How to make money with cryptocurrencies? Is it possible to make money with cryptocurrencies?
These are some of the questions we hear most often and which are searched on the web by those approaching this relatively new market for the first time, the cryptocurrency market .
We will not talk about what a cryptocurrency is or how it works in this article, but we will focus on the ways, some more known, some less known, through which to profit from these virtual currencies.
Before seeing the most used techniques to earn with cryptocurrencies, however, some clarifications must be made. First of all, we are talking about a new market, an innovative reality which, being still young, has both strengths and some limitations, typical of innovations.
The advantages and disadvantages of investing in cryptocurrencies
Among the advantages there is certainly the capitalization which has not yet reached very high levels. In fact, although 900 billion were exceeded in 2017, the figures reached in recent years are around 300 billion. It is therefore a still young market , in a growth phase and at the moment little affected by the traditional market.
Another advantage is the presence of regulatory and market gaps and holes that can be exploited to monetize. This is always due to the fact that it is still not very stable and efficient.
However, this is one of the two sides of the coin: in fact, these characteristics also determine some cons, to be taken into consideration when deciding to invest in cryptocurrencies .
Since, as we have said, the laws change often and we are also talking about a volatile and fragile market where a small indiscretion on the part of an investment bank can lead to a peak or a collapse in the value of cryptocurrencies .
Not only that, given its instability, it is not a market within the reach of any investor. In order to obtain large profits, it is necessary to accept high risks and not everyone can afford it. There are no low-risk investments that generate large profits, if you hear this, you are probably in front of a Ponzi or a scam.
If you are tempted to invest part of your savings in cryptocurrencies, it is good to rely on conservative operating strategies.
This market is suitable for those with a high propensity for risk and a well-diversified portfolio : those who invest in medium-low risk assets may think of placing a part of it in the world of cryptocurrencies, i.e. a high-risk investment.
It is not wise to think of using all the available sum only in this economic reality, since without other lower risk investments, the possible loss could empty your pockets of everything you own.
The 9 ways to earn in the world of cryptocurrencies
The holding company’s strategy , also called HODL , consists in buying cryptocurrencies , holding them for a period of time (drawer operation) and finally reselling them at a higher price than the purchase .
From a more practical perspective, holding means materially investing in a crypto that you think will increase in value and keep it in your wallet in the hope that it will appreciate over time.
Those who opt for this method very often buy several to diversify the basket and increase the probability of earnings. So that if it were to lose with the sale of one, there is the possibility to compensate the loss with the others.
In any case, less experienced investors are advised to limit themselves to buying cryptocurrencies that have already shown a certain stability and trust over the years.
The term trading refers to a variety of very short speculative operations . We are talking about a behavior opposite to that seen in the previous point, in fact, with trading we try to make the maximum profit in the shortest possible time , owning the cryptos long enough to earn.
Even within the same day or the same month, a single coin is bought and sold many times to reap lower (1-3%) but repeated profits.
They are micro operations which, however, carried out constantly over time, can guarantee a high profit.
In order to carry out trading with the least risk, it is advisable to carry out an in-depth technical analysis of the trend of the reference market, using statistically valid strategies and with an always favorable risk/return ratio.
Trading can be done through Exchange platforms or through derivative instruments.
The term mining means to dig, or rather to extract. This technique consists in the extraction of virtual coins through a long and complex process that exploits the computing capacity of computers.
It therefore consists in buying machines that solve calculations to extract rewards, i.e. coins, from the network.
In fact, some coins are released from the network whenever the computational power is made available to solve particular complex calculations.
There are two best ways to make a profit through mining: the first consists in directly purchasing important hardware that is used in these calculations, obviously taking into account the maintenance price of the former and the actual reward given by the latter. Currently, this methodology tends to be inconvenient.
A second method, potentially cheaper, instead provides for the rent and not the actual purchase of the machines, thus sheltering themselves from onerous prices and from the possible economic loss in the event of loss of earnings. In essence, you join other people by investing
in a mining pool. The profit is then divided among all participants.
Cryptocurrency arbitrage is the method that allows you to earn from the price difference that is created between two or more Exchanges .
To better understand, let’s take an example. Suppose you buy a Bitcoin at a price of 10,000 on one Exchange and sell it on a second Exchange where Bitcoin is traded for 10,050, obviously the values indicated are invented, but it can help you understand how arbitrage works.
There are two particular types of cryptocurrency arbitrage: Regular and Triangular.
With Regular Arbitrage , the same crypto is bought and resold on different Exchanges with a significant price difference, as in the example mentioned above.
Triangular Arbitrage , on the other hand, exploits the price difference obtained through an intermediary currency. For example, you buy Bitcoins paying in Euros, Convert Bitcoins to Ethereum, finally exchange Ethereums for Euros, for a value higher than the initial investment. This technique takes advantage of the exchange rate advantages of the various exchanges.
Arbitrage traders make money through micro transactions from one exchange platform to another by taking advantage of price gaps.
Cryptocurrency arbitrage is very similar to the Surebets of the Betting world, to do it you need to have the right tools and have a good timing.
Cryptocurrency staking can be seen as an alternative to mining that requires less resources.
It involves holding funds in a cryptocurrency wallet to support the security and operations of a project or blockchain. More simply, we can say that staking consists of blocking cryptocurrencies to receive rewards.
In most cases, you will be able to stake your coins directly from the wallet. Additionally, several exchange platforms offer staking services to their users.
The gain is considered annualized and the period varies according to the signed contract.
Among the most famous is Crypto.com , which allows you to block cryptocurrencies in order to periodically make a profit. The percentage usually fluctuates between 2 and 5% based on the type of currency you decide to entrust.
Crypto.com has contributed to the spread of syndicates, special promotions that are made by platforms to promote a cryptocurrency.
Often there is no shortage of opportunities, for example it may happen that there are some offers relating to coins, which are sold at reduced prices.
There are conditions to be accepted in order to participate and take advantage of Syndicates, but the gain can be advantageous.
Similar to Syndicates, Airdrops allow you to receive coins for free. What is required is the execution of small operations such as subscribing to a Telegram channel or a newsletter.
An Airdrop is nothing more than a gift given by the founders of a cryptocurrency for a mostly self-promotional purpose. It is therefore a marketing activity by the team to make the new token or cryptocurrency known to the vast community. Coins can appreciate over time.
The term cryptocurrency fork defines a modification to the original code whose purpose is the improvement of a digital currency. This allows you to generate a new version of the coin or token, while maintaining all the previous history.
The mechanism in question has allowed the birth of new coins with different characteristics compared to the original cryptocurrency.
This is a particular phase of the coin, where for certain factors it is split in two and if you are its owner you will end up with two coins instead of one at two different prices. Both are immediately usable and can be monetized.
9. Dark Pool
Little known and very innovative, they are an excellent tool for creating interesting performances. Large capital is required to participate in a Dark Pool.
Dark Pools are an alternative trading system that allows institutional investors to anonymously place large orders without having to publicly disclose their intentions when looking for buyers or sellers.
The advantage of this instrument is that investors tend to buy in blocks, in order to avoid slippage and to trigger a potential adverse price movement.
Some experienced traders exploit this system to gain access to privileged information or to make money through arbitrage between the dark pool book and the public book.
More ways to make money with cryptocurrencies
So here are the main methods with which you can earn in the world of Cryptocurrencies. If you know others and want to share them with us, enter the Investhero community and write a post about it, you will be able to compare yourself with other investors like you