Circuit), which may cost up to almost $10,000. You will also need to spend thousands of dollars on electricity to compete with other miners, and there is no assurance of profit.

There are bitcoin mining pools where investors may pool their processing power and share profits. However, there is no easier setup. Users of a mining pool must pay a charge, and the bigger the pool, the less the payout.