How to Make Money by Trading and Investing in Cryptocurrency

Investing in cryptocurrency can be intimidating for newcomers, but this guide will show you how to make money with cryptocurrency via various strategies.

  1. Three Ideas for Making Money with Cryptocurrency

  2. Investing Your Money in Cryptocurrency

  3. Earning Cryptocurrency

  4. Conclusion

 

If you’re looking for a way to make money online, investing in cryptocurrency and trading on exchanges is a fantastic option.

More and more people have turned their hand to cryptocurrency investments in the past few years. One of the most popular cryptocurrencies is Bitcoin, though there are plenty of others out there to consider. Bitcoin’s value has fluctuated again and again, which means anyone trying to make a major profit from their Bitcoin investment may have been disappointed.

Situations like that can prompt people to ask whether they actually stand to benefit from investing in cryptocurrency, and the answer is yes! People who really understand the market and its movements continue to generate profits. And you’ll be in a better position to join them by the time you’ve finished reading this post.

This comprehensive guide is designed to help you understand what that means, how you can get started, and everything else you need to know.

Three Ideas for Making Money with Cryptocurrency

It’s easy for beginners to assume there’s some magical secret when wondering how to make money with Bitcoin and other digital currencies online seeing as it’s all virtual. They may think they can start generating big bucks without putting any effort into the process.

However, you need to invest your time and money into cryptocurrency to see real revenue. Yes, cryptos open the door to new opportunities, but it’s not the quick fix newcomers may expect.

You can make money via cryptocurrencies in three ways: investing; trading; and earning.

Before we start looking into the more complex details of how to make money with Bitcoin and other cryptos, here are the main benefits and drawbacks of investing and trading:

Investing

Advantages

  • Anonymous investments

  • Autonomy for a more streamlined experience

  • Quality trading software available

Disadvantages

  • Risk of theft

  • Potential security worries

  • Fears over mismanagement

  • Volatility

Trading

Advantages

  • Trading cryptos is convenient

  • Real mobility

  • Rates can fluctuate to your advantage

  • More brands accepting cryptos

Disadvantages

  • You’re unable to trade every hour of the day, so could miss opportunities

Earning

Advantages

  • It’s easy to start earning cryptos once you’re set up

Disadvantages

  • A lot of time and attention required

  • Payments can take a while to come through

  • Can be difficult finding a suitable project

Investing Your Money in Cryptocurrency

You can try investing in cryptocurrency in multiple ways: passive income; arbitrage investments; or long-term investments. Each offers its own benefits — some demand substantial investments, and others are ideal for investors with minimal starting capital.

There are disadvantages to consider, too, as our lists of pros and cons below show. One of the biggest overall factors is that cryptocurrency isn’t recognized by many state structures, and while the lack of centralized control is a huge draw for most users, it also means any transactions involving Bitcoin or other cryptos are done entirely at your own risk.

Another potential issue to consider is cryptocurrencies’ high volatility. This can vary from one day to the next. Beginners may start to panic and lose capital when even a minor downward trend occurs.

Let’s look at each of the crypto investment methods mentioned above.

Passive Income

The term passive income refers to a source of income that requires no maintenance from you. For example, holding stocks’ dividend payments could be regarded as a passive income.

Basically, this is typically sourced from, say, a partnership or a rental property. Passive incomes may also come from being an investor in a business with no input required.

Deferred compensation can be taxable (and often is), while experts believe “portfolio income” is passive income, so dividends and interest could be considered passive.

Surprisingly, few traders realize that cryptocurrencies are a dividends source. How can you generate additional passive income from the cryptos in your own wallet? There are certain similarities to the more traditional financial market techniques, such as owning shares that pay dividends or owning a bond that charges fixed interest from time to time.

Pros

  • Certain cryptocurrencies pay investors dividends of between 5 and 10 percent each year

  • If the price of the coin increases over a period of time, you could generate bigger profits

Cons

  • When investing in cryptocurrency with large amounts, there’s a real risk of losing money

  • Constant diversification of deposits is required

Cryptocurrency Arbitrage

Crypto arbitrage is another strategy discussed when people ask how to make money with Bitcoin or other cryptos.

Arbitrage between multiple trades is generally the most transparent trade type, as it’s similar to Forex arbitrage and sporting trades. The concept at its core is simple: investors aim to benefit from cost differences for a similar coin across various exchanges.

As an example, let’s say one exchange sells a crypto coin for $7,000, while another sells it for $9,000. You would want to take advantage of these different exchange rates to generate some revenue. But you would have to keep the commission on each trade market in mind before trying this!

There are a number of key factors to consider when comparing cryptocurrency arbitrage to trading:

  • You may find selling at certain times of day easier or harder, depending on your regional time zone

  • Liquidity is crucial, too, as market interest differences affect costs; prices vary on trades settled progressively, unlike on new or small ones

  • Values differ when a cryptocurrency is recorded on one of the major exchanges, such as Binance

Making Money by Trading Cryptocurrency

One of the most popular ways to make money from cryptocurrencies is trading. It’s not too different from, say, trading shares or valuable metals.

