Make Money With Cryptocurrencies: 7 Real Methods in 2022
Are you looking to earn income with Cryptocurrencies? Without guidance, finding the right option could be tricky as there are so many methods and it's hard to keep up with what's new in the world of digital assets.
That is why the objective of this guide is to guide you on how to earn money with Cryptocurrencies in 2021. We are going to see real methods in detail, but first, we will review a basic difference between the different types of income.
Active Income vs Passive Income in Crypto
The ways to make money with cryptocurrencies that we are going to talk about are possible but require some effort and dedication.
For this reason, it is important that the method we choose to obtain returns on our capital adapts as best as possible to our personal characteristics according to the knowledge, experience, and time available to us.
One of the things you should keep in mind is that there are active and passive income systems. Each of the methods is closer to one extreme than the other.
- Assets are those that require you to do something to generate income. A clear example is intraday trading.
- Passives are those that require virtually no action on your part. An example of this type would be getting money by depositing our cryptocurrencies in an exchange.
Here we present 7 different ways to get returns on our capital actively and passively that really work, each presenting different degrees of difficulty.
How to make money with Bitcoin and Cryptocurrencies
Let's now see the best real methods of making money with cryptocurrencies today.
- Buy Cryptocurrencies to invest
- Trade Bitcoin and Cryptocurrencies
- Look for cryptocurrencies that can be mined profitably
- Earn rewards by staking
- Get returns on your money with Decentralized Finance (DeFi)
- Invest in NFTs or digital art
- Create an investment portfolio with Stocks and ETFs.
Read on to learn about each of them in more detail.
1. Buy Cryptocurrencies to invest
This type of investment consists of buying the cryptocurrencies with the most future and keeping them safely waiting for them to increase in value over time. Later we would sell them to obtain profits with the operation.
It is the most basic way to get returns for our money and is known in the crypto world as “hold” or “accumulate”.
The idea is to analyze different cryptocurrencies using fundamental analysis, technical analysis or both methods. Subsequently, we proceed to the purchase of the digital currencies that, according to our research, have the greatest potential for revaluation and thus we will create an investment portfolio with the aim of growing the capital over time.
Bitcoins and other cryptocurrencies can be purchased at exchanges or exchange houses, such as Coinbase or Bit2me.
Once purchased, the correct thing to do is store them safely by sending them to a cryptocurrency wallet. Some examples are Trust Wallet, Electrum, Trezor, and Ledger Nano.
An interesting way to buy cryptocurrencies for Holder is through a DCA (Dollar Cost Average) strategy. It basically consists of buying an asset periodically (daily, weekly, fortnightly or monthly purchases) so that we obtain an average purchase price for the chosen currency.
2. Trade Bitcoin and Cryptocurrencies
Cryptocurrency trading consists of operating on the movements that occur in the different cryptocurrency pairs.
These price fluctuations can occur in pairs of a cryptocurrency against the Dollar (BTC/USD, ETH/USD…) or between a cryptocurrency against another cryptocurrency (ETH/BTC, XRP/BTC…).
The main differences compared to investment are:
In trading, operations are kept open for shorter periods of time.
By trading, we can make profits both if the price goes up (going long) and if the price goes down (going short).
Traders primarily focus on reading charts using technical analysis.
But the most common is to use other methods of analysis such as the fundamental, study of the news, onchain metrics, and other indicators to evaluate the behavior of the price of an asset.
To make money trading cryptocurrencies it is important to develop a strategy with a long-term positive expectation, manage risk, and control emotions so that you can consistently make profits.
To trade Bitcoin or Altcoins we operate through an exchange like Binance. But it is also possible to do it through a traditional Broker since we have several financial instruments on which to operate, the most important being:
Spot market: where you go and exchange one currency for another.
Futures contract market: agreement to exchange an asset on a pre-established date and price.
Contracts for difference or CFDs: they allow operations to be carried out on price movements without owning the underlying asset.
