3 Simple Tricks to Turn $1,000 Into $10,000 With Bitcoin

Bitcoin (CRYPTO: BTC) has the potential to be a very powerful wealth-building investment. In fact, it's capable of turning a relatively humble sum of $1,000 into $10,000, so long as you're willing to play the long game and be consistent with your investing habits.

Curious about how to place your bets on the king of cryptocurrencies? Let's nail down a few basic strategies that will make the process a lot easier.

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1. Invest consistently over time

The most important foundational strategy when it comes to investing in Bitcoin is to be consistent with your purchasing habits.

Dollar-cost averaging (DCA) an investment of $1,000 by breaking it up into 10 separate purchases of $100 each, spaced out over weeks or months is likely to have better results than investing a lump sum made at a time that you calculate to be the most favorable. Look at this chart depicting Bitcoin's price during the past 10 years:

Bitcoin Price data by YCharts

As you can see, if you placed a single lump sum purchase, there were many opportunities to buy the very peak of the market. Then, you'd be sitting on steep losses for months or years before seeing your investment break even.

Aside from being psychologically uncomfortable to hold an investment that's underwater, leaving the timing of your purchases to your whims will often result in buying precisely when there's the most media attention and chatter about the price of the coin, which is nearly always at the highest after a sharp run-up. The price typically goes down after that.

Take any opportunity for fickleness out of the loop. Spread your purchases out, ensure that each purchase is for a relatively small sum, and automate the process to the best of your ability. Investing in Bitcoin is a marathon -- no single step along the route should take up any of your headspace.

2. Track the cycle, then exploit it

Now, let's add a dollop of nuance to the long-term strategy described above.

As you probably know, to create new Bitcoins, miners need to use high-powered computers to solve increasingly difficult math problems. The difficulty of those problems increases over time. To complicated matters further, after a certain quantity of coins have been mined, the rewards distributed for mining decrease by 50% in a process that's called a halving.

Thus far, halvings occur about every four years. Think about the impact of this in economic terms of supply and demand. What is the expected price impact on a good if it suddenly becomes significantly more difficult to produce? The price rises, at least until producers adapt to the new difficulty by expanding their capacity to meet demand.

And that's exactly why there's a high degree of cyclicality to the price of Bitcoin, though there are many other factors that also influence the coin's price. Based around the date of the halving, prices can be expected with reasonable confidence to increase within about nine months -- and then, after (very roughly) a year or so has passed, to decrease significantly once again as supply outstrips demand from investors.

Don't focus too closely on the exact number of months here, and don't be concerned about timing the bottom of the coin's cycle. Just recognize that in addition to your regular purchases, there are periods of additional opportunity in which it might make sense to load up a bit more aggressively.

Therefore, if the price of Bitcoin falls by half from recent highs, it's probably a good idea to consider loading up while it's cheap, assuming you're going to be holding your coins for at least another few years.

Finally, many years down the line, when it's time to take some Bitcoin off the table, remember that you'll get the highest prices if you sell in the period after a halving.

3. Don't even think about selling

If you want your investment of $1,000 to grow to become $10,000, you simply can't sell off bits and pieces of your holdings over time.

As tempting as it may be to realize profits when prices are high, if you're investing for a large gain over the long term, be serious about holding on to your investment through thick and thin. Interrupting the process of your investment compounding in value, especially early on, will make it much harder to reach your target value. Furthermore, so long as your investment thesis for buying Bitcoin remains intact, selling doesn't make much sense unless it's necessary to provide funds for an emergency of some kind.

Resisting the temptation to sell is easier when you only look at your Bitcoin investment once in a while. For the purposes of understanding where the coin is in its four-year cycle and making additional purposes, it's sufficient to look at the price (and the value of your investment) once a month. Any more than that, and the risk of getting dragged into a detrimental shorter-term mindset grows.

Don't quit the marathon before you cross the finish line you set for yourself at the start.

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Alex Carchidi has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.