Everyone is talking about cryptocurrencies for an obvious reason – this market offers a unique money-making opportunity. In fact, there are so many ways to get your little slice of heaven and make a good thing of crypto. Some of these can help you hit it big almost overnight (yet, keep in mind this doesn’t happen that often and involves high risks) while others take some time, yield lower rewards, and are practically risk-free.
On the other hand, some of them are passive and more beginner-friendly while others require your active involvement and getting to know a thing or two about financial markets, technical analysis, etc.
So, it actually doesn’t matter if you want to do crypto for living or just buy it and forget it – you can make money either way. Without further ado, let’s extend upon the most popular strategies on how to make money from cryptocurrency.
HODLing is a no–brainer strategy for making profits in crypto. It’s as simple as buying some tokens and holding them for a couple of months/years. This method works best if you are 1) a beginner and 2) are in it for the long haul.
Somehow, crypto, price volatility, and speculation go hand-in-hand but if you want to minimize risks, reduce stressing over daily fluctuations, and still generate some revenue, invest in established tokens such as Bitcoin and Ethereum and just leave them to sit in your wallet.
Or, you can do some research and try to find new, promising tokens to invest in. Just remember that Bitcoin was traded at almost $0 and Ethereum at less than a dollar when they were launched. If you manage to spot a good project in an early phase now, your investment can blow up in a couple of years. Sure thing, it’s not that easy to predict what’s the next crypto to blow up, which is why it is so important to diversify your portfolio.
Staking is probably the best alternative to HODLing and, according to many enthusiasts, the best way to take profits in crypto. When you stake tokens, that means that you are simply holding them in your wallet but earning a passive income for that.
Sometimes, you’d have to lock your tokens away for some time, other times you’d be able to sell them at any moment. Solana, Cardano, Polygon, and Polkadot are some of the best tokens to stake while Bitcoin can’t be staked. Interest rates for staking vary from 0.05% to 20%, although 5-8% is considered an average APY (annual percentage yield).
Yield Farming and Lending
Similarly to staking, yield farming means locking your tokens in a liquidity pool. Simply said, a liquidity pool is a pile of tokens that are being traded in pairs within the pool itself while injecting more funds provides enough liquidity for the pool.
By locking your cryptos in a pool within a certain period, you will provide liquidity to decentralized exchanges (basically lend them your money) and will be paid an interest rate. Some liquidity pools offer an amazing APY of 1,000% per year, although you’ll more often come across the ones that offer up 50% APY. For instance, the APY for locking your CAKE tokens in the PancakeSwap’s liquidity pool is approximately 45%.
If you want to learn how to trade cryptocurrency and make profit, you might want to get familiar with technical analysis. Get a knack of reading charts and you’ll become the master of day trading. The principle here is rather simple – sell your tokens when the market is going up and buy when the price is touching low levels.
You should also set sell orders at critical levels, when there’s a greater chance for the token to start dropping in value than to break through the resistance area, and buy orders at strong support levels.
This strategy of timing the market and taking profits or buying more tokens at the right moment makes it super-easy to benefit from daily price fluctuations. Still, instead of making a lot of money through a single trade, you’ll, more likely, be making small but frequent profits.
If analysis is simply not your thing but you have some cash set aside, you can invest it in miners, machines made for solving complex mathematical equations and minting new tokens.
However, keep in mind that mining consumes a lot of electricity, which is an added cost. You should make at least basic calculation of how much money would mining a certain token cost, whether the reward would be higher than the investments, and start purchasing the equipment only then.
Ernest Miller is a research analyst for Investment Talk. He has built his career as a banking officer and later on a financial advisor. Now, he is focusing primarily on blockchain and cryptocurrency, but here you will also find his texts on the traditional economy, as well as analyses of stocks and investments.