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There are many ways to make money from cryptocurrencies. The basic principle is somewhat anecdotal, dating back to the traditional markets - Cheap to buy, expensive to sell
. In the cryptocurrency market, finding a good time to enter the market
is almost an art, but by applying simple strategies you will be able to achieve a satisfactory return on investment. I invite you to read a comprehensive guide to making money with cryptocurrencies.
Cryptocurrencies are our future. But digital currencies are not just a revolution in the world of payments. It is also a huge technological advance - for all sectors. A voting system based on blockchain? No problem. A census in Cardano blocks? Nothing simpler. Windows paying washing robots? China has already demonstrated this...
Since the primary function of cryptocurrencies is payments, analogous to traditional currencies - FIAT - the easiest way to make money on cryptocurrencies is through exchange speculation (trading), which involves buying cryptocurrencies at a low, favorable price and then selling them at a higher price.
For the sake of simplicity, I will illustrate short and long-term investments with examples. Has it been possible to make money with cryptocurrencies since 2017? And how much can you earn with ... 100 PLN?
In 2017, as now - in 2021, many currencies were undervalued. We invest £100 in various projects in 2017, now we sell - how much do we earn?
By investing 100 zloty, or €25, in DOGE in 2017, we could have bought 125,000 units of this fun cryptocurrency. If we had sold it during the average bull market moment - missing the peak - i.e. for $0.32, we would have earned 160,000 zlotys, or about 35,000 Euro s. And that's for only PLN 100 in 2017! No investment would make such a return in such a short time, but the cryptocurrency market is an extremely dynamic place.
Unless...
In 2017, when ADA came out on exchanges, it was priced at $0.025. For 100 PLN / 25 EURO we could buy 1000 ADA. Selling this unique cryptocurrency now, we would see 11600 PLN, or 2530 EURO, in our wallet.
The exceptionally strong returns are not just embedded in 2017 investments - opportunities lurk on every doorstep, but you have to choose well. There were gems in 2020 too.
We hypothetically buy Solana in May 2020. It costs only $0.55. Again, we invest 100 PLN or 25 EURO. We only have 45 pieces of this cryptocurrency in our pocket, but we only paid 100 PLN. How much would we draw today? 1 SOL is valued at $77, so we already have 13800 PLN or 3000 EURO in our pocket!
Investing in an ICO (Initial Coin Offering) is a very popular way to make money among novice and advanced investors. ICO is the debut of projects, usually the first public offering and the first interaction with investors. Initial prices for cryptocurrencies are very low, so there is no shortage of people willing to participate in this type of event.
Even if you fail to get on an ICO, cryptocurrency exchanges are awash with young and undervalued projects. Many of them have the potential to catch up with Ethereum and, in time, even Bitcoin.
But how to distinguish a weak coin with no future (the so-called Scam, Shitcoin), from pearls like the aforementioned Solana and Cardano.
The value of a project comes from many factors, these are mainly the experience of the development team developing the project, the main originator, the idea and value that the project can potentially bring and the interest of huge corporations who see the project as useful.
These originators are often the stars of the cryptocurrency world. Knowing that at the helm of the project are such experienced developers as Vitalik Buterin, Brendan Eich, Charlie Lee, Justin Sun or Charles Hoskinson, investors are almost certain that the project is likely to succeed.
Equally important is the vision. Bitcoin, Ethereum, Cardano or Tron all came out with a specific vision and clearly defined ideas and goals set on a roadmap. Shitcoins mostly lack this. They lack functionality and very often... Their own code! Many of these weak cryptocurrencies are copies of existing ones. Many of them have comments in their code referring to the names of other projects.
Shitcoins are created to extract money from people who do not do their own research. Their value is based almost entirely on speculation. But despite this, thousands of people still decide to invest their capital, just because the cryptocurrency is small, cheap, but has ambitious plans - while they know nothing else about it.
Another way to start making money on cryptocurrencies is called arbitrage. The strategy involves buying an asset on one market (exchange) and selling it on another market where its price is higher at a given moment. In practice, this is a very simple way (at least in terms of how to make a profit) - imagine that you can buy Bitcoin on one exchange at a price of $10,000, while on another exchange at the same time the selling price is $10,100. How is this even possible?
There can be many reasons for this, but it is usually the result of higher volume and a temporary increase in demand for Bitcoin on one of the exchanges. This way of investing seems an ideal prospect, but in practice it is not so simple. On the one hand, the possible profit is relatively low (the differences between exchanges are small), you have to add transaction costs and the fact that we can never be sure if prices on the markets will not suddenly change.
