Is It Better To Invest Or Trade Bitcoin?

Learn how to trade and invest in Bitcoin

Last Updated January 11th 2022
22 Min Read

Is Bitcoin a good investment and, if so, how much should you invest in Bitcoin?

If you know how to invest in cryptocurrency and you expect the price of Bitcoin to rise, investing in Bitcoin could be a profitable venture. It sounds easy enough. Buy Bitcoin, wait for the price to increase and sell your Bitcoin.

But is investing in Bitcoin (BTC) so easy? Is it better to invest or trade Bitcoin, and is trading Bitcoin profitable?

Bitcoin is the #1 cryptocurrency by market cap. The cap on the number of BTC is 21 million, and, currently, there are 18 million BTC in circulation. In theory, the investing or trading rule is that supply and demand dictate the market price.

Remember when the first rumbles of the Covid-19 pandemic began. Here is a classic example of supply and demand. Toilet rolls were in short supply. The public panic purchased, which meant that the supply of toilet rolls diminished further. The price of toilet rolls consequently doubled, tripled, or quadrupled in the shops.

With only two million BTC remaining, will the demand for Bitcoin increase? Is Bitcoin a commodity, or has it become a vehicle for investors and traders to make money? Because compared to third-generation cryptocurrencies, the utility of Bitcoin is ineffective. The blockchain still uses proof of work (PoW) consensus, which is expensive, slow, and a massive drain on the earth's resources.

Bitcoin miners can no longer mine Bitcoin on a home PC. The increased complexity of solving the hash problem has created demands for superior computing power, such as ASICS, which can cost upwards of $1000 to $10,000.

The running costs of a Bitcoin mining rig are prohibitive. With the difficulty of solving the hash problem, now in the trillions, the large Bitcoin centres have the edge because they can afford the necessary computer power.

The rewards for mining Bitcoin halves every four years. In May 2020, the rewards split from 12.5 to 6.25, and in 2024, it will halve again.

At today's price, let's look at how halving affects Bitcoin miners:

12.5 x $41k = $520,000.

6.25 x  $41k = $260,000.

Halving isn't a problem as long as the price of Bitcoin increases. But, when the price of Bitcoin drops, Bitcoin mining rewards become less viable. Electricity expenses keep increasing, and there is no guarantee of rewards.

It currently costs between $7,000 to $11,000 to mine one block of Bitcoin.

Those with vast computing power stand the best chance of reaping Bitcoin rewards because they can solve the hash problem faster.

Why does it matter how useful Bitcoin is or how difficult it is to gain rewards from mining Bitcoin. How does Bitcoin halving affect investors and Bitcoin traders?

Because, at some point, these factors may create issues for Bitcoin. The impact on the environment, for instance, could be problematic as governments ramp up global warming regulations. Rising electricity costs could force independent Bitcoin miners out of the game.

And, finally, next-generation cryptocurrencies could outperform Bitcoin. Already, there are cryptocurrencies on the market with far greater function and utility than Bitcoin.

We're not scrapping the idea of trading or investing in Bitcoin. But, if you are serious about making money from Bitcoin, you mustn't be blindsided by fear and greed or FOMO. Investing in Bitcoin or trading Bitcoin requires a rational approach to the crypto markets.

This guide will show how to trade Bitcoin for a profit. You will find out if investing in Bitcoin is profitable and if Bitcoin is a good investment for beginners. We'll look at the Bitcoin chart to see what is happening with Bitcoin right now. And we'll take a glimpse into the future to assess the price of Bitcoin in 2025 and 2030.

If you want to invest in Bitcoin quickly and easily, check out eToro!

 

Contents

How to Invest in Bitcoin and Make Money

The principles of investing in Bitcoin seem easy. You buy Bitcoin at a price you think is reasonable, and you sell your Bitcoin at a price at which you are happy.

But is investing in Bitcoin easy? If so, how come so many people lose money when they invest in Bitcoin?

The truth is that investing in Bitcoin takes a specific mental approach.

You can't randomly buy Bitcoin one day, expecting to make huge profits in five minutes. You will get the same negative results if you do what all the other novice Bitcoin investors do.

