How to Make Money with Cryptocurrencies?

The content on this site is written by a few crypto enthusiasts. We all invest in digital currencies, have taken part in ICOs and one of us is trading professionally. However, nothing in this post should be taken as investment advice.

All the ways to make money with cryptocurrencies described here are legal and widely known, though. Before you plunge into any of these strategies, you should dive deeper into the topics. Buying anything without thorough background research and understanding what you are doing can easily result in throwing your investment into a black hole.

With all that said, crypto does present many interesting opportunities for passive investing, trading, etc. So let’s take a closer look at the various ways of making money with cryptocurrencies.

Buying & Holding

make money witch crypto investing

Long-term investing is by far the most common way to make money with cryptocurrencies. Doing a lot of research before buying anything may seem really tedious, especially considering the complexity of blockchain itself along with all the intricacies of each project. But it’s definitely necessary. Yes, also when buying Bitcoin.

Even if you cannot precisely tell which ones are more likely to succeed, it’s not always that difficult to find glaring red flags about a project only after a little bit of Googling. There are, unfortunately, quite a few money-grabbing projects lurking out there. So eliminating such projects from the scope can make the possible return that much better.

It is important to remember that the variety of projects come with different objectives and assess them accordingly. Whether they want to make the currency a form of financial payment or rather serve a utility like paying for data transactions makes a difference. The latter type of projects is pretty much all startups with some added risks compared to “traditional startups”. But often they can also offer larger and quicker rewards.

Holding, or hodling as the crypto community calls it, is simply investing some money in a project that you feel can actually accomplish something and waiting for a brighter future. If you choose this strategy, we advise you to keep away from trading in order to increase your stack. Although it seems easy and stories about others tripling the amount they are holding can be seen, there are more losers amongst people without any trading knowledge trying to do something they have no experience with.

It is also wise to allocate some money towards investing in crypto and buy with certain time intervals. While you may lose out on some gains, should the price rise just after your first purchase, you also bring down the effect a next-day -50% will have on your situation. DCA, or dollar-cost averaging, is the way to go here.

Crypto Index Funds

Don’t want to buy Bitcoin only but not sure what else to buy either? Crypto index funds may just be the solution for you.

Hopefully, index funds are not something new to you. If they are, here’s a short explanation.

Traditionally, an index fund is basically a collection of different stocks. The most famous is probably the S&P 500 which includes the TOP 500 US-based companies. Investing in an index fund means that you will now own a little bit of all of these 500 companies, reducing the risk compared to investing in single stocks.

“I believe that 98 or 99 percent — maybe more than 99 percent — of people who invest should extensively diversify and not trade. That leads them to an index fund with very low costs.”

Warren Buffet

The same principle can also be used with cryptos. Of course, you could also buy, for example, the TOP 10 digital currencies yourself without using an index fund as one of the large perks of traditional index funds is overcoming the otherwise large buying fees for each stock. Buying cryptos comes with significantly lower fees.

If you don’t want to make these choices yourself, a crypto index fund may be the ideal solution for you. One of the standouts in the scene is Crypto20 which includes the TOP 20 crypto coins based on market cap. Visiting the page also shows how the money is allocated, as it is not divided equally.

Crypto Coins with Passive Income

Cryptocurrencies that pay dividends

Another way of guaranteeing a passive stream of money with cryptocurrencies is by buying coins that pay “dividends”. Why quotation marks? Because this is not really the same as how actual dividends work – companies paying out money to shareholders based on financial calculations.

Crypto dividends are usually paid out to all holders, or people who are staking coins, at a fixed rate. For example, if you own NEO, you will start getting GAS, which is the secondary token in the system for paying for transactions. GAS has its own price that can be checked on CoinMarketCap, for example. The generation rate for GAS can be seen here.

Similarly to NEO, Vechain is another crypto project with a two-token system. Every VET holder gets VTHO, which is used for paying for transactions. VET itself has no real utility other than generating VTHO. You can how much VTHO is generated with a certain amount of VET here.

The VET calculator also shows different node levels. Anyone with at least 1,000,000 VET qualifies for a node and can start staking. This further increases the generation rate to maximise the potential.

Other coins that offer passive income generation possibilities include Komodo, Decred, PIVX, Tezos, NAVCoin, Neblio, etc. Each has its own system, as some start paying dividends right away while others need you to first buy a certain amount for staking.