Next on our list, a once incredibly popular way to make profits on cryptocurrencies is mining, or digging. This is a very important part of the decentralised peer-to-peer network that underpins cryptocurrencies, bypassing the central authority responsible for 'policing' the market.
Mining is the process during which transactions between investors are verified and information is given to the public blockchain registry. In the mining process, new cryptocurrencies or tokens are also introduced into the supply. Until a few years ago, for a relatively large group of people, cryptocurrency mining was a very convenient way to make money.
Today, however, the situation on the cryptocurrency market is somewhat different, and digging itself involves additional investments. In the first place, computers with above-average parameters are needed, which act as so-called diggers.
They differ from ordinary computers primarily in their graphics card, which must be powerful enough for the device to solve complex mathematical operations. Certain altcoin algorithms additionally mean that special chips called ASICs are increasingly needed for mining, devices that are tailored to mine a particular online investigation.
As cryptocurrency mining continues, the complexity of the mathematical tasks also increases. In addition to modern computer equipment, you also need a fast and stable internet connection for mining.
In addition, the work of such equipment consumes much more energy than standard computers, so the cost of power supply for one of them is at least several hundred zloty per month. Mining is therefore worthwhile when we have access to cheap electricity (preferably if we do not have to pay for it at all).
The role of the Market Maker can be read from the name itself - it is a person (or institution) that creates its own, separate market for its collaborators (clients). In this situation, it is the platforms that create the internal transaction market, and the broker does not act as an intermediary. The broker in this model is the other party to the transaction.
As a Maker, we create our own market, use prices from the interbank market, and add spreads (our own profit). This is an option that can only be used by experienced traders and experts who understand the rules of the market - otherwise you risk losing not only your own money, but also your colleagues.
The downside of such a venture is that sometimes there may be a conflict of interests between the trader and the broker. On the other hand, traders using such an option usually receive many interesting trading options (depending on the platform) such as stop-loss and fixed spread.
Masternode
What if we already own a certain amount of cryptocurrency assets? In such a situation, we can take advantage of several ways that (at least in theory) will allow us to earn extra money. One such option is to create a Masternode server, which will store a full copy of the blockchain of a given currency. In practice, we then become the owner of the registry, on which transactions made by other traders will be recorded.
To get started, we need to meet some rather demanding criteria. The basis is a computer with internet access and software that allows it to function as a server. Apart from that, a certain amount of a particular cryptocurrency is also required. What do we get in return? We earn small commissions for each transaction recorded on the server.
Cryptocurrencies offer many opportunities, so one solution is to borrow the cryptocurrencies you already own. This is one of the most profitable ways to make money from cryptocurrencies, but it is also... very risky, because the person on the other side of the screen may, after all, not repay the loan taken out.
If we need a bit more security, we can use SWAP contracts, but then we enter the sphere
similar to investing in classic currencies, which is associated with a much lower interest rate. It is also worth knowing that some cryptocurrencies pay dividends just for owning their assets and putting them on the market. Examples of such currencies are: QTUM, Neo, CryptoBridge, Komodo and KuCoin Shares.
An ICO, or Initial Coin Offering or IPCO - Initial Public Coin Offering, involves raising capital from people who have decided to back a particular cryptocurrency. The process usually takes place before the cryptocurrency sees the light of day and is available to all investors. People who decide to support a project usually contribute money in addition to spreading the word about the asset.
However, this is a somewhat controversial method as there have been several cases of fraud in history. Creating your own crypto involves working with a team of developers and a team that will develop it gradually. Effective marketing can make us quickly find people ready to support the project, but we should not do it if we are aware that the cryptocurrency being created is without future
, because then it is more like a scam than seeking help from investors.
However, one cannot present ICOs only in a bad light, because, for example, in the case of a small investment (about PLN 100) in the ICO of the NXT currency at its peak, we could earn several hundred thousand!
One more option, not directly related to investing your own money, is to teach others and act as a 'mentor'. Those with the knowledge, experience and evidence of the effectiveness of their strategies can begin to teach others and help them make profitable trades. Before becoming a mentor, it is necessary to be qualified - without this it is illegal to give investment advice.
However, if you have an idea to develop your brand and spread valuable information about cryptocurrencies, why not give it a try? However, you need to bear in mind that this form of earning often also requires resources to create a website, blog or social media profile, as well as finding a way to reach potential customers.
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