3. Look for cryptocurrencies that can be mined profitably
Cryptocurrency mining is a proof of work process that consists of validating and recording transactions in the block chain or Blockchain, in such a way that new cryptocurrencies are produced or issued.
Some define it as creating coins in exchange for earning them.
In theory, this is a decentralized, third-party-free, and tamper-proof process.
Currently, mining is a highly professionalized industry that requires a lot of investment. For this reason and in my opinion, it is the least recommended option when it comes to making money with cryptocurrencies since it is increasingly difficult to find cryptos that can be mined profitably without making a large investment in equipment.
4. Earn rewards by staking
Staking consists of receiving rewards for leaving cryptocurrencies blocked on deposit in a wallet or wallet. This method offers double earning potential through price appreciation and dividend payout for your locked coins.
We basically keep our crypto locked in a wallet which allows you to earn additional coins for securing that particular crypto network.
Some examples of coins that can be blocked are Tezos (XTZ), Cosmos (ATOM), and Decred (DCR).
5. Get returns on your money with Decentralized Finance (Defi)
Not depending on centralized financial intermediaries is the reason for the existence of decentralized finances ( Decentralized Finances or DeFi ) and has been the next step in the process of decentralization of money as we know it today.
Having been born in the Ethereum Blockchain, DeFi comes to constitute an entire open financial ecosystem that includes digital assets, protocols, smart contracts ( smart contracts ), and decentralized applications ( dapps ). It is a whole world within another world, in which financial tools and services can be built on a small scale and in a decentralized way.
The DeFi ecosystem offers endless platforms that allow, for example, to obtain interest on our cryptocurrencies, request credits, or exchange currencies in a decentralized way.
In the case of wanting to get returns on our money, we would focus on platforms that passively give us interest. Some examples are Compound, Curve, and Maker.
However, if we want to earn interest in the simplest way possible, it is best to do it through exchanges like Binance that allow us to obtain returns when depositing our cryptocurrencies. As a negative part, we must indicate that we do not have custody of our money (it always happens when using a centralized exchange).
6. Invest in NFTs or digital art
It could be said that non-fungible tokens (non-fungible tokens or NFTs) have been a real boom in 2021. Also known as crypto art, it is a special type of cryptographic token with a special feature: it is indivisible or unique.
This being the case, NFTs have come to represent much more than a new digital fashion option for collectors, conferring value on almost anything that can be created and attributing unique traits to it.
The way to make money with NFTs is simply to buy them to sell them at a higher price once they have appreciated in value.
If you want to know more about these types of assets and how to invest in them, I invite you to look at this article in which I explain how to invest in NFTs.
7. Create an investment portfolio with Stocks and ETFs
Finally, we are going to see how we can have exposure to the cryptocurrency market without buying them. The two most common ways would be through publicly traded companies and through ETFs.
In reference to stock companies, the clearest example is Coinbase (COIN), which was the first company in the crypto world in the entire history of the United States. Other companies with exposure to cryptocurrencies include Riot Blockchain (RIOT), MicroStrategy (MSTR), and Square (SQ)
On the other hand, we have the ETFs (Exchange Traded Fund for its acronym in English), a kind of traded index fund, which makes it a hybrid between an investment fund and a stock. Buying shares in an ETF means buying a basket of securities, just like a traditional mutual fund, but it trades on the stock market just like a stock.
Some examples of ETFs with exposure to companies related to Bitcoin and Blockchain would be the Nasdaq NexGen Economy ETF (BLCN) or the Purpose Bitcoin ETF (BTCC).
Finally, we must refer to the Grayscale Bitcoin Trust (GBTC) that basically works like an ETF although it is not (it is an investment fund). Buying their shares from us would be exposed to variations in the price of Bitcoin without having them in our possession.
CONCLUSION
In this article, we have talked about how to make money with cryptocurrencies in the easiest way possible.
As you have been able to verify, there are plenty of ways and options to obtain profitability from our capital. And as days go by, the industry matures even more and new opportunities are created if we pay attention to them.
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