An important thing to note here is that although the coins pay dividends and you are definitely earning passive income, you are still vulnerable to the overall fluctuations of the market. So getting a 3% yearly return on your coins may largely backfire if the crypto itself falls off the cliff to lose 80% of its value over the same course of time. Or overnight, as it is crypto, after all.

Mining

Mining cryptocurrencies
A proper crypto mining farm

This is the way many of us in this sphere started when getting into cryptos, as mining used to be easy and profitable at the same time. Nowadays, your old PC is not much good for anything. BTC miners are notorious for having huge mining rigs and out-competing each other using new tech and doing the work in places with low electricity costs.

So all that would need a huge investment. Still, there are other coins out there that do not need that kind of power to participate. Regular GPUs are sufficient to compete with the technology and bring in some income from mining alone.

There is another option as well. Mining without any hardware – cloud mining. This way you can basically rent hardware while paying for the electricity. All this is deducted from your returns or you can pay up from, depending on the service provider. Be careful when choosing to go this way because the space is still early and there are not many service providers around with a glowing reputation. The linked article brings out some of the more trustworthy ones, though.

Accepting Payments in Crypto

The crypto world has been looking for ways to spend the money as it was intended to but little to no adoption has followed. So one way to make money with crypto is just accepting payments in different digital currencies. This is true for both products and services.

Again, you are exposing yourself to the price swings but may be able to ask for a premium, as people do not want to go from FIAT to crypto and back to FIAT with their investment gains. And nobody forces you to hold the coins. You are free to sell them right after receiving the payment. If you don’t know where to do this, we have compiled a list of the best cryptocurrency exchanges in 2020.

One of the sure-fire ways to expose yourself to crypto payments is doing IT work for crypto companies. Besides IT work, you can just add crypto payments to a regular website selling stuff. Here is one way to open the gates to cryptocurrency payments. Promoting such crypto-accepting sites in crypto communities on the web always attracts a lot of attention and can potentially bring in many new customers.

Participating in ICOs

An initial coin offering means that a crypto project has minted some coins beforehand (e.g. 20% and the other is left for mining) and are selling them before going live. The money is used to fund the project. At least hopefully, because the ICO craze of 2017 & 2018 brought in a lot of money-grabbing projects who did nothing besides scamming the investors.

The bright side here, though, is that if the project really takes off, you are in before the others on the market. Hard-capped ICOs only accept a certain amount of investments before closing the doors and leaving many others waiting for the coins to hit the market. This way you may be able to sell your coins at a considerable return only after a few months of waiting.

Remember that participating in an ICO makes you basically something like an angel investor in the startup scene. These guys are throwing lumps of 10k at different projects, knowing full well that most of them will burn out very soon but the few successful ones will make up for that. And if they are lucky, the overall returns are many-fold.

So it may be wise to take a similar angle and first invest some time learning about the strategies angel investors use before investing your own money. Also, you are making your judgement mostly based on a few interviews, websites and LinkedIn profiles, should they have them. This makes it all the while riskier.

Trading Crypto

making money with crypto trading
ETH/BTC trading view on Binance

Trading cryptocurrencies can be extremely profitable. But it is also very risky. The average investor may grow impatient when holding his coins and start trading when seeing others make money even over the course of a bear market.

There are a lot of tutorials available online that help you learn the basics of TA (technical analysis). Knowing what these signals may represent is the basis of trading. These are by no means waterproof tactics but knowing where to put your stop-losses will help you avoid big crashes.

Beware of the plethora of Twitter gurus who are known to delete their past projections after announcing new market lows, only to see the opposite happen in a few days. There are no shortcuts here and the best way is not to rely on others but to learn yourself by starting trading with small amounts at first and notice why you are losing money. If the opposite happens, you are probably just lucky.

But why can it be extremely profitable then? Because cryptocurrencies are notoriously volatile. +20% in a few hours? Nothing spectacular, try 50%. And trading is not about catching the peaks or the lows spot-on. It’s about recognizing trends and patterns to assume with some certainty what could happen next. If you are able to do it correctly, it will definitely give you a huge advantage in a market flooded with a lot of people gambling away their money without being aware of any of that stuff.

There are a few different types of trading strategies. We’ll cover them briefly here.

Arbitrage trading

Arbitrage is something forbidden in many sectors, from traditional stock markets to sports gambling. Crypto is unregulated, so this is a straightforward way to make some easy money.

