Bitcoin is gradually becoming a must-have currency today. As a digital currency, bitcoin serves three unique purposes for investors: Bitcoin doesn’t involve third parties. Secondly, bitcoin is a value-creating unit, where the number of units gained or lost is equivalent to a gain or deduction in a person’s net worth. Thirdly, bitcoin is a value unit that facilitates the exchange of goods and services for an agreed currency value.
That said, you can strategically invest in bitcoin. This article seeks to highlight 3 distinctive strategies that can help with your bitcoin investment. (Please know that your investment outcomes, however, will depend on many other factors than just the 3 strategies listed below.)
Here are 3 avenues that can help you with your bitcoin investment, possibly increasing your capital.
Purpose-Driven Strategies For Bitcoin Investment
1. Predict the bitcoin value
It is possible to generate profit without exchanging any goods or services. To do this requires knowing the supply-demand trend in the market. By observing the market and correctly predicting the likely trend of the bitcoin, you can make an investment potentially influence the market and increase your profit. .
2. Bitcoin mining
(While it may be a form of currency, it tends to be treated as assets.)
Nonetheless, bitcoin mining is another way to increase your bitcoin investment. Bitcoin mining is where you add new blocks (bitcoin transactions) to the public ledger (database of all bitcoin transactions). You solve algorithms from your computer (competing with others to be the first to crack it). When your hardware generates the first correct answer you create a block, getting block rewards (amount you can claim for creating that block).
This stuff can get a little confusing so let’s look at it another way. Think of bitcoin mining as technological mining. Instead of using a pick axe or drill, you’re using your computer. You’re drilling through the algorithms possibilities, trying to crack the algorithm.
The thing with bitcoin miners is that every four years, the blocks will depreciate in half, meaning that if creating a block was worth 50 bitcoin, the block would then be worth 25. That way bitcoin increases value.
There are several things you should note about bitcoin mining in terms of an investment avenue:
- It is relatively expensive to set up the mining hardware and specialized software for bitcoin mining.
- Do your research and choosing the right company for you to design, launch and maintain your hardware (which is a part of the investment costs).
On the long term, the Bitcoin currency will reach 21 million Bitcoin, and then it will forever be terminated. This limit means it will increase in value and thus pose greater rewards for those who invest in mining now.
3. Taxes and location
There are two things you should know about bitcoin as unit of trade when exchanging it for goods and services. To understand this, imagine the meaning of responsible investment, where your strategy is what makes returns, and not fate. These are:
(i) Keep record of your bitcoin transactions
- Like with any investment you need to keep account of it for tax purposes. You will have to include bitcoin transactions in your tax records when filing your taxes. Bitcoin is usually regarded as an asset/assets.
(ii) Do your research
- Please note that some governments are anti-bitcoin (Russia happens to be very anti-bitcoin). This means that activities such as bitcoin mining is probably going to be illegal. Make sure you understand your government’s bitcoin policies when considering to invest in bitcoin. For the most part, North America and Western Europe consider bitcoin mining legal.
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