To help you get started investing in Bitcoin, check out the below pre-investing list for Bitcoin.

  • What do I know about investing? – if you know nothing about investing, it might be worth doing some investment study. Bitcoin is volatile, and nobody knows what might happen next for Bitcoin. You could buy Bitcoin and see your investment halved in a few weeks. If you aren't mentally prepared for such outcomes, you may make poor investment decisions that you later come to regret.
  • What do I know about Bitcoin? – in the opening paragraphs of this guide, we went into some detail about Bitcoin. There is a plethora of information online, so you don't have to take our word for it. Learn as much as you can about Bitcoin before investing in Bitcoin
  • Should I invest in Bitcoin? – ask yourself why you want to invest in Bitcoin. If your sole reason is to make money, dig deeper into whether investing in Bitcoin is the best way to make money. Bitcoin sprang into the public domain in 2017 when the price reached almost $20k. Bitcoin has created many millionaires. But for every millionaire, there are undoubtedly several hundred thousand investors who lost every penny they sunk into Bitcoin.
  • Are there better cryptos to invest in than Bitcoin? – the true answer is yes, probably, because emerging cryptos have vastly superior utility than Bitcoin. Some cryptos may improve mainframe infrastructure, and you can buy cryptos for a few dollars. One of these cryptocurrencies could be the next Bitcoin. 
  • How much can I afford to invest in Bitcoin? – you don't have to invest $45k in Bitcoin. You can buy smaller denominations of Bitcoin. For instance, you could put $5,000 into your Bitcoin investment. Only invest what you can comfortably afford to lose.
  • What is my long-term plan for investing in Bitcoin? – before purchasing Bitcoin, you must have a plan for your exit point. Decide how long you want to hold your Bitcoin or what price you want to sell your Bitcoin. Determine these factors from the offset, and you won't make panic decisions if something dramatic happens to the price of Bitcoin.
  • What is my risk tolerance? – the level of your risk tolerance depends on several factors, such as how much money you invest in Bitcoin. If you are uncomfortable watching your Bitcoin investment falling, you have, as they say, too much skin in the game.
    For instance, say you earn $50k a year and have $10k in your savings account. Your monthly expenditure leaves you with $1,200 spare. You decide to put your $10k savings into Bitcoin. Three months down the line, you lose your job. Meantime, your Bitcoin holdings have dropped to $5,500. What do you do? Like most novice investors, you decide to sell your Bitcoin for a loss because you need the money.
    A month later, Bitcoin shoots up to $30k, and you get a new job. Imagine how this would make you feel. Think hard before investing in Bitcoin because you may have many price peaks and troughs to sit through.
  • Where will I store my Bitcoin? – don't leave your Bitcoin holdings on an open crypto exchange. Choose a secure Bitcoin wallet and transfer your purchase immediately. Keep a safe note of your wallet key and set up 2F factor authorisation to help prevent hacking.

In 2018, novice investors sold off Bitcoin in droves, cutting their losses and vowing never to rebuy Bitcoin. The uneducated investor fails to understand the crypto market because crypto prices go up and down and sometimes dramatically. The price never stays down, nor does it stay up. It's like watching the waves of the ocean.

Familiarise yourself with how investing in cryptocurrency works. Study the Bitcoin charts and learn what affects the price of Bitcoin. It's tempting to jump into the Bitcoin market when it looks like the price is rising. But, mostly, that's the worst time to buy Bitcoin.

Learn how to invest in cryptocurrency so you can know if Bitcoin is a good investment for 2021. If you want to know how to invest in Bitcoin and make money, investment education gives you the knowledge needed for profiting from Bitcoin investing.

Read Also: Pros and Cons of Investing in Bitcoin

buy bitcoin

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

What Moves the Price of Bitcoin?

