What started with Bitcoin in 2009 has now become a $2.5 trillion industry. One of the fastest-growing asset classes in financial markets as we enter the 2020s in terms of value and adoption is cryptocurrency. The year 2020 saw more retail and institutional investors enter the cryptocurrency market than at any other point in the industry’s decade-long history.
As the market grows, so do the available opportunities. In the past, there were limited ways people could earn money from cryptocurrencies. However, the introduction of new services and products have increased the range and number of opportunities open to you to make money from Bitcoin and other cryptocurrencies, and not only by investing or trading.
Read on to find out some of the ways you can make money from crypto, including but not limited to investing or trading. If you already know what cryptocurrency is and how it works, skip the first section below.
What is Cryptocurrency and How Does it Work?
Cryptocurrency is cryptographic, digital currency that operates through a decentralized blockchain technology network. Cryptocurrency coins are secured by cryptography, making it virtually impossible to counterfeit them or double spend. What makes cryptocurrencies unique is that they are not issued by central banks or governments, usually have a defined supply which cannot be arbitrarily extended and are (so far) relatively free from government interference and manipulation. As such, many believe that cryptocurrencies represent a superior store of value to fiat (government issues) currencies, and as such are likely to rise in value in terms of fiat currencies, giving traders or investors an edge on the long side.
Cryptocurrencies are designed to enable secure payments online between two parties. Cryptos operate in a peer-to-peer manner, with no intermediaries. They work using blockchain technology, in which every computer involved in cryptocurrency transactions plays a role in managing and recording transactions, making registry fraud extremely difficult to execute.
Top 10 Ways to Make Money with Crypto
There is a surprisingly wide range of different ways you can make money with cryptocurrency:
Buy and HODL
If you were to ask a random person with little crypto knowledge how to make money with cryptocurrency, the first answer you will receive is to buy and hold. This is because it is the most popular way of earning money from the market. It involves buying Bitcoin or other cryptocurrencies, hodling it for a few months or years and selling it when the price increases. The investing strategy here involves doing your research and identifying a coin you believe has the potential to experience a surge in value within a few months or years. However, before you can do this, you will need a wallet to store, buy and sell the coins. You can buy the coins from cryptocurrency exchanges and transfer them to external wallets for safekeeping.
While most investors focus on the bigger coins such as Bitcoin, Ethereum, Litecoin and Bitcoin Cash, there are thousands of other altcoins with growth potential within the market. You only need to conduct in-depth research and find excellent projects with promising coins or tokens.
Day trading cryptocurrency has become an obvious and favourite way to make money from crypto. Although potentially very rewarding, this is extremely hard to do, with a large majority of people attempting it losing rather than making money. Unlike long-term investing, cryptocurrency trading (especially day trading) requires either extremely strong analytical and technical skills, or nerves of steel and a preparedness to endure long and deep losing streaks. As a trader, you will need to forecast short-term price movements in cryptocurrencies using technical analysis and possibly other analytical tools and have the confidence to put your money where your “mouth” is. With the crypto market’s volatility, you can make huge profits from day trading, but you can also suffer big losses if you get it wrong continuously.
Crypto mining involves programming a computer of minimum technical specifications to solve complex mathematical problems to unlock and receive new coins and approve transactions on a blockchain network. Mining is only applicable to the proof of stake cryptocurrencies like Bitcoin. As a miner, you are rewarded with new coins after unlocking a block on the blockchain. However, this way of making money with crypto requires huge investments in hardware and electricity. Anyone can mine Bitcoin if they invest enough resources into it, but it is very challenging to do so in a profitable way: if it costs you more than the current value of one coin to mine it, it is pointless to mine. For some time now, most individuals have not been able to mine profitably – this requires a large-scale operation.
Earn Cryptocurrency Dividends
This way of making money from crypto is directly linked to buy and HODL: once you are holding, you can receive dividends. Some cryptocurrencies pay users who buy and hold the coins for a certain period. COSS, CEFF, NEO and KUCOIN are some of the cryptocurrencies that pay owners a dividend. Unlike staking (covered below), you don’t need to hold the coins or tokens in special wallets to put your crypto holdings to work.
Run Cryptocurrency Master Nodes
A cryptocurrency master node maintains a real-time record of a blockchain’s activities. Unlike regular nodes, master nodes are not tasked with adding new blocks of transactions to the blockchain. Rather, their job is to verify new blocks and carry out some special roles in governing a blockchain. However, keep in mind that operating a master node is expensive and involves running costs which could exceed the reward. Operators of master nodes are rewarded with coins, usually a share of the block rewards.