The main aim is to purchase at the lowest price you can and sell at a higher rate, to generate the best profit possible. But the big difference between crypto trading and stock markets is the exchange rate’s high volatility.

Trading involves placing money on a short-term stock: traders buy and sell quickly to generate higher revenues. If you miss the right time to make the purchase or sale, you could end up with a loss. Experienced traders know to survey the company’s present results to achieve better prices and short-term profits.

On the other hand, investing means keeping away from market trends and focusing on value instead. Investors are playing a long-term game and monitoring their stocks closely. They’re waiting for stock to reach its highest potential patiently.

The most common trading strategies offering the best profits are:

  • Intraday trading

  • Swing trading

  • Scalping

  • Position trading

  • Trend trading

We’ll explore each of these in closer detail further down the page to show you how to make money with Bitcoin and other cryptos. But before we do, we want to emphasize that you should never choose a trading strategy at random. You need to analyze the potential outcomes and issues before you try to make money.

Think about:

  • The initial capital required for making trades

  • How likely a strategy is to inspire rash actions

  • If the strategy is a suitable match for your psychological approach

You might find analyzing your own suitability for a specific trading strategy difficult, so consider speaking with experts to calculate the risks and help you approach crypto trading smartly.

Here are the pros and cons of trading cryptos:

Pros

  • 24/7 bidding

  • Entrance fees usually low

  • Independent of the world economy and politics

  • Volatility is high

Cons

  • Losing your deposit on a poor technique is possible

  • You need to understand how blockchains work

Intraday trading

Brokers in the securities exchange can purchase offers from the free market to achieve their trading goals. The offer cost will go up or down as the market does. Brokers who manage to cash in on this market can generate impressive profits.

However, things can go wrong. Intraday trading essentially refers to buying and selling offers within a single day, so you should think about intraday trading carefully before you try it.

While there are odds that point to reaping big rewards with intraday trading, it can be dangerous too. You have to square-off your situation ahead of 3.10pm, so if you have bought a lot of stock, you would need to sell it before that time arrives.

Pros

  • Simple to know the chosen strategy’s profitability

  • Money management is easy

  • Low risk of losing whole deposits

  • No commissions to worry about

Cons

  • Intraday traders are required to watch the market all the time

  • Patience and accurate planning are essential

Swing trading

This type of trading aims to catch stock gains over a number of days or even weeks. Swing traders typically rely on technical indicators to spot opportunities for trading, and they may utilize fundamental analysis as well as analyzing market trends/patterns.

Swing traders usually look for opportunities day to day, watching charts covering varying time frames.

Pros

  • Less time-consuming than day trading

  • Increases momentary benefit by catching market swings’ central parts

  • Dealers may rely on specialized investigations to make sense of the trading procedure

Cons

  • Trade positions are reliant on medium-term and end-of-week showcase hazards

  • Unforeseen market inversions can lead to significant issues

  • Swing traders often miss out on longer-term inclines for momentary market movements

Scalping

Scalping strategies are incredibly popular with cryptocurrency traders. This can be a confusing area, though, for newcomers looking for easy information on how to make money with cryptocurrency.

Scalping strategies may be based on interpretations of current news on financial markets, but tend to revolve around technical analysis too. These are quick deals for purchasing and selling cryptocurrency during a time in which prices changes remain insignificant, as brief as one minute.

Traders can open many positions each day, and this strategy is popular with people unsure how to profit from cryptocurrencies.

Scalpers may execute thousands of trades within a specific period of trading, and techniques involved in scalping are characterized by these factors:

  • Profit margins are small

  • Leverage is high

  • Short positions

Scalpers are known to target price differences and additional loopholes in short-term exchanges. This helps them turn large positions for profit quickly. Scalping also enables traders to accrue practical experience within a short space of time. There’s real potential for high profitability with scalping strategies, but earnings tend to be low on average.

Big trading companies and banks’ investment departments often use scalping. These have access to experienced trading experts, a lot of money, and automated trading software. These programs (bots) can buy and sell cryptocurrencies without manual input.

Pros

  • Scalpers can trade with small deposits

  • No complicated analysis is required, and losses will be offset by transactions that turn a profit

  • There’s no need to wait, as scalpers always have a way to trade

Cons

  • With scalping strategies, there’s a thrilling nervous tension: you have to make fast decisions and open new positions frequently

Position trading

It’s fair to describe position traders as “trend devotees”: they tend to feel that trends will probably extend over a long period once they begin, rather than vanishing quickly. Position trading usually covers larger time frames than scalping.

Position traders aim to catch the most significant parts of a trend’s movement, which may take a long while. As a result, this means position trading is the reverse of day trading, which is intended to take advantage of transient changes in markets. Position trading is also different to swing trading, though both obviously rely on following trends.

Position traders may use specialized analysis to settle on trading decisions. Furthermore, they typically rely on macroeconomic variables, real examples, and overall market patterns to pick speculations they believe will help them achieve their goals.