Three main factors drive the price of Bitcoin

  1. Supply and demand –  when supply diminishes, demand increases and prices rise
  2. How much it costs to mine a Bitcoin – as detailed above, the costs of mining Bitcoin are constantly increasing. The energy demands of Proof of Work (PoW) Bitcoin mining are colossal
  3. Media coverage – cryptocurrencies are sensitive to Media coverage. For instance, in 2021 Elon Musk made a statement announcing a ban on Bitcoin payments for Tesla vehicles. His objection was the intensive energy demands on the environment from Bitcoin mining. Bitcoin price fell 10% overnight. Musk has since retracted his statement.
    Dogecoin co-founder threw all his toys out of the pram when he denounced cryptocurrencies as a scam. He said he had sold all of his crypto holdings. DOGE has a loyal following, but the price was stationary for over a month. Only months later DOGE was making some headway again

It pays to monitor supply and demand for Bitcoin and keep track of Bitcoin news. Register with a site that reports current updates for Bitcoin. Be alert to media coverage (especially tweets from big investors) because any controversial statements can influence the price of Bitcoin.

Read More: Bitcoin Predictions – Factors That Could Significantly Influence Its Price

How to Trade Bitcoin for Profit

What's the best way to trade Bitcoin for profit? Is trading Bitcoin for beginners possible and what is Bitcoin trading, and how does it work?

Trading Bitcoin may be one of the most challenging things you ever do, especially if you are a beginner in the cryptocurrency market. Without some experience of trading cryptos, Bitcoin trading for beginners is tough. Most retail traders lose their money trading Bitcoin because they do not understand the challenges of trading cryptocurrencies.

The process of trading Bitcoin seems simple. You buy at one price and sell at a determined time later for a profit. You have a 50% chance of being right. But that's where novice Bitcoin traders go wrong. They adopt a gambling mindset, assuming that trading Bitcoin is easy.

The best way to trade Bitcoin is to treat trading as a business. Acquire the skills and the knowledge to trade Bitcoin like a pro.

In this section, we'll open up the Bitcoin chart to help you understand the best way to trade Bitcoin. The saying knowledge is power is apt for trading bitcoins for beginners or more advanced cryptocurrency traders.

To begin, let's look at the monthly chart for Bitcoin (BTC/USD)

BTC/USD monthly chart

At the bottom left of the chart, Bitcoin began January 2016 at $396. Month by month, Bitcoin chartered upwards, but not without some dips. From October 2017, the Bitcoin price gathered momentum. It reached almost $20k before the market rejected that price.

Then began a year-long bear market for Bitcoin and all cryptos.

During that year, novice investors sold off their Bitcoin, believing they had lost their money. Admittedly, a drop from $20k to $3k is significant, and you would need to have nerves of steel to ride a year-long wave of price drops.

Crypto is still relatively new, so we can't effectively map future predictions based on historical price action. Looking at the monthly chart gives an overall view of Bitcoin but, to trade Bitcoin, it's best to analyse the lower time frames.

Below is the daily chart for BTC/USD

BTC/USD daily chart

On the daily chart, it is easier to determine price action for Bitcoin.

The first thing to note is the support zone which is at $30k. With three touches in this price zone, it qualifies as support.

As a crypto trader, you observe these zones. At the third touch of support, the price of Bitcoin bounced off it with a green momentum candle. The move correlated with a break of the descending channel.

To find an entry point, you can move down to the 4-hour chart or 1-hour chart.

The below image is the 1-hour chart for BTC/USD

BTC/USD 1-hour chart

The 1-hour chart for BTC/USD allows for a precision entry. This chart shows five confirmation signals for taking a Bitcoin trade

  1. The Bitcoin price rejects the support zone
  2. Bitcoin breaks out of the descending channel
  3. The price retests the 50 EMA (blue line) and 200 EMA (red line) (experiential moving averages)
  4. The 50 EMA and the 200 EMA cross over
  5. Momentum gathers speed (from here, the price of Bitcoin shot up by over $8k)

You may have to wait days, weeks, or months for precision entries like these. But, the results can be significant. Professional crypto traders make a lot of money from Bitcoin price action such as the above.

Although trading Bitcoin is challenging, adopting a clear strategy for trading Bitcoin will put you on the right side of your Bitcoin trade.

Check Out: Bitcoin Trading Tips to Follow

What Is the Price Prediction for Bitcoin by the End Of 2022?