Staking is like holding and earning dividends. However, the process differs as staking involves holding coins within a special wallet and earning coins as a reward. Usually, staking your coins adds liquidity to a network and ensures its increased usability for others. As a result, you can earn money by adding liquidity to the network.
As an unregulated market, it is sometimes tough to have a uniform price for an asset across hundreds of exchanges and trading platforms. Crypto arbitrage involves you taking advantage of tiny, split-second price differences between the same cryptocurrency asset on different platforms to make money. You buy the asset or coin at the lower price on one exchange and sell it at the higher price quoted on another crypto exchange. If done properly, you can make profits from the price spreads across the exchanges, but it is very challenging and requires special hardware and software to give you a chance of executing the trades quickly enough to work.
This is not a widely popular way to make money from cryptocurrencies. However, it still works. A crypto faucet is a reward system that operates on a website or an application. The qualified users are rewarded with free Satoshis (the lowest denomination of Bitcoin). The rewards are given to users after they complete a few set tasks.
Create Cryptocurrency Content
You can make money from cryptocurrency as a cryptocurrency content creator. The crypto market is growing and evolving, and lots of websites are looking for crypto writers to publish. If you are doing your own analysis to trade or invest in crypto, you already have a product which you might be able to monetise. You can make money by creating a video or written cryptocurrency content. It can be news, tutorials, in-depth articles, blog posts etc. Cryptocurrency podcasts can also be successful in generating interest.
Getting involved with an airdrop is another way you can earn from cryptocurrency. You can earn free coins or coin tokens via airdrops, which are usually done to generate awareness. A crypto exchange might offer an airdrop to active members of a particular blockchain community to generate awareness for a new project or new feature it is about to launch.
The Best Cryptocurrency Strategies for Trading or Investing
During their so far short lifespans, cryptocurrencies have exhibited dramatic price trends, very high volatility, and huge increases in value. This means that the best-performing cryptocurrency trading or investing strategies are the ones that are best aligned to benefit from these price properties of cryptocurrencies.
Traders or investors need to be aware of what vehicles are available to get exposure to cryptocurrencies and how much you need to trade in them. It is possible to buy or sell cryptocurrencies directly, speculate long or short with Bitcoin futures (although the margin required for just one micro futures contract may be too high for many traders) and CFDs (only a few other cryptocurrencies are available as CFDs), and from October 2021 it has been possible to invest in a Bitcoin ETF with exposure to Bitcoin futures.
Long-term investors will probably have most success by researching cryptocurrency in general and then drilling down into individual cryptocurrencies to determine which have the best growth potential, and then buying that cryptocurrency when it reaches a new multi-month high price in fiat currency terms. Investments should be kept small as a percentage of liquid capital, because many cryptocurrencies have more than halved in value in a matter of days. A big question for investors is when to get out when an investment goes bad. For example, you might decide that when the cryptocurrency you have invested in falls in value by 25% from its peak, it is time to get out. The beauty of this stop loss strategy is that it can also be used to tell you when to take profit.
For more short-term traders, trend following has worked very well with cryptocurrencies, especially the major ones. The other feature that can help bring trading success is the fact that cryptocurrencies, being very highly speculative, tend to respect key support and resistance levels. Taking trades in the direction of the long term, multi-month trend from bounces off key levels can be the basis for an extremely powerful crypto trading strategy.
Cryptocurrency as an asset class may see some big ups and downs over the coming years, but it is almost certainly here to stay for the foreseeable future. While investing and trading cryptocurrencies will remain the most popular and straightforward ways to profit from crypto, there are several other ways to engage with crypto to earn some money that you might also find suitable for you and interesting to pursue. Of the eight methods outlined above beyond trading or investing, the most interesting possibilities for you are likely to be earning dividends from holding the few cryptocurrencies which pay owners dividends, staking, faucets, or creating cryptocurrency content.
What are the most popular cryptocurrencies?
Some of the most popular cryptocurrencies include Bitcoin, Ethereum, Litecoin, XRP Cardano, and Bitcoin Cash. However, there are many other cryptocurrencies available to investors and traders.
Are there other ways you can make money from crypto?
Yes, you can work for crypto companies if you have the skills they require. You can also become an influencer or an advertiser for a cryptocurrency project and get paid for your work.
Do I need to spend to make money from crypto?
Yes, in most cases. An initial investment is required in virtually every aspect of the crypto space. You need money to invest, trade, set up a mining operation, stake or lend, and even to operate a master node.