5 ways to make money with cryptocurrency
2021 was the year of the second boom of cryptocurrencies after 2017. Many investors entered the market, and NFTs and metaverses made their way into all the headlines. But how much and where to invest? The crypto industry can be difficult for beginners, so we have prepared a guide to invest in cryptocurrencies with five ways to earn money.
Bitcoin is the first cryptocurrency in the world. It has existed for more than 14 years, and its price is getting higher and higher every year. Who do you think earned more during this time – those who bought and did nothing for a long time, or those who bought and sold, devoting several hours every day to this?
The answer is not obvious — those who bought and “forgot” about their asset most likely earned more. Having invested $100 at the beginning of the last decade, now this capital would be more than $30,000. This approach is called HODL. Hold and don’t sell. Most analysts expect the main cryptocurrency to rise to at least $100,000
By the way, this strategy works not only with bitcoin. The second cryptocurrency by capitalization, Ethereum, grew 40 times from $120 to $4,000 in 1 year. Many may think that these cryptocurrencies have nowhere to grow further. It always seems that way when reaching All-Time High, and so far, it has always been wrong. Therefore, the HODL strategy is still relevant.
Mining is when an investor, using special equipment, keeps the network working and receives a reward. Roughly speaking, the investor converts electricity into cryptocurrency. Many coins can be mined through mining, and bitcoin is one of them!
Initially, everything was mined independently. But independent mining is no longer mining cryptocurrencies from your home PC. Now it is a way of earning for those who have good capital. To buy modern equipment, you will need $16,000+, but you need to find a miner in stock.
You do not have such capital, and electricity is expensive? It’s okay because most investors have been using cloud mining for the last five years. It is a service in which you do not buy equipment but rent the capacity of the provider’s equipment. You pay a small commission of the service, but it is still 20% more profitable than the usual purchase of cryptocurrency.
What happens if you combine HODL and mining? You will get a cryptocurrency alternative to a bank deposit. In the case of mining, to maintain the network, you need to perform calculations and spend electricity constantly. For staking, you just need to buy a cryptocurrency and “freeze” it (as in the HODL strategy).
This way of maintaining the network is called Proof-of-Stake (PoS). As part of it, new blocks are created by cryptocurrency holders. They are also called validators. Moreover, the reward for producing a new block is distributed among the validators evenly by the number of cryptocurrencies that they “frozen.”
As a result, you will passively earn from 5% to 20% per annum without making any effort. Your money works for you and attracts additional income. Yes, this is not such a high income, but the risks of losing capital are minimal. Therefore, this type of investment is more suitable for the most conservative crypto investors.
If staking returns seem low, you might want to look into decentralized finance (DeFi) lending. DeFi is an industry of financial applications based on blockchain technology. Lending in them occurs automatically and is protected by smart contracts.
DeFi makes lending transparent and accessible. It is gaining immense popularity because borrowers do not need to go through a scoring system and contact the state machine. It is enough just to register on the platform.
The total value of DeFi protocols is over $50 billion. So it is a huge and promising market. But before lending through DeFi services, be sure to check their hack history. Ideally, they shouldn’t be.
In the traditional economy, promising companies raise funding for their projects through IPOs. However, cryptocurrency has its own alternative to this approach, and more than one! ICO, IDO, IEO is an opportunity for projects to issue their tokens and raise funding using cryptocurrencies.
Investors are usually among the first to try to buy tokens. After all, if the project is excellent, its price may soon increase several times. Investors often track new token sales on the Coinlist and Huobi exchanges.
After the cryptocurrency has risen in price, the investor can decide which strategy to follow next. Someone immediately fixes the profit, but others use the HODL strategy, which we wrote about at the beginning of this article.
It is hard to realize that you had the opportunity to increase your capital by 2000 times but did not take advantage of it. Therefore, it is important to know about all the ways to invest in cryptocurrencies and use those that are more suitable for your risk profile. So, learn cryptocurrencies, invest, and do not regret the lost profit!