How to make money with Bitcoin in 2022

Making money with Bitcoin (BTC) has become increasingly difficult in 2022. Prices have fallen after a crypto crash. Promises of free Bitcoin are often scams. Bitcoin mining, once available to individual investors, is now so competitive that it is rarely a profitable venture for those with small setups.

However, it is still possible to make money with it Bitcoin. You can trade it, lend it, keep it or earn it. Returns are not guaranteed on this volatile asset; just as you can make money when the price goes up, it is also possible that you can lose money if the price goes down. But Bitcoin’s growth since its launch has some crypto investors optimistic about the future: In 2010, 1 Bitcoin was worth about 9 cents, and now each coin is worth somewhere in the neighborhood of $19,000.

Return: Depends on the size of the investment and price changes. In its last bull run in 2021, Bitcoin prices more than doubled.

Buying and holding Bitcoin as a long-term investment – or, as some crypto enthusiasts call it, HODLing — can be a low-stakes way to make money in the long run, as long as the price when you finally sell it is higher than the price you bought it for. Historically, the price of Bitcoin has reached as high as $65,000 per coin, so it is reasonable to imagine that it could reach a similar figure in the future.

Bitcoin was originally conceived as a cryptocurrency that could be used for daily transactions, but as its value increased, many investors have begun to view Bitcoin as a long-term investment. As with any investment, holding for the long term means that you have to endure the ups and downs in prices without being tempted to buy or sell. If you choose to buy and hold Bitcoin, you want to make sure that you are not overexposed to any asset and that you are not investing money that you cannot afford to lose. A guideline is to invest no more than 10% of your portfolio in risky assets like Bitcoin.

Return: Typically 5% or less per dollar spent on certain categories and 1% on all other purchases.

There are many crypto credit cards that allow you to earn rewards in cryptocurrency. Like traditional cash-back programs, you can earn a small percentage of the purchases you make with the card, which can be paid out in Bitcoin or other cryptocurrencies. Some offer sign-up bonuses that allow you to earn more rewards if you meet certain criteria.

Keep in mind that your crypto rewards may be reduced by transaction fees or a spread added by the provider. A spread is the difference between the market price and the rate given by a particular platform; when a crypto credit card issuer has one that applies to rewards, it means you get a slightly less favorable exchange rate when you both earn and sell those crypto rewards.

If you already own some Bitcoin, you can earn interest on your holdings by lending to other investors or institutions. Platforms like The twins and Cake DeFi allows users to lend out portions of Bitcoin at interest rates as high as 5% APY.

However, each platform has requirements for lending. For example, with both Gemini Earn, Gemini’s interest-earning program and Cake DeFi, you can lose part or all of your investment if the borrower you lend to defaults.

Cryptolending is also a relatively new category and entails high risk and uncertainty. In particular, several platforms have stopped offering lending services this year:

• Celsius, one of the largest crypto lending platforms, froze withdrawals in June 2022 in the wake of a crypto crash and later filed for bankruptcy.

• BlockFi stopped offering its lending product in compliance with an order from the US Securities and Exchange Commission, which accused the company of failing to register offers and sales for its crypto lending product.

• Nexo, a crypto platform that offered a lending product, is being sued by several states for deceptive marketing and voluntarily stopped offering its product to new customers in the US

Return: Depends on the amount of payments in Bitcoin and price movement.

If you accept payments or tips for side gigs or a business, consider giving people the option to do so pay with Bitcoin. You can do this with platforms with processing services such as Coinbase or BitPay.

The setup is relatively simple, although navigating the tax implications and risks associated with accepting Bitcoin payments can be more complicated. Coinbase’s self-managed account can be set up instantly. BitPay takes a few days to be approved, but allows you to accept multiple cryptocurrencies.

Something to keep in mind: If your goal is to have exposure to Bitcoin, be sure to use a service that allows you to accept money in Bitcoin. While BitPay and Coinbase allow you to receive funds this way, some processors only allow you to accept funds in fiat money.

Return: Depends on the size of the investment, trades and price changes.

It is technically possible to make money by buying and selling Bitcoin within short windows, moving in and out of positions as the market changes. But like day trading stocks, you are far more likely to lose money this way.

Stock day traders use macroeconomic and microeconomic data, market trends dating back to the beginning of the stock market, and other tools at their disposal to make educated guesses about which stocks to buy or sell. And still, these active traders struggle to match the returns that can come from buying and holding, say, low-cost mutual funds that track a broad market index.

Investors have far less data on the behavior of Bitcoin under certain economic conditions, so it can be even more difficult to predict its price movements. For example, at the beginning of 2022, the price of 1 Bitcoin was over $47,000, and as of September, it is trading at just over $19,000 per coin. Additionally, trading cryptocurrency on a regular basis can quickly turn into a tax season nightmare. You must be careful to keep track of what you have bought and sold and the different price points involved. If you’re thinking about becoming a frequent cryptocurrency trader, it’s a good idea to talk to your accountant and make sure you know what to keep track of before you start.

Some volatility is necessary to make money through day trading; prices must move up or down for a trader to make a profit. But Bitcoin and crypto are more volatile than other assets, making an already deceptively difficult notion like “buy low and sell high” even more of a challenge. If you intend to try this, start small and be careful.

Bitcoin mining can be a lucrative way to make money with Bitcoin, but not for individual investors. Due to the computing power required, the upfront and ongoing costs can far exceed mining rewards earned.

Bitcoin’s blockchain operates using a proof-of-work consensus mechanism, which means miners perform the essential task of validating transactions to keep the network secure. New blocks of transactions are added to the ledger once every 10 minutes, and the miner who validates a new block is rewarded with 6.25 Bitcoins, which is roughly $122,000 based on recent prices. Miners also earn transaction fees paid by users who want to have their transactions validated faster, which can add around $4,000 to the reward for each block.

But to have a chance of earning a Bitcoin reward for validating a block of transactions, you need a powerful computer known as an ASIC (or application-specific integrated circuit), and these can cost upwards of $10,000. You’ll also need to spend thousands on electricity to compete with other miners, and earnings are not guaranteed.

There are mining pools where investors can pool computing resources and share rewards for mining Bitcoin. But the setup is not simpler. Pools charge fees for their users, and the larger the pool, the smaller the reward.