Cryptocurrency has changed the world of finance forever, with new and groundbreaking methods for profiteering in a number of ways. Profiting with Bitcoin has ranged from early adopters to today — more sophisticated traders. But with its high volatility and complexity, it is wise to know the various methods and strategies of this market before getting involved. This article aims to list down some of the major methods wherein one can do proper money by using cryptocurrency with a better example and, more explanation in detail.
1. Buying and Holding (HODLing)
It is the simplest and one of the most widely-used techniques to earn money in crypto world. The act of buying cryptocurrencies to hold onto in the long term, with hopes that the value would eventually rise is called HODLing.
Example:
Think about purchasing 1 Bitcoin (BTC) back in 2015 at $250. Had you kept that Bitcoin until today when it is valued at well over $30,000.00 the return would have been +12,000%. This is what I call HODL!!!!!!!….. its the patient waiting for future profits.
Explanation:
To HODL is to hold onto the belief that prices of certain cryptocurrencies will rise astronomically in the future once they become more mainstream (adoption), are improved upon from a tech point-of-view, or by economic trends like inflation. This yields, which have historically been huge for early Bitcoin and Ethereum investors can also carry significant risks due to the volatility of markets. Cryptocurrencies tend to quickly depreciate after a price increase, so you need to have nerves of steel and advance planning.
2. Trading Cryptocurrency
HODLing is a more passive way to earn profits in the market compared to trading cryptocurrency. Attempt to profit from short-term price changes caused by volatility in the market, buying and selling digital assets. The trade can be performed manuall and also by passing through the automated systsems of bots with algorithms.
Example:
You might purchase Ethereum (ETH) at $1,500 believing that the price will rise. Ethereum then jumps to $1,800 a couple of days later. Now you can sell your ETH at a whopping $300 profit per token. Through consistent trading experienced traders can accumulate great gains overtime.
Explanation:
Buy and Sell Same Day for short term profit.
Swing Trading: Moving assets in excess of a few days, hopefully catching wide price variations.
Scalping: exploiting minimal price alterations to make multiple transactions in one day.
Trading can be very lucrative but you need to know what is going on, read technical analyses and often require a lot of time. To address these issues, traders take advantage of charting software and technical indicators along with risk-minimizing stop-loss orders.
3. Staking and Yield Farming
Staking is the process of locking part of your cryptocurrency holdings to support blockchain network operations. In return, you get rewards — most commonly more cryptocurrency. Yield farming, on the other hand, is when you lend your cryptocurrencies to earn interest or rewards over decentralized finance (DeFi) platforms.
Example:
For example, let’s say you stake 10k Cardano (ADA) in a staking pool that returns 5% per year. This allows you to receive a 500 ADA reward on an annual basis, and your bag will grow over time incrementally without actively trading or selling.
Explanation:
Staking refers to a process commonly executed on PoS blockchains like Ethereum 2.0, Cardano and Polkadot. It is among the easy ways of making passive income within a week with less risk compare to trading. Yield farming, more complicated, places liquidity into pools within Uniswap or Compound. You can also receive rewards like UNI or COMP (usually governance tokens) by depositing liquidity. On the one hand, that can provide extra returns as reward for yield farming but also represents risks like impermanent loss and smart contract compromises.
4. Mining
Mining: The ancient but traditional way of generating income from cryptocurrency During the early days of Bitcoin, anyone would be able to mine it using their computer power by solving complicated mathematical problems verifying transactions on the blockchain. When solving the problem, you use your computer’s CPU and GPU Mining occurs in diferent coins.
Example:
For example, let’s say you created a mine from ETH with some GPUs Your mining rig would produce 0.5 ETH per month, with all of the electricity costs plus hardware expense and pool fees deducted With Ethereum at $3,000 each that translates to a monthly revenue of $1,500.
Explanation:
Even if you go the industrial route with mining, this has fast become a harder way to accumulate cryptocurrency as it becomes more competitive. This means competition: Today, smalltime miners can no longer compete against large-scale mining operations that now dominate the Bitcoin network. But for some cryptos, you can still turn a profit by being one small fish in an ever-expanding sea of bigger ones. Cloud mining became widespread as well: it is when a person rents out the capacity of his miners, rather than incurring capital costs by owning hardware.
5. Airdrops and Forks
Airdrops is to give free cryptocurrency tokens for all users as a marketing strategy or network upgrade. Forks are essentially what happens when a blockchain divides into two, often leaving those with the original coin holding coins on both chains.
Example:
Launched via a hard fork from Bitcoin, back in 2017. They had equal amount of Bitcoin Cash to their respective number of Bitcoins and could decide if they wanted to either sell or hold that BCH. This has led to windfall profits in some instances for those who exited prior.
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Conclusion
There are several ways to make money from cryptocurrency, ranging from the more passive approach of HODLing crawling over towards a bit more active spectrum such as trading, staking and yield farming. All approaches have their trade-offs and it is important to make an informed decision by doing sufficient research on these subjects before allocating your capital.
To an absolute novice or seasoned investor, diversifying how you approach cryptocurrency and being knowledgeable with crypto trends will increase your chances at making a profit. Remember that the market is SURREAL and you are never safe from going to bed at a profit then waking up in loss. Top risk versus top awards for sensible investing