Pros

  • Position traders can calmly wait for price levels to reach their target points

  • This strategy enables traders to monitor occurrences in markets and make changes as required

Cons

  • In-depth market knowledge required to plan an effective strategy

Trend trading

Trend trading involves taking advantage of upturns where values will reach new heights or downtrends where values will descend to new lows. Upturns see swing highs and swing lows get progressively higher, while downtrends involve progressively lower swing highs and swing lows.

Trend traders utilize various instruments, such as specialized markers and trendlines to identify trend courses and, potentially, see trade signals. They use value activity and other special tools to predict a trend’s course.

Pros

  • Trend traders can pinpoint market entry and exit points clearly, to get the most out of movements in price and reduce risks

  • There are plenty of strategies and trend indicators

Cons

  • The reliability of trends hinges on the time frame: the older it is, the more dependable it will be, though its formation will take longer

Earning Cryptocurrency

For a lot of people, purchasing and selling cryptocurrency is similar to visiting a casino. There are thrilling ups and downs, with real potential to come out on top.

Many with an interest in cryptocurrency believe it’s the future, and the right investments will lead to big earnings over time.

So, let’s think about how to make money with cryptocurrency with help from online technologies. But bear in mind: if you’re looking for ways to earn with cryptocurrency, only risk funds you and your family can afford to lose.

Mining cryptocurrency

This alternative to investing in cryptocurrency involves extracting it instead.

Cryptocurrencies are the result of data exchanged between millions of people online, a process demanding immense computational power. So-called “mining farms” facilitate mining, with the simplest comprising a suite of powerful video cards linked together in one system running special software.

Crypto mining is best for people who feel comfortable with cutting-edge computers and related tech, and who have the money to spend on high-end gear.

Pros

  • Potential for great profit thanks to the growth of cryptocurrencies being mined

Cons

  • Major ROI on tech/components necessary

  • Energy bills can be high

  • Requires constant system monitoring

Cloud mining

You can also earn from cryptocurrency by purchasing other users’ mining capabilities.

Pros

  • No need for massive investments

  • Return on payments can be fast

Cons

  • Commissions to receive funds can be big

  • If a site is closed down, you could lose your investment

Working in exchange for cryptocurrency payments

Some companies are now using cryptocurrencies, like Bitcoin, to pay their employees. However, workers receiving crypto-based salaries are representatives of ICO projects, crypto brands, and blockchain companies.

They’re more prone to adopt innovative approaches and would welcome a cutting-edge form of payment. And companies may lack the fiat funds required to pay workers in the traditional way.

Cryptocurrency salaries are also an effective way to help promote a company if the tokens paid out are related to a specific project.

In the United States, for example, they have the Bitwage payroll service. This was launched in 2014, and enables employers to process payments internationally via national and digital currencies, specifically Bitcoin, Litecoin, Ethereum, and DASH. In total, 25 coins are supported by this service. Such major brands as Google, Arbnb, and Facebook are regular users.

Many businesses based in the US and Europe tend to pay employees across Latin America in cryptocurrencies. This is because their national banks don’t offer a dependable infrastructure for making transfers internationally.

Furthermore, services dedicated to helping executors ready to work for cryptocurrencies are available. These include BitGigs, Dream, and Coinality. If you’re looking for crypto-paying jobs, try Crypto Jobs and Crypto Jobs List.

Faucets & Micro Tasks

What are faucets? These are sites awarding you cryptocurrency if you complete certain tasks. For example, this may be entering data into a captcha input field under specific circumstances.

The coins available through faucets vary. You could get what appears to be a lot of money, but once it’s exchanged into fiat money, doesn’t actually seem like much. Make sure you’re happy with the compensation a faucet offers.

Micro tasks are an easy but time-consuming way to get Bitcoin or other cryptos. You will visit a special site at which advertisers ask you to accomplish goals, such as clicking banner ads. They will pay you a small number of coins in return.

As you may have already realized, faucets and micro tasks are only really viable if you have a lot of free time.

Pros

  • Potential to earn without investing funds

  • Possible to make money in your spare time

Cons

  • Profits can be very small

  • Can take months or even years to earn coins

  • Demands a lot of your free time

Crypto affiliate marketing

Working with a cryptocurrency affiliate marketing system is basically the same as a standard affiliate plan. You find a cryptocurrency afficialte system you want to join and connect to them.

The rest should be fairly easy to understand as you start working, but the main aim is to refer others to buy specific products or try certain services. Any payments made to you should be in cryptocurrency.

Conclusion

There’s high potential to earn a nice profit with cryptocurrency, though there are some risks to consider too.

Your outcome typically depends on your knowledge, your experience in financial markets, your strategy, volatility, etc. But let’s not forget that, sometimes, luck plays a huge part too. When exchange rates grow substantially within a short period, such as Bitcoin has in the past, a limited collection of people can reap the rewards.

Now, the cost of business components and competition in crypto trading has risen significantly. Medium to large businesses are stepping into the mining market, and more people are trading on crypto exchanges worldwide.

So, if you choose to try crypto trading to make a profit, we suggest you do your research and explore automation software solutions. These can help you save time, conduct trades round the clock, and achieve a better trading experience overall.