Cryptocurrencies are touted as the newest, easiest way to make money online – simply buy some Bitcoin or another coin, sit back, and watch the money roll in, right? Unfortunately, though this may be true sometimes, it’s not exactly easy money. If you want to start making money from cryptocurrencies. Here’s how people actually do it – so you can decide if it’s worth your time and effort.
Cryptocurrencies are skyrocketing in popularity and value, and the world is watching with bated breath as their number of users rapidly increases. While it’s become more common knowledge that cryptocurrencies exist and that people are making money from them. Many people still wonder how exactly these transactions take place. What types of people make money from them, and how they can do so themselves. If you’re one of these people, or if you just want to know more about cryptocurrencies in general. Check out this article for the truth about how people actually make money from cryptocurrencies.
- Table of Content
- 01. Mining Cryptocurrencies
- 02. Day Trading Cryptocurrencies
- 03. Investing in Altcoins (other Cryptocurrencies)
- 04. Investing in Other Blockchain Startups
- 05. Earning From Arbitrage
- 06. Developing Altcoins, Smart Contracts, and Dapps
- 07. Investing in ICOs (Initial Coin Offerings)
- 08. Staking Crypto For Passive Income And More Rewards
01. Mining Cryptocurrencies
This is a somewhat misleading term, as it conjures up images of people with pickaxes and shovels digging for gold. But it’s generally easier than that: you need only a fast computer and specialized software to mine cryptocurrency. These miners solve complicated mathematical problems to unlock blocks of transactions on the blockchain, collecting transaction fees in return. This activity is referred to as mining because it resembles a physical mining operation, But there’s no need for heavy machinery or excavation: just fast computers and strong software skills. Once you’re set up with hardware and software, mining cryptocurrency can be a fairly straightforward process.
02. Day Trading Cryptocurrencies
The crypto day trading community has grown considerably in recent years. Whereas before cryptocurrency speculation was only limited to people who had a very high-risk tolerance, traders now have more choices. They can choose between shorter time frames and different exchanges that give more insight into price movements. Some exchanges even provide basic analytical tools like trend lines, levels, volume indicators and other elements that can be used to gauge a cryptocurrency’s price movement. The sheer variety of exchanges also means there are lots of places where traders can sell their coins once they’ve bought them (and in general, research your options before you buy). With so many options, it’s easier than ever for inexperienced crypto-investors to get involved with digital currency.
03. Investing in Altcoins (other Cryptocurrencies)
As an investor, you’ll want to buy your cryptocurrency outright from a broker and store it safely in cold storage. Like trading, any other type of security, investing in cryptocurrencies will cost you money. Every time you buy a coin, there’s a chance that you’ll make or lose money. We’ve found that investors usually lose money when they invest directly into coins instead of buying them through some sort of exchange. In fact, many market analysts suggest that trading coins is one of the riskiest investment strategies possible. Instead of selling coins right away after you invest in them, why not hold onto them for 30 days at least?
04. Investing in Other Blockchain Startups
The most common way of making money from cryptocurrencies is by trading. And one of the best ways to do that is to invest in other blockchain startups. You see, with initial coin offerings, there are two types of people: investors and developers. Most ICOs are financed by investors who buy cryptocurrency tokens offered by a startup at a cheaper price than what these tokens will be worth when they’re launched on an exchange. The price goes up once you cash out your tokens into an exchange because they can then be sold to someone else who wants to buy them and make money from them; in essence, they become valuable as they begin to appreciate (hopefully) in value over time.
05. Earning From Arbitrage
One way that investors can make money from cryptocurrency is by purchasing a single coin and then earning interest on it. They might be able to earn more money than they initially invested. Investors often seek out arbitrage opportunities in markets where they believe they can buy coins cheaply, transfer them to exchanges, and sell them at higher prices later on. The following example uses bitcoin but is similar to all cryptocurrencies: As of mid-2018, one could have purchased approximately 0.071 BTC for $5,000. If that same investor waited until January 2019 to sell it, they would have received $6,400 (assuming there was no change in price). That’s an increase of more than 43% in 10 months! That’s pretty substantial!
06. Developing Altcoins, Smart Contracts, and Dapps
Most cryptocurrencies begin their lives as a new platform, like Ethereum or Waves. Developers write a white paper—like a business plan—and use it to fundraise. They also create a native currency to run on top of their platform. ICOs are mostly done through Bitcoin and Ether, which was how Ethereum raised more than $18 million in 2014. But other types of cryptocurrency can also be used to fund projects; Lisk, for example, uses its own cryptocurrency called LSC to pay coders and developers who work on its platform. All these currencies create competition for Bitcoin by providing new ways for people to buy things or earn money online with less risk and expense than using Bitcoin or other cryptocoins directly.
07. Investing in ICOs (Initial Coin Offerings)
Most people get involved in crypto by buying Bitcoin or another top coin. Then they hold it, hoping that in a few years they’ll be able to sell their holdings for enough money to buy a house or pay off student loans. If you want to skip over those steps and make some real money right now, one way to do so is by investing in ICOs (Initial Coin Offerings). In short, an ICO is a way for a startup to raise capital by selling coins (similar to shares of stock) directly to members of the public. By bypassing banks and venture capitalists as middlemen, companies can often raise more money than from other traditional sources. Some have raised tens of millions of dollars within hours–or even minutes–of beginning their sales.
08. Staking Crypto For Passive Income And More Rewards
One way to make money with cryptocurrencies is staking—and it’s not just for people with a ton of money. The process involves setting up a wallet and leaving cryptocurrency within that wallet, either on an exchange or in your own personal cold storage. This serves two purposes: It encourages users to leave their cryptocurrency untouched while they use it (or figure out how to spend it), and rewards those who stake their cryptocurrency by providing transaction fees from others using it as currency.