So you own some Bitcoin… now what?
Things to do with cryptocurrency once you actually own some
So a question we get from non-crypto friends and colleagues all the time is: What can you do with Bitcoin?
And it’s a legitimate question as more and more people want to understand what all the cryptocurrency commotion is about. It was certainly easy to understand when the hype was highest, when the price of 1 Bitcoin ($BTC for short) was nearly $20k at the end of 2017 — sell and sell high is simple. But with prices now firmly back down to under $10k, what are people doing still with that internet money in 2020?
Quick primer on Bitcoin
Without getting too deep, Bitcoin is the first and still largest major cryptocurrency (see the original Bitcoin white paper to get deep). It’s essentially digital money tracked on a blockchain so that any two people can send each other Bitcoin (an entire $BTC or fractional) without the need of external parties or institutions, such as payment processors or banks. Though no physical version exists, once a US dollar value started getting attached via transactions made on the Internet, Bitcoin prices started rapidly increasing and people began to consider it as an investment opportunity.
And as the Bitcoin value significantly grew, so did innovation in the crypto finance space, offering both twists on traditional finance and completely new opportunities for generating wealth through centralized and decentralized channels. So long story short, Bitcoin is a digital store of value which makes it treatable like any other asset. And keeping the risks involved in mind, this means $BTC owners can:
- HODL
- Sell for fiat money
- Trade/Exchange for Other Cryptocurrencies
- Lend, Borrow
- Save, Earn Interest
Do you maybe understand the above list of words but aren’t sure what they mean in the context of Bitcoin? Continue reading for more explanations.
So What Can I Do?
HODL
HODL, as the kids call it, refers to holding. This basically means if you own $BTC, don’t sell it, don’t exchange/trade it, don’t do anything except maybe continue to acquire more of it. Treat it as a long-term investment with the expectation that the mass adoption of crypto will come and the increased value will position you well in this new decentralized digital landscape.
And if simply owning $BTC is the limit to your risk appetite, you should keep access to your crypto assets (known as private keys) as secure as possible. There are many options for wallets, digital and physical, and you can use this handy guide to determine what’s best for your situation.
Sell for Fiat Money
Probably the most easy-to-understand case, you can sell $BTC for fiat money (real money like USD), ideally for financial gains — buy low, sell high. Cryptocurrencies in their short histories have been highly volatile, which has created a lot of opportunities for speculators to make significant earnings off sales. And frankly, this point probably continues to be the largest driver of interest in Bitcoin, even today. So if you own $BTC (or other crypto) and you’re interested in liquidating, you can consider the options listed below:
- Centralized exchanges; trading platforms where you don’t necessarily interact with blockchains to buy & sell at market rates. But for ease of use, trade-offs are giving up access and less privacy due to requirements like KYC. Well-known platforms are Coinbase, Kraken, Bitstamp, and BitMex.
- Decentralized exchanges (DEX); trading platforms where you don’t entrust your assets to a third party. Although middlemen are less in the picture, trusting code to take care of you isn’t always reliable either. Prominent platforms include Binance DEX, Shapeshift, and Changelly.
- Peer-to-Peer (P2P); for those who want the most control over trades, P2P platforms provide the most flexibility (lighter KYC, custom exchange rates, desired currencies, payment methods, etc.) and to deal more directly with the other party. Notable platforms include LocalBitcoins and Paxful.
Trade/Exchange for Other Cryptocurrencies
Massive swings in $BTC prices significantly raised the interest in crypto. Other blockchain projects and companies quickly formed, with financing largely in $BTC — Ethereum ($ETH), Cardano ($ADA), EOSIO ($EOS), and Stellar ($XLM) are a few. And with thousands of cryptocurrencies in the market, you can diversify in hopes of more bull runs and massive gains.
- Centralized exchanges; just like for selling crypto for fiat, you can use trading platforms to deposit crypto to exchange for other crypto at the market rates. Platforms with the most trading pairs tend to be popular. Major exchanges again are Coinbase, Kraken, Bitstamp, and BitMex.
- Decentralized exchanges (DEX); again, decentralized versions of trading platforms enable you to trade crypto-for-crypto without requiring you to entrust your assets to a third party at the market rates. Prominent platforms again are Binance DEX, Shapeshift, and Changelly.
Lend, Borrow
As in traditional finance where people and institutions attempt to leverage assets in transactions as collateral to secure better terms and conditions, Bitcoin and other digital assets are increasingly used in similar fashion. Depending on your risk appetite, rather than passively hold your crypto, you can use to it secure loans for yourself. For example, you can deposit your $BTC to a lender without selling it as collateral for taking a loan in fiat money.
With an increasing number of services forming around digital assets, offers of credit lines backed by crypto is growing. While terms may vary significantly by provider, the net increases in accessibility to capital are indicative of how new financing opportunities can be created and secured. Lenders in this space include BlockFi, Nexo, Unchained Capital, and Celsius Network.
Save, Earn Interest
On the other side of the borrowing coin is savings. While you might not need additional capital today, there are other individuals and businesses in the crypto industry who regularly do. And so there are service providers today who provide compound interest (with rates ranging from normal bank rates to as high as ~20%) on any amounts of crypto you may deposit into the interest-bearing accounts they offer.
As such services can increasingly be offered through code and smart contracts, more service providers are focusing on creating opportunities for greater financial inclusion — this can lead to a types of wealth generation no longer dictated by human gatekeepers who have historically preferred the small high net worth individual segment.
Due to the obvious overlap, service providers are often the same ones in lending and borrowing: Players again include BlockFi, Nexo, Unchained Capital, and Celsius Network.
So you own Bitcoin, now what?
If there’s one takeaway we can emphasize from this piece, it’s that Bitcoin is way more than Internet money used to buy drugs online. It’s an ecosystem of more open forms of finance like those mentioned above that continues to expand; and the only way to gain access and participate is through Bitcoin and other cryptocurrencies. And as a result, $BTC and other crypto have become digital assets to invest in for more and more people across the globe.
Acquiring Bitcoin today is primarily done through one of two channels: 1. Mining, which is increasingly more difficult as it gets closer to reaching the 21 million total supply; and 2. buying, from other people, services, exchanges, etc. But neither option is particularly intuitive, which creates barriers for people who’d otherwise be highly interested in getting started in owning their own $BTC. And so at Quidli, we offer an easy and passive way for people to gain access — the option of receiving Bitcoin as a perk from their employers.
And as a final note, we’re compelled to acknowledge that Bitcoin, cryptocurrencies, and digital assets are not legal tender nor backed by governments, and so are not subject to FDIC or SIPC protections. This post and all Quidli content is an opinion and is for informational purposes only. It’s not intended to be investment advice, for which we highly encourage you to seek a licensed professional.
Want to start offering team members crypto as a work perk? Simply create an account for your company on Quidli to get started.
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