How to Make Money with Bitcoin [Guide]

Millions of people globally have invested in bitcoin due to both its potential as a financial investment and long term store of value. Over the years, as new retail investors enter the market, one of the most common questions they typically ask is how to make money with bitcoin.

This article answers this question and explores strategies for maximizing one’s bitcoin holdings and ensuring secure storage while highlighting the key differences between long-term holding (HODLing) and day trading. It also examines the psychological challenges of day trading, where emotions like fear and greed can lead to impulsive investment decisions.

Bitcoin’s Long-Term Potential

One of the most popular ways to make money with Bitcoin is through long-term investment. Bitcoin has been referred to as "digital gold" because, like gold, its supply is limited.

There will only ever be 21 million bitcoin, which makes it inherently scarce and therefore, disinflationary. This scarcity, combined with increasing adoption, gives bitcoin long-term growth potential.

Many investors view bitcoin as a hedge against monetary devaluation and economic instability. By holding bitcoin long-term, investors hope to benefit from its increasing demand and limited supply.

Internet Adoption Rate vs. Bitcoin Price

Source: Fxstreet

The Power of the "Buy and Hodl" Strategy

The "Buy and Hodl" strategy is simple: buy bitcoin and hold it for an extended period of time. This approach has historically been one of the most effective ways to maximize one’s Bitcoin holdings. Early adopters who bought bitcoin when it was worth just a few dollars and refused to sell have seen their portfolio value skyrocket.

The key to this strategy is patience and belief in bitcoin’s long-term potential. While the price of bitcoin can be volatile in the short term, its long-term trajectory has been one of consistent growth, making it an attractive option for those willing to wait.

Logarithmic Chart of Bitcoin’s Price Over the Years

Source: Man

The Risks of Day Trading Bitcoin

While appealing to those seeking quick returns, day trading presents substantial risks that may outweigh the potential rewards. Bitcoin’s notorious price volatility, while creating profit opportunities, can just as easily result in significant losses, especially for traders who lack deep market experience or fail to respond quickly to sudden shifts.

Unlike traditional markets with set trading hours, Bitcoin operates 24/7. This means that price fluctuations can occur at any moment, even outside typical trading windows. Traders may find it difficult to react in real-time to unexpected market movements, which can lead to missed opportunities or amplified losses.

Additionally, day trading requires constant attention, technical skills, and emotional discipline—factors that make it a challenging and stressful endeavor. Without these qualities, traders are more likely to make poor decisions, chase trends or react impulsively, which can erode their capital.

In contrast to long-term holding strategies, which historically reward patience, day trading exposes individuals to a greater risk of financial loss with no guarantees of success. For most, the high risk and potential stress make it an unwise choice.

Bitcoin: Realized Loss [USD] 7-Day Moving Average Snapshot 2022

Source: Beinc

How to Safely Buy and Store Bitcoin

To safely buy and store bitcoin, begin by selecting a reputable exchange or peer-to-peer platform with strong security measures. Once you’ve purchased bitcoin, transfer it immediately to a personal wallet to maintain control over your private keys, as leaving your funds on an exchange exposes them to potential hacking risks.

For short-term transactions or frequent access, software wallets are convenient, but they do come with higher risks due to their online connection.

For long-term storage and maximum security, cold storage is the best option. Hardware wallets, such as Coldcard or Blockstream Jade, keep your private keys offline, minimizing the risk of cyberattacks.

Cold storage methods, which include hardware and paper wallets, are specifically designed to protect Bitcoin's private keys from online threats.

Additionally, always backup your wallet’s recovery phrase and store it offline in a secure location to ensure that funds can be recovered if needed. Cold storage remains the gold standard for securing bitcoin over the long term.

Patience and Emotional Discipline

Profiting from Bitcoin is not solely dependent on the strategy employed but also on the investor's mindset. Patience plays a pivotal role in successful bitcoin investment, as many make the common error of selling during market downturns out of fear, only to witness the price rebound later.

Maintaining emotional discipline is crucial, particularly in a volatile market like Bitcoin. Adopting a long-term perspective enables investors to avoid making impulsive decisions driven by short-term price fluctuations.

Those who succeed in bitcoin investments understand the importance of holding through both market highs and lows, keeping their focus on long-term objectives rather than reacting to temporary market conditions.

Bitcoin’s Supply Schedule

Source: Grayscale

Conclusion

To answer the question of how to make money with Bitcoin, there are several approaches, each with varying levels of risk and reward. Long-term investment is one common strategy, where individuals buy and hold bitcoin. This approach benefits from bitcoin’s historical growth and potential as a store of value. 

The other strategy, day trading bitcoin, can be highly risky and is generally not recommended for most individuals. The Bitcoin market is extremely volatile, and day trading requires significant experience, constant monitoring, and quick decision-making. Many traders often lose money due to emotional reactions or sudden price swings, making this approach far less reliable than long-term investing.