The concept goes like this. First you find an exchange that is maybe a little more obscure, meaning less liquidity which results in larger price fluctuations. As soon as someone fulfils a large sell order, the price of that asset may tank considerably because there are just so few buy orders. Now, as the price has fallen on this exchange, you buy in low.

As it’s only one small exchange, it has no impact on the overall market. You can just transfer the same coins to another exchange to sell at a premium or wait for the price to regain its normal levels on the same exchange.

Day trading

Day trading refers to a short-term trading strategy for quick but usually smaller profits that accumulate to make a considerable income. These trades can mean buying and selling in a span of a few seconds to a few hours. In principle, all trades should be closed by the end of the day.

Usually, these trades are meant to make a profit of around 1% and a similar portion of the overall stack is the maximum a trader should be betting a single trade. Common cryptocurrency trading exchanges are offering up to 125x leverage which can “wick” you out in a heartbeat. So you will need to adjust your stops according to the time frame you are trading.

Day trading requires mainly 2 things – knowledge and discipline. While studying the different patterns may be difficult for some, it is nothing to be afraid of. The patterns work as key inflection points, you just don’t know which way the sword is going to fall. Everything can be learned over time and experience will further cement the truths of appropriate response when the time is right.

But discipline is probably the harder part of trading, especially in the high leveraged crypto environment. Even 4h and daily candles can have massive retraces to your “ideal” entry only to stop you out thinking that the trade has reversed. What obviously happens is that the trade continues in the original direction and moves past the previous low or high, leaving you on the sideline. It hurts, as it sure looked like the move was done. This is where experience and discipline will pay off.

For a feeble mind, active day trading may seem nothing more than gambling and it can definitely feel the same, given the excitement rushes. If you recognize yourself, it is better to stay away. For more resilient people, it can be an interesting and enticing way to earn crypto without leaving home.

Scalping

The little brother of day trading. This approach needs a serious amount of commitment and a cold head. Scalping is a strategy mostly executed by professional trading firms like Star Beta who can benefit from the combined volume and therefore enjoy lower fees.

However, this does not mean that a single individual could not do this successfully. Quite the opposite, as this trading style requires a connection/feel with the market. You will be keeping an eye on the order book and evaluating what the bigger fish are up to at key price levels.

You will be looking straight at the heart of the trading engine. Once liquidity on either side is taken there is an actual intent, there is no lying, and most importantly, the information is not lagging. No indicator can beat the quality of the information you will be getting from the order book.

These trades are usually from a few seconds to minutes that will or can be converted to day trades depending on the continuation of the move.

This is where you can use higher leverage as your stop is almost always a push against your position. Which means that you will get your size off as soon as the push is over and you will enter again when the initiative returns. This is the part where you need a cold head as it could be as much as 10 times (why not more) of unsuccessful trying before the trade actually works.

You will definitely need to invest time to read the order book correctly. There will be a lot of “spoofing” (orders that are pulled as soon as someone is seeking that liquidity only to be lifted up or down after the push is over). You will also have “icebergs” (the orders that are sitting on the order book but are marked as invisible), etc.

This requires paying attention and dedication. It takes time to understand the mechanics of certain instruments or exchanges (e.g. Bitmex order flow is completely different from Binance although the underlying product is the same), but this is certainly something that every trader should know how to use regardless of the timeframe she is trading.

You surely want to be onside as soon as you enter and you surely want to take profit as soon as the move is over. This is why order flow reading skills are necessary. Especially in crypto, as the average leverage is high. Which means cascading moves (liquidations) are frequent and a single push/candle move can result in significant gains.

To take this a step further – think about what this means for longer time frame trading (day trades, swings). It sure won’t be beneficial as your stop needs to be wide exposing you to much higher risk. This is why scalping could be a great approach if you got time for it.

Crypto CFD trading

CFD stands for Contract for Difference. It is quite a new feature for the crypto markets but has been long established for traditional trading markets.

This is a more advanced way of trading because you can now use leverage trading and also profit during falling prices. Yes, this sounds fabulous because of the extra gains but is also adds another layer of complexity.

CFD is an instrument where you agree on a contract with a broker, saying that a crypto asset will either rise or fall. So it is not much different from betting really. You are not buying the asset, therefore it is that much safer (no hacks or complications with crypto holding).