What will the price of Bitcoin be by 2022? Crypto industry experts predict that the price of Bitcoin could be between $66,000 and $100,000. To reach either of these price points, Bitcoin has a few impending challenges.

BTC/USD daily chart

The above image is the daily chart for BTC/USD

The two blue arrows on the left indicate a strong support zone at around $45,450. To create a higher price, Bitcoin has to break away from this support zone.

Let's take a closer look at the chart.

The below image is a close up of the BTC/USD daily chart

BTC/USD daily chart

From support at $30k, the price action for Bitcoin had strong momentum. The price broke past the last high but is now hesitating at a resistance/support zone. Following a bullish momentum candle, there is now uncertainty. The bullish candle had a small wick, and today's Doji candle indicates further weakness.

To reach $66k and above, Bitcoin has to:

  1. Break past the current support zone
  2. Overcome the potential resistance zone at $64,350

If the price of Bitcoin pushes through these two price zones, it is likely to go way beyond $66k.

A potential high probability trade is setting up. If Bitcoin gains momentum at the current zone, it should reach the last high of $64,350. You could split your trade into two positions:

  1. Target the first exit for profit at $64k
  2. Set a trailing stop loss on the second position, so you trail the Bitcoin price to maximise profits.

Don't Miss: Bitcoin Price Predictions

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Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

Recap of is it Better to Trade or Invest In Bitcoin

This article looked at how to invest in Bitcoin and make money and how to trade Bitcoin for profit.

Professional traders know how to trade cryptocurrency like Bitcoin, but how about beginners to trading Bitcoin? Is Bitcoin a good investment for beginners? Or are beginners best to check out other cryptocurrencies with the potential to make a profit?

People ask, 'should I trade or invest in Bitcoin?'

It's a big decision.

You want to know how to invest in Bitcoin and make money. Perhaps you dream of becoming a Bitcoin millionaire. The risks of trading Bitcoin are significant but, equally, investing in Bitcoin is also a risk for uneducated investors.

Before investing in Bitcoin, remember the 8-step checklist:

  1. What do I know about investing?
  2. What do I know about Bitcoin?
  3. Should I invest in Bitcoin?
  4. Are there better cryptos to invest in than Bitcoin?
  5. How much can I afford to invest in Bitcoin?
  6. What is my long-term plan for investing in Bitcoin?
  7. What is my risk tolerance?
  8. Where will I store my Bitcoin?

The more you know about Bitcoin, the greater chance you can profit from investing in Bitcoin. Be patient and wait for Bitcoin to hit a position on the charts as shown above with three touches at support at $30k.

Is Bitcoin a good investment for 2022? It could be. Learn how to read Bitcoin charts so that you can map out potential opportunities for investing in Bitcoin.

We discussed how to trade Bitcoin because you want to learn how to trade Bitcoin for profit and find out the best way to trade Bitcoin.

Is trading Bitcoin profitable? Yes, but the proviso is the same as investing in Bitcoin. You need to understand price action for Bitcoin and play the long game.

Bitcoin trading for beginners is super challenging and may lead to losses. So, before trading Bitcoin, learn how to trade Bitcoin without the risk. Download trading software for a demo account and practice trading Bitcoin until you are consistently profitable.

Cryptocurrency trading for beginners is exciting, but the focus is on how much money you can make from trading Bitcoin and other cryptos. It is far healthier to direct your energies in learning how to trade Bitcoin.

Trading cryptocurrencies is a learned skill, and it takes time to develop chart reading skills with technical analysis. But, mostly, making a profit from trading Bitcoin comes from working on your trader's mindset.  

Sentiment drives all financial markets, but in the cryptocurrency market, it may be more so. Fear, greed, and FOMO cause impulsive and revenge trading, which almost always leads to losses. Work on remaining detached, whatever is happening in the Bitcoin market.

Is it better to invest or trade Bitcoin? Weigh up the pros and cons in this guide and decide to become a Bitcoin investor or a Bitcoin trader and hopefully make money from trading or investing in Bitcoin.

Please note that the above information is not providing advice on tax, investment, or financial services. We provide the above information without consideration for risk tolerance and a specific investor's financial circumstances.

