How To Make Money from Bitcoin (Part 2)

Cloud Mining and Hashing

Although buying and running your own mining hardware for coins is both expensive and fraught with technical difficulties, it is still possible for ordinary people to make money by mining.

One easy way to mine is to hire space on a specialist mining computer—or a whole machine—in the same way that you would hire a server for website hosting. By doing this, you can estimate your profits using one of the many mining-profit calculators available online. Some firms claim, based on past results, that you can break even on your initial investment in three months using this method.

A slightly different take on the cloud mining concept is provided by CEX, which is basically a trading platform for miners and investors to buy and sell shares in mining hardware. In addition to generating income from the computing power that you control, you can also choose to offer your shares for sale at any time. This is a good option if you want to invest in Bitcoin mining but would like to retain the possibility of liquidating your assets whenever you like.

While there is a good chance you can make a profit over the cost of the hosting, success is not guaranteed. Your profits will depend on both the value of the coins themselves and on the changes in mining difficulty over time.

Algorithmic Trading

Like any currency, stock or other financial product, money can be made by judiciously buying and selling bitcoins. You can try doing this yourself, but you need to have incredible insight into the market to have any success. Just like those other financial products, however, some traders have created automated systems to buy and sell bitcoins based on a mathematical algorithm.

Buy and Hold Bitcoin

Many people who owned bitcoins made a large profit last year simply by holding coins in their wallets. This is still the easiest way to invest in the cryptocurrency phenomenon.

As I mentioned in the first section, there are many opportunities for growth and price surges in the coming year. This means that there's still a possibility that the coins will keep in increasing in value as fast as they have been up until now, if not faster. If that happens, then simply buying and holding would prove to be a very profitable investment opportunity. Of course, there is also a very real possibility that the price could crash and you could lose most of your money.

If you don't mind holding your money on an exchange rather than in a wallet on your own computer, then hold your coins in an account on a site such as Bter,which pays a small amount of interest on all deposits.