Crypto Gaming

Yes, that’s right. You can earn crypto for gaming. We included it in the list just to not omit it completely. However, it does look something like “filling internet surveys for money” where a full day’s hard work can bank you $5. So we’ll leave it at that.

Affiliate Marketing

Another way of making money with crypto is doing affiliate marketing. Affiliate marketing means creating a website (a personal blog for example) that provides valuable content for users. In crypto terms, this can mean different cryptocurrency & exchange reviews, etc.

If you get it right and your website is generating organic traffic, you may be able to qualify for an affiliate deal. A site like Binance will give you a certain URL and if the links on your website start directing traffic that converts to paying customers, you get part of the profits. Let’s say you, the reader, create a user on Binance with our link and start trading, we will start getting a percentage of your trading fees.

The most difficult part is this – there are plenty of websites that provide crappy content but are masters at ranking on Google. All these black hat tricks make their domain powerful. Although they are largely forbidden and penalized by Google, there are certain sections like gambling where these sanctions do not apply. And crypto seems to be one of them. So good content alone may not be enough to outperform these sites.

At the same time, the content out there really leaves much to be desired. A lot of the posts are outdated, based on other articles that provide no insights and include a mess of “related info” that is not really important for the topic. Once Google decides to tackle this (and surely it will, with one of those infamous updates), you just may have a shot at this.

Keep in mind that creating these thorough posts requires significant research, though. Even if you know the answers to the basic questions regarding crypto, every project comes with its intricacies. Good content will not leave that unnoticed.

Crypto Faucets

These are websites that pay you small amounts of money for either completing some simple tasks like solving captchas or just viewing ads. Both BTC and altcoins have a variety of faucets available to make some money.

Admittedly, this is kind of in the same category as crypto gaming when it comes to earnings – you will not be able to pay your rent with the income it generates.

What’s in it for the sites, anyway? It’s just a simple way to promote your currency with low costs. Now these sites are heavily depending on ad placements and make most of their own income from there, paying you smaller amounts that they are getting through you clicking on the ads.

Blockchain Developer

Make money with blockchain coding

The IT crowd is in high demand everywhere. And blockchain is no exception. Creating a framework for new blockchain projects needs extensive knowledge and creativity to solve problems you cannot always find references for.

Although it may sound challenging, and it definitely is, it’s the perfect place for someone looking to put his expertise to its full use. And the compensation for that talks volumes about how highly these skills are regarded. The average salary for a blockchain developer is around $160,000 per year and can easily go higher than that. At the same time, the average salary for an IT engineer is around $137,000.

On top of that, compensation in the form of the native cryptocurrency to the project likely applies. Similarly to startup shares, you are able to pick up some of the speculative assets that just may reach the highs like seen before.

Can You Still Make Money with Crypto?

We all know about the 2017 crypto boom where the price of Bitcoin hit $20k. It was great and everyone in the cryptocurrency space is hoping for a similar run in the future. But the past should not be taken as a sure-fire indicator for the future.

Regardless, 10 years after Bitcoin made its market entry, the space as a whole is still in its early stages because there is little to no adoption and the prices are still largely (or entirely) based on speculation. Nobody knows for sure what will happen once the first blockchain projects with significant partnerships are going to kick-start to life.

So that alone makes for an interesting proposition when looking to invest in cryptocurrencies in long run. More and more types of cryptocurrencies are coming into the mix, each offering individual perks.

Other than that, trading does not really have much relation to the success of crypto as a whole, unless it’s going to zero. This is probably the most profitable way to earn money with cryptocurrencies, as you are not relying on anyone else doing their job excellently. It all rests on you.

Also, should the crypto market really come down crashing some time in the future, the same skills can be applied to other markets. Learning trading can easily (with commitment, of course) serve you well for times to come, with or without crypto.

Conclusion

So there you have it. There are several ways to create a flow of income with cryptocurrencies. These include everything from buying and hodling, active trading, mining to just selling services for crypto.

The Cinderella stories of getting rich quick are largely based on a few people managing to invest in the right currency at the right time. But most importantly, also cash in at the right time.

Other than that, these methods are still the good old ways, only in the crypto-sphere. And the last part is important because the possibilities for higher and quicker returns are evident. It’s just a matter of mindset. Do not try to be the next Cinderella. Taking crypto seriously as another investment tool can result in what you are looking for – making money with cryptocurrencies.