Trading or investing in financial instruments such as cryptos may not be suitable for all investors. It does involve risk and the possibility of a loss of capital. There are no guarantees for profiting from cryptocurrencies, and it's advisable only to risk what you can comfortably afford to lose.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Trading Education.

eToro – Best Platform To Buy And Sell Bitcoin

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eToro have proven themselves trustworthy within the crypto industry over many years – we recommend you try them out.

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

Read More:

Why Bitcoin Will Skyrocket

Should You Buy Bitcoin?

Bitcoin Facts: Top 7 Surprising Facts You Didn't Know About

Bitcoin Price Prediction for 2025 and 2030

Forget Bitcoin: These Cryptocurrencies Can Triple Your Money

What Are Bitcoin Futures?

FAQs

Can I trade Bitcoin with $100?

You can trade Bitcoin with $100, but what's the point? The risks from trading Bitcoin with $100 outweigh the potential rewards. If you happen to enter the market at the wrong time, Bitcoin trading will quickly swallow up your $100.

Can a beginner trade Bitcoin?

Anyone can trade Bitcoin (unless your country has a ban on cryptos), but that doesn't mean they should. Trading any financial instrument is challenging, and the truth is that most traders lose money.

Successful crypto trading is a learned skill, and it can take many years of mistakes and losses before you start making consistent income from trading Bitcoin. 

Bitcoin trading beginners have not developed the mindset skills to trade Bitcoin. The best way to learn how to trade Bitcoin is to practice with a demo account until you feel confident you can trade Bitcoin successfully.

Is trading Bitcoin profitable?

For professional cryptocurrency traders, trading Bitcoin is profitable. Pro traders understand the crypto market, and they know how to trade Bitcoin. It is difficult, though not impossible, for a novice crypto trader to become profitable from trading Bitcoin.

Can you sell less than 1 Bitcoin?

Yes, if your trading platform has micro-lots, the smallest denomination of BTC is 0.001BTC

Is it worth it to invest in Bitcoin?

Investing in Bitcoin requires a high tolerance for risk. Bitcoin investors accept that the cryptocurrency market is volatile. As the leading cryptocurrency by market cap, Bitcoin leads the way with momentum. The fact is Bitcoin is a high ticket purchase at $45k. For the small investor, it's a significant risk.

But, you don't have to invest the full $45k. You can buy portions of Bitcoin and hold on to your Bitcoin holdings until you make enough profit to sell. For instance, if you invest $1000 in Bitcoin and it reaches $500k in 2030, that's an increase of over 1000%, meaning your Bitcoin is worth $10,000.

What happens if I invest $1000 in Bitcoin?

After buying $1,000 of BTC, put your BTC into a secure wallet. Decide either:

  1. What price do you want to sell your Bitcoin?
  2. When do you want to sell your Bitcoin?

Either decision, you will likely need to hold your Bitcoin for a period of a few months or years to make a good return.

If the price of Bitcoin drops, you haven't lost your money (Unless you have a stop-loss order). It just means the value of your investment has (temporarily) fallen. Hold your nerve and try not to panic sell.

Can a Bitcoin crash?

The cryptocurrency market is notorious for massive price swings. In April 2021, the price of Bitcoin (BTC/USD) was $64,000. But, a month later, the Bitcoin price dropped to less than $30,000. 

In August 2021, BTC/USD is $45,500. To a novice Bitcoin investor or trader, these crashes may seem random. But, if you learn technical analysis for Bitcoin, you can anticipate Bitcoin crashes from a break of support or resistance, trendlines, or channels.

What will Bitcoin be worth in 2025?

A panel of cryptocurrency experts predict that the price of Bitcoin in 2025 could be as high as $300,000. In 2024, Bitcoin halves again and considering the Bitcoin cap of 21 million coins, lower supply could drive demand which equals higher prices

What will Bitcoin be worth in 2030?

It's a challenge to predict what will happen with Bitcoin over nine years. But the consensus from crypto industry experts is that Bitcoin can potentially increase to $500,000 by 2030. While $500k for Bitcoin may seem unrealistic, let's remember that five years ago, you could buy Bitcoin for $369. In May 2021, the price tag for Bitcoin was $64k.