Here you will find information on how to invest your bitcoin with the intention of making more bitcoin. This can be done by a single return on your invested bitcoin or by periodic interest payments where you receive a percentage of your invested capital. This is also known as passive income and is a much easier form of earning bitcoin than working for it.
Here are a just a few ways you can invest your bitcoin to get you started. NOTE: do your own research and make sure your chosen investment is right for you. Never invest more than you can afford to lose.
Bitcoin as an investment
Like other currencies, bitcoin itself can be an investment. It is still highly volatile, but it has progressively increased on average at a very high rate compared to all other currencies. It is quite easy to buy bitcoin through many exchanges such as Magnr.
Obviously you will need a bitcoin wallet which you can get from Xapo. Keep in mind that if you are investing large amounts for the long-term think carefully about storage. I also recommend Xapo for this as you get access to their cold-vault storage which is one of the most secure available for bitcoin.
If you really like a DIY approach, then a great way to get started in investing bitcoin is through LocalBitcoins who make it very easy to find a place to buy bitcoins. You simply sign up to the site and you can search for people selling bitcoin and organize a trade with them. The rates vary wildly but you can get pretty good deals if you are patient and pick the right time.
If you prefer a more hands-off approach to investing, an easier option is a bitcoin investment trust which is basically a large chunk of bitcoin that you can buy shares in. One such trust is Grayscale Investment Trust. The main advantage is that it’s managed by a large company, so some of the risk is removed and it also qualifies for many tax-deferred retirement accounts such as 401k and superannuation. However, it does come with a management fee and will generally trade at a premium to the underlying asset (bitcoin in this case). Remember that it is still exposed to the bitcoin price so it will fluctuate with it.
Grayscale Investments is part of the Digital Currency Group who have a lot of fingers in the bitcoin pie and most recently purchased Coindesk, so they definitely have some knowledge of bitcoin. The trust trades publicly on the OTCQX exchange with ticker code GBTC and can be bought and sold easily.
Yes, I can hear you yawning, but stay with me. Saving is a fairly basic form of investment which everyone is probably very familiar with. It’s not going to make you rich but it is low risk so shouldn’t keep you awake at night. Also, it’s not a bad idea to have a portion of your bitcoins earning at least some interest. A bonus is that the interest is compound, so if you don’t withdrawal anything, your savings can add up quickly.
Magnr is the most popular savings platform for bitcoin at the moment and it comes with the benefit of an attached trading platform. It pays a 2.35% annual effective rate on all deposits up to 100BTC which is calculated daily and compounded monthly. The interest is fixed until June 30th 2016 and then will become variable. You are free to deposit and withdraw savings at your own discretion with no fees. Be aware that even though your savings are 1:1 backed, the interest is paid from the trading carried out so it may vary from month to month.
High-Yield Investment Platform
Or HYIPs, are a very popular form of investment for small amounts of bitcoin at the moment. Particular interest comes from countries with tight monetary controls such as Russia and Brazil, as well as emerging economies such as India and China. It is the highest yielding investment and it also carries the highest risk; so, it is not for the risk-adverse.
Due to the volatile nature of HYIPs I will not list any here. Instead I have a specific part of the site dedicated to them, which you can find here. Here you can source the latest ones, get info on the highest paying as well as scam ones, and even track the progress of each of my HYIP investments.
Loaning bitcoin as an investment is not an obvious one, and it is certainly a topic that would make many run for the hills. However, there are a number of options where you can loan bitcoin and get a reasonable return.
BTCjam is one such website which has a good reputation and a large number of loans you can invest in. You can also use the site for acquiring a loan if you need to. It’s basically a form of crowd funding where multiple investors chip in an amount to fund a specific investment (i.e.- loan). Or you can fund an entire investment if you want.
The site uses a proprietary credit score algorithm that takes into account hundreds of data points to assess the risk of each borrower and loan. At the time of writing, according to the site the loan repayment is 90%, which highlights the risk, but also makes this a very viable investment option.
Investments are graded according to user profile, credit score, reputation, and loan history so you can pick and choose what suits. Remember to diversify across a number of loans to reduce your exposure to a single investment, and hence reduce your chances of total loss of your investment capital.
There is also an auto-invest feature which can ease the pain of choosing and also help with diversification. Simply create a plan indicating your risk profile and return expectations, then specifiy how much bitcoin to invest. Just find a balance that you are happy with and that’s pretty much it.
BTCPOP is another bitcoin peer-to-peer lending site with similar features as BTCJam. In addition to the standard loan listings, the site also features a number of different investment options than simply loaning bitcoin, including pooled investments, IPOs, and even a savings account.
The pooled investment options are great way to keep your bitcoin working without you actively seeking loans and funding them. You can choose from six different loan pools ranging from the Trusted Pool down to the E-rated Pool. Once you allocate some funds to a pool, an estimate is given on the interest you will be paid over a 14-day period. This is based on how much you allocate and a percentage of the total pool funds, so it will vary a bit. The pools are a great way to reduce risk as they give you instant diversification with minimal fuss.
The savings account is also a pooled investment but it is much lower risk. It pays 5% annual interest which is compounded daily. This is more than double the interest from Magnr as discussed above and it is well worth going for.
So, although lending your bitcoin sounds risky, with a little experience you can get some really great returns for minimal risk.