A Must-Read for Cryptocurrency Beginners! How to Profit from Bitcoin and Key Points to Watch Out For

In recent years, more people have started investing in Bitcoin. However, you might be wondering, “I started investing because someone recommended it, but how do I actually make a profit?”

In this article, we’ll introduce ways for beginners to profit from Bitcoin investments. We’ll also explain the key points to watch out for, so be sure to use this guide as a reference!

How to Profit from Bitcoin

Here are four main ways to profit from Bitcoin:

1. Trading Spot Bitcoin
2. Using Leverage Trading
3. Earning Through Lending
4. Mining Bitcoin

Let’s explore each method in detail.

1. Trading Spot Bitcoin

This method involves buying Bitcoin at the current market price and selling it later when the price has increased.

• Simple and straightforward, this trading approach is well-suited for beginners.
• Be mindful that if you sell when the price has dropped below your purchase price, you will incur a loss.

2. Using Leverage Trading

Some exchanges allow you to trade with leverage by depositing a certain amount as collateral (margin). For example, with a leverage ratio of 2x, depositing 100,000 yen allows you to trade up to 200,000 yen worth of Bitcoin.

Unlike spot trading, leverage trading allows you to:

• Profit from a falling market by executing short-selling (selling high and buying back lower).

Once you’re comfortable with spot trading, consider trying leverage trading.

Note: If the price moves against your position and your losses exceed your margin, you may need to provide an additional margin deposit (margin call).

3. Earning Through Lending

Lending allows you to profit by lending your Bitcoin to third parties in exchange for interest payments.

• This method is low-effort and ideal for those who are too busy with work or household duties to actively trade.
• Many cryptocurrency exchanges offer lending services.

Caution: Not all exchanges provide lending services. Additionally, if the exchange goes bankrupt, you may lose the Bitcoin you lent.

4. Mining Bitcoin

Bitcoin can also be earned through mining, which involves using computational power to verify and add transactions to the blockchain. Miners receive Bitcoin as a reward for this work.

• Unlike fiat currencies like yen or dollars, Bitcoin is produced through mining, without a central authority managing its issuance.

Note: Mining requires high-performance computers and substantial electricity costs, making it less suitable for beginners. Instead, consider the other methods to start profiting from Bitcoin.

These strategies offer various ways to earn from Bitcoin. Choose the one that best fits your experience level and investment goals!

Tips for Profiting from Bitcoin Trading

Here are some essential tips to help you maximize your profits when trading Bitcoin:

1. Use a Low-Fee Cryptocurrency Exchange
2. Stay Updated on Cryptocurrency News
3. Set a Stop-Loss Line
4. Invest Only with Surplus Funds

Let’s explore each tip in detail.

1. Use a Low-Fee Cryptocurrency Exchange

• Opt for exchanges that offer low or zero trading fees.
• Choose exchanges with a narrow spread (the difference between the buying and selling price) to make it easier to profit.

Even if fees or spreads seem small on a per-transaction basis, they can add up significantly if you trade frequently. Reducing these costs will improve your overall profitability.

2. Stay Updated on Cryptocurrency News

Regularly keeping an eye on cryptocurrency-related news is crucial.

• Positive news: For example, a prominent figure buying Bitcoin can drive prices up.
• Negative news: Regulatory announcements or bans can cause prices to drop.

Being aware of market-moving news helps you make informed decisions and anticipate potential price changes.

3. Set a Stop-Loss Line

Bitcoin prices can sometimes move in the opposite direction of your expectations.

• To avoid widening losses, set a stop-loss line beforehand (e.g., “Sell if the price moves down by X amount”).
• This helps you exit trades before losses become too large.

Don’t rely on the hope that prices will recover; having a clear exit strategy helps protect your capital.

4. Invest Only with Surplus Funds

Predicting Bitcoin price movements accurately is challenging, and losses can occur.

• Never invest funds that you need for daily living expenses.
• Always use surplus funds to ensure you can handle potential losses without affecting your financial stability.

By following these tips, you can trade Bitcoin more effectively while managing risk and enhancing your chances of making a profit.

Important Points to Watch Out for When Profiting from Bitcoin

To successfully profit from Bitcoin, pay attention to the following key points:

1. Avoid Buying at the Peak
2. Use Exchanges Registered with Financial Authorities
3. Implement Personal Security Measures

Let’s look at each of these in detail.

1. Avoid Buying at the Peak

• Buying during a price surge and then facing a sudden drop, resulting in an unrealized loss, is known as “buying at the peak.”
• Cryptocurrencies like Bitcoin have higher volatility compared to stocks or forex.

To avoid this:

• Don’t get swayed by short-term price swings.
• Carefully analyze whether the market shows a long-term upward or downward trend before making a trade.

2. Use Exchanges Registered with Financial Authorities

• When using overseas exchanges, you might face challenges like language barriers or lack of legal protection under Japanese law in case of disputes.

For beginners, it’s safer to:

• Use domestic exchanges listed in the Financial Services Agency’s (FSA) registry of registered cryptocurrency exchanges.
• Be cautious when searching online, as many results may include foreign exchanges.

3. Implement Personal Security Measures

• Registered exchanges typically have adequate security protocols, but relying solely on them isn’t enough.
• If you plan to store Bitcoin in your personal wallet (on your PC or smartphone), take steps to protect against computer viruses and cyber threats.

Security Tips:

• Use antivirus software and keep it updated.
• Avoid using free public Wi-Fi for transactions or wallet access.
• Consider using hardware wallets or offline storage for added security.

By keeping these precautions in mind, you can reduce risks and trade Bitcoin with greater confidence and safety.

Summary

To profit from Bitcoin trading, it is essential to understand various methods such as spot trading, leverage trading, lending, and mining.

While each approach offers opportunities, they also carry inherent risks due to Bitcoin’s high volatility. Successful trading relies on selecting low-fee exchanges, staying informed about market news, and implementing strategies like setting stop-loss limits and investing only surplus funds.

Additionally, to mitigate risks, it is crucial to avoid buying during price peaks, use exchanges registered with financial authorities, and maintain strong personal security measures. By combining informed decision-making and effective risk management, you can navigate the Bitcoin market more safely and confidently.