How To Make Money from Bitcoin (Part 1)

Is It Too Late to Make Money from Bitcoin this Year?

Investing in Bitcoin, a new peer to peer, decentralized digital currency, made a lot of people a hell of a lot of money in 2013. The price of a the coins rocketed from $60 to over $1000 in just a few months, although it has now fallen back down into the $900-range. Some of the people in these overnight success-stories didn't even need to buy their Bitcoins, because the coins can be 'mined' using the processing power of their own computers.

The days of becoming a Bitcoin millionaire virtually overnight with little-to-no investment have certainly passed, but that doesn't mean there isn't still money to be made.

Investing in Bitcoin is a pretty risky business, so you should only use a relatively small amount of capital that you can afford to lose entirely if things go badly. But these high risks could also come with high rewards.

You can still make money from mining coins, from buying and holding them, or from trading them on the financial markets.

Challenges Facing Bitcoin Markets

• In 2014, Mt. Gox, the most popular Bitcoin exchange, filed for bankruptcy after being hacked, losing around 850,000 coins. Since then, the market has more or less recovered, but the future of Bitcoin will depend on ensuring investors' trust and security.
• Cryptocurrency is still largely unregulated. If governments or regulatory bodies change this, they could make a big dent in the current values. We've seen this happen before, when the price dropped overnight after the Chinese government introduced trading restrictions in 2013, and could easily happen again, multiple times or on a larger scale.
• Although it has been enthusiastically adopted by geeks and speculators, the general public is yet to buy into cryptocurrency on a large scale. The ecosystem of apps and services surrounding the currency will have to demonstrate some movement towards making it more user-friendly for the not-so-technically-adept to justify its valuation.
• There is now a wide range of alternative digital currencies that compete with Bitcoin. None have proved to be a major challenge so far, but it could be in the future.

• A lot of hackers are interested in Bitcoin. Wallet-stealing is already something of a threat for owners of the currency, and the possibility of something called a '51% attack' in which members of powerful mining pool successfully 'double-spend' their coins cannot be totally discounted. A major security breach or widespread virus targeting people's digital wallets would dent confidence and send the price tumbling.

Opporutunities and Potential in 2015

• In order to engage the general public and transition from niche interest to mass usage, there needs to be a killer app. A user-friendly means of trading coins would increase demand and send the price of the coins rocketing, potentially increasing their value even more dramatically than we saw in 2013.
• Mainstream investors have shown a lot of interest in Bitcoin, but most have held back due to the market's high volatility. Any stabilization of the price, if combined with continued incremental improvements in services, could trigger an increase in investors buying into the currency, driving up the price.
• If major Internet retailers were to start accepting the currency as payments, they would drive increased adoption and investor confidence. We could easily see some dramatic overnight price surges on the back of such retailer announcements. Overstock started accepting Bitcoin in 2014, and there was indeed a small surge as a result. Bigger retailers like eBay are now considering it as a payment option, which would have a much more dramatic effect.
• Emerging markets such as India, Turkey and others are feeling the pinch as the US cuts its stimulus measures, leading to capital outflows from emerging markets as banks have less to invest, especially as home markets are starting to look more profitable. One of the major risks to emerging economies as a result is inflation (currency devaluation). This is already happening, and if it continues, those countries' wealthy citizens will want to unload local currency. For them, the deflationary nature of Bitcoin may make it seem like an attractive alte