Introduction
How do you make money from cryptocurrency?
The most common answer is trading. You can also buy and hold Bitcoins for a set period. However, there are more ways of earning money from cryptocurrency than most people know.
Some strategies offer high returns and also come with a higher risk. Some strategies would require periodical investment for steady earnings.
Through this article, we have explored the best ways to make money using cryptocurrency. Read on if you are interested.
7 Strategies to Make Money from Cryptocurrency
Here are seven different strategies for making money from Bitcoin and other altcoins.
1. Utilize the buy-and-hold
How do you make money from cryptocurrency? The easiest way (in our opinion) to earn money is through the buy-and-hold method. It’s effective. However, it can be time-intensive. This method involves buying a crypto token and holding it for a significant period (sometimes years), regardless of market fluctuations.
This strategy depends on the belief that the value of a cryptocurrency will increase over time. Investors who believe in cryptocurrency’s future value often follow this process to make passive income.
Although some may find it challenging, it can be rewarding because patience is key. They buy a currency where they see potential and hold it for some time.
However, there are some pros and cons to this type of investment in cryptocurrency –
Advantages:
In contrast to trading, where you have to monitor the market on a daily basis, you can invest in and hold a cryptocurrency. This eliminates the labor of daily monitoring the rise and fall of a currency.
You can capitalize on the long-term growth of your cryptocurrency and slowly increase your portfolio.
Considerations:
The buy-and-hold method doesn’t make you rich overnight. You have to wait for years to see your investment bring results.
Cryptocurrency prices are volatile. So stay alert for the volatile market.
- Try Day Trading
People who have been trading cryptocurrencies for years are more into trading than investing. It’s a way to make money on a single day using slight changes in cryptocurrency prices. For this type of earning through cryptocurrency, you have to have a strong knowledge of the cryptocurrency market.
When practicing day trading, investors buy a cryptocurrency for a price in a day and sell it for a higher price on the same day or within a few days’ interval. This type of cryptocurrency investment requires a keen understanding of the industry and market sentiments.
Advantages:
Great for making a profit on the go with the current portfolio.
Investors can quickly respond to real-time changes in the market.
Considerations
Investors must have significant knowledge about the market.
There’s a higher chance of losing a sizable amount of money on day trading if the trader lacks insight.
If you want to start day trading, build your knowledge by reading blogs like Coinfomania, watching YouTube videos, or reading relevant documents.
- Consider Dollar Cost Averaging (DCA)
Think of Cryptocurrency as a mutual fund or periodical investment, then you get the DCA. Through this investment process, investors have to deposit a set amount to their cryptocurrency portfolio regularly.
This investment type is almost a volatility-averse investment technique. You can spread the investment amount through a period to mitigate the impact of a volatile market.
Advantages:
Stay away from the risk of investing a large amount in cryptocurrency and secure your money.
Use a disciplined investment method to earn gradually from cryptocurrency.
Considerations:
It can result in a higher average cost when the price rises significantly over time.
Investors may not like the ongoing requirement for putting money into an asset.
- You Can Buy Low Sell High
How do you make money from cryptocurrency? You can use the most popular method to make money from any asset. When the price of a cryptocurrency goes low, investors can buy and hold it for a period.
They can sell it off as soon as the price starts to increase. However, executing this type of strategy would require strong market analysis and close observation of the changing market.
Advantages:
Investors can make a substantial profit if they can correctly utilize this method.
Considerations:
It’s not an easy task to know the right time to buy or sell cryptocurrency.
Investors need a strong understanding of the cryptocurrency market to make this kind of trade.
- Crypto Arbitrage Trading is Worth a Try
Crypto arbitrage is another process to make money from cryptocurrency investments. It’s also a type of trading cryptocurrencies where investors use price discrepancies to make a profit. They look for discrepancies across different exchange platforms to make this kind of trade.
Imagine you have a Bitcoin valued at $1000 on Coinbase. However, that same Bitcoin is being sold for $1200 on Binance. In this situation (or case), you can do a cross-platform trade to earn that extra $200 in profit.
It’s just the act of purchasing from someone who sells it for less and then selling it to a buyer willing to pay more but on another platform. Although it sounds easy, there are some risks involved because prices can change quickly. This means you have to act fast!
Advantages:
Arbitrage trading doesn’t require investors to rely on price movements.
Considerations:
Requires access to different exchange platforms and quick execution, which isn’t always possible.
Cross-platform transaction fees can reduce profit.
- Staking and Yield Farming
How to make money from cryptocurrency without investing? Well, this is not cryptocurrency investment in its popular sense. However, staking is a process where investors take part in the operation of a network. Therefore, they have a specific amount of cryptocurrency locked in for them earning rewards over time.
Yielding is also a process that provides liquidity to DeFi protocols. In exchange, investors get tokens of interest.
Advantages:
Investors can generate passive income from their existing holdings.
Considerations:
Investors must understand different protocols and platforms. Knowledge of different blockchains may also be necessary.
There are risks like losing a significant amount of money for staking assets into such operations.
- Invest in Blockchain Projects
Investors can directly make money from Blockchain investments. They can invest through Initial Coin Offering or Token Sales. If you have keen eyes for potential projects early on, you can make money from them. This strategy requires strong research into the fundamentals of a project, technology and the team behind it.
Advantages:
If the project succeeds, a high return is assured.
Considerations:
Many cryptocurrency projects fail. So, there are similar chances of losing money.
Investors must go through extensive research and due diligence.
Conclusion
To maximize your profit on cryptocurrency and find the right answer to how you make money from cryptocurrency, you can depend on more than one investment strategy. Experts suggest building a portfolio based on your risk tolerance. If you vary the level of investment, you have a better risk tolerance capability. You can follow the rule of thumb to invest only 5 to 10 percent of your cryptocurrency investment.
If you are planning to take a long-term approach, follow the buy-and-hold method, a good short-term approach would be crypto arbitrage. But, before you build your portfolio, always talk to an expert who can give you personalized advice.
