Cryptocurrencies attract many investors with their profitability. You can make money in a whole number of ways such as investing, trading, mining, arbitrage, ICO, issuing your cryptocurrency, or through a bounty program. We will take a look at the advantages and disadvantages of each and make a final verdict on which is the easiest, safest, and fastest way to raise funds with the help of crypto.
Trading cryptocurrencies can go either way: you can make insane profits or lose all of your money. It involves predicting the future price of a currency using different strategies such as day trading, swing strategy, and end-of-the-day trading strategy. Following relevant news and analysing technical data may also increase the likelihood of an accurate price increase prediction.
However, the degree of risk is high in trading. Moreover, you need to possess analytical skills and a keen eye for detail to become a successful trader. That is why this method is most suitable for advanced investors. Trading is also often used by companies that deal with crypto – it helps them avoid losses due to the volatility of crypto prices.
There is a certain risk factor in trading – the number of fraudulent crypto exchanges and brokerages. You need to be careful with where money is being invested. Coinbase and Binance are some examples of legitimate trading platforms.
While trading can mean large and quick profits, it also requires knowledge, skills, and high-risk tolerance.
Cryptocurrency mining involves a lower risk but requires a large start-up investment. It is suitable for beginners as long as you know the basics of setting up your computers and how a mining rig operates. Companies also frequently use this method as an additional source of profits.
The process involves using computer power and electricity/energy to create blocks that are added to the blockchain. Miners obtain a pre-set amount of a coin for each block mined. For example, for mining a block of BTC, miners get 6.25 bitcoins.
Mining has been one of the most popular ways to get BTC, but the drawback is that the mining reward decreases by 50% every four years. Plus, you need a large start-up investment, and you have to be the first to mine the block. Essentially, you are competing with other miners on who will be the first to solve the hash and get the block reward. So, the process is less stressful and less risky than trading but has its pitfalls.
Crypto arbitrage is available for both individuals and entities. It involves acquiring cryptocurrency at one exchange platform and then reselling it at another for a higher price. You can either follow the changes in price manually or use statistical arbitrage where you use bots and quantitative data models to execute multiple simultaneous trades automatically to maximise profits.
The important thing here is to be fast because if the time between the nodes validating your trade and you buying crypto on another platform is too long, the price difference may not be significant enough to give you profits. It is also important to choose the platforms with transparent and trader-friendly fees – large fees can significantly reduce your profit margins.
But if you are responsive, pay attention to details and are consistent with your efforts, this may be the go-to option for you.
ICO and IEO
ICO (initial coin offering) and IEO (initial exchange offering) are the fundraising tools for cryptos. These methods of earning on crypto are used by blockchain startups that need funds for the development of their projects.
An ICO is a fundraiser without partners, where the cost of marketing and attracting investors lies with the developers. An IEO is a method that uses a crypto exchange as the third-party responsible for evaluating the project, contacting investors, and distributing tokens.
Investors are more confident because seeing a digital asset token sale on a reputable crypto exchange renders legitimacy to a project. IEO projects are more likely to succeed and can provide marketing and development support. Investors have a more user-friendly experience with initial exchange offerings, which makes it easy to contribute.
Issuing Your Own Cryptocurrency
This method is only suitable for professionals and companies as it requires many technical skills and strong market knowledge. There is little start-up capital needed, but a lot of coding and development knowledge is required. There is almost no risk involved, but it is highly complex to set up.
Investing money in crypto and holding on to it is one of the most common ways to earn money since it has the lowest risk and does not require much expertise. To make the right investment decision, you need to consider the volatility of the coin, its technical basis, liquidity, and use cases. Investing in crypto is a great way to make money for both an individual and an enterprise.
You can either have a concentrated or diversified cryptocurrency portfolio, depending on your risk tolerance. A diversified portfolio has less risk but average returns, while a concentrated one can make you more money with higher capital investment and less research needed.
If you are a developer, investor or even just an experienced software user, you can earn money through a bounty program. A bounty is a reward to a participant in an initial coin offering for completing certain tasks targeted at promoting the coin.
The idea originates from video games, where people would test games for gifts and rewards. There are two types of bounty: pre-and post-ICO. The former gives a reward for social media promotional activities and the latter rewards product improvements like code bug reports and translation of crypto documents.
Bounty programs are somewhat of a legal grey area as they are neither proper marketing nor a pyramid scheme as such. However, they have been used by numerous projects, like Ethereum and Zcash, which proved successful.
Note that this method may be risky and can lead to unpaid work if the coin price never increases.
The crypto market offers various ways to earn money. Beginners may feel most comfortable with investing and holding as it only requires a basic level of knowledge. If you have technical and analytical skills and an eye for detail, you can choose trading or arbitrage. For a tech-savvy person, mining is a great way to make money, but only if you are comfortable with a large starting investment.
Bounty rewards for promoting the coin or helping fix bugs can also bring you some money but you have to have certain expertise in the required tasks. Companies and projects may benefit from issuing their coin and raising money through an ICO and IEO.