You might have heard about people who made a killing in the crypto world. Are these days over or is it still possible? What approaches can you use to profit from crypto?
The world of cryptocurrencies is still relatively new, it is evolving very fast, and brings in opportunities that have never been here before: coins, tokens, mining, trading, arbitraging, ICOs, staking, tokenization, etc. Let’s have a look at these possibilities a bit more.
Profiting From Coins and Tokens
Many people profit from crypto by investing in promising coins and tokens. Coins and tokens are usually established and traded on exchanges. Investing in coins and tokens can yield profits if traded regularly. Long-term holders can profit too. A textbook example is Bitcoin where the price went from about $0.01 in 2010 to an all-time-high price of $19,783.06 on December 17, 2017. Some other cryptocurrencies saw similar appreciation in just a few years.
It is important to keep in mind that the crypto market is still quite new, which is connected to higher volatility. Watching for the bottom to buy at the lowest price, and looking out for the high to sell at the highest price, might not be the most rewarding strategy.
Profiting From ICOs
ICO (Initial Coin Offering) is a fundraising process in which a company seeking capital will offer investors an opportunity to invest in their company by purchasing their cryptocurrency coins or tokens. The ICO offer price is (hopefully, but not guaranteed) lower than when the coin is listed on an exchange.
A new coin or token can be offered through several sales phases: Private Sale, Presale, Public Sale.
Private Sale, with the highest possible discount, usually applies to larger investors who are given an opportunity to purchase a new token before it is offered to the general public. Presale, with a bit of a lower discount, takes place before the new asset is finally made available to the general public at Public Sale. After that, the price of the asset can still grow considerably.
The biggest wave of ICOs seems to be over, at this time. But new projects are coming up and it isn’t unreasonable to follow the news. Conducting due diligence is the key here. In case of a high-quality project, the gains from an ICO can be extremely interesting. Investors using ICOs to generate profit in crypto can see their investment grow quickly.
Profiting From Trading On Exchanges
Trading cryptocurrencies on crypto exchanges is similar to trading stocks and shares on traditional stock exchanges. You place a buy order for a certain coin that you then sell at a later time, profiting from the rise in the value of that coin.
This method of profiting in crypto is open to market fluctuations. There is very little you can do to influence any outcome. The lack of governance in crypto also makes it more open to market manipulation than traditional markets.
Some traders rely on technical analysis (TA) to help them assess statistical data on price changes and traded volume. TA can be useful to see patterns and trends that may be taken as trading opportunities. The con is that crypto assets are relatively new, thus the trading history might be quite short for a telling technical analysis. One negative comment from a media outlet can impact a coin’s price, at least in the short term, and there is no way to predict this. That’s why traders also use fundamental analysis, focusing on evaluating the strengths of an asset.
Profiting From Arbitrage Between Platforms
There are many crypto exchanges or platforms to purchase cryptocurrencies. Arbitrage is a practice where a trader takes advantage of a price difference between two or more markets: The trader buys an asset in one market and sells it on another market, profiting from the price differences.
Arbitrage is considered a low-risk investment because the period in which the price could fluctuate is very short. Still, good timing is the key here. To profit from arbitrage, you need to be able to transfer your asset from one exchange to another exchange fast to take advantage of price differences.
It should be noted that the crypto space is quite volatile at the time being, and trading or arbitraging cryptocurrencies only increases this risk for an absolute crypto beginner.
Profiting From Mining
Crypto mining is another area that can be a source of profit, but it requires a higher initial investment capital. The miners “validate” the work on a blockchain, for example, by confirming a transaction on the blockchain. Mining is the proof-of-work approach. The alternative to this is the proof-of-stake approach.
You will need to set up a crypto mining “rig” which utilizes a combination of computer hardware and software to validate transactions through the blockchain of a cryptocurrency.
In return for validating transactions, the miner receives a reward of the mined coins. It takes some effort to set up a mining rig and incurs continuous expenses, since you will need to take care of maintenance and pay for the electricity to operate the rig.
At the start of Bitcoin, mining was possible just with the CPU of your computer. Later on, graphics cards were used. After that, the demands rose to FPGA boards (Field Programmable Gate Array) and then to the most costly ASIC miners (Application-Specific Integrated Circuits). So, it is important to count all the costs to see where you break even and start to be profitable
Getting Paid in Crypto
Getting paid in cryptocurrencies can be extremely attractive in countries with very high inflation, such as Venezuela, Argentina, etc. In case you get paid, for example, in a stablecoin (such as USDT), you can preserve the purchasing value of your wages much better than in your inflationary national currency. Alternatively, you can get paid in a cryptocurrency that you expect to appreciate.
Wages in crypto is a logical way in technological companies that use cryptocurrencies. This smooth, borderless means of payment is also attractive for freelancers working both locally and internationally. Some examples of how you can get paid in crypto:
- You can get paid fully in crypto.
- You can get a certain percentage in crypto.
- You can get crypto retirement payments.
- You can get bonuses and non-regular compensations in crypto.
You can also receive contributions from donors from all around the world in multiple cryptocurrencies. Just post all your crypto wallets/addresses on your website. Since blockchain is a public ledger, your donors can always see online what has already been donated.
Profiting From Staking
Instead of a term deposit with a very low interest, you can make use of staking: Hold and keep your staking tokens at the exchange which can give you around 10% per year, and even more, depending on the asset. Of course, you need to conduct due diligence to choose a quality staking token that will not lose its value in the long run. It’s a good idea to look for tokens that are useful, that bring in some features desirable for the users. For example, with DEXFIN (DXF) token, traders save 50% on their fees.
Profiting From Tokenization
You can also profit from tokenization – a new form of crowdfunding for companies. Tokenization makes it possible to divide one ownership right (e.g. to a manufacturing plant) into individual tokens. Thus, it is very easy for investors to support your business venture by buying a fraction of the shares of your company in the form of tokens. You can profit as a company owner by getting the needed financial support from the new investors. And you can profit as an investor by acquiring tokens of companies with meaningful and interesting projects, products or services.
Many Ways to Profit From Crypto
Investing in cryptocurrencies can be profitable in several ways. To profit in crypto, you can mine cryptocurrencies, trade cryptos on crypto exchanges, invest in ICOs, invest in coins and tokens, make use of arbitrage opportunities, get paid in cryptos, make use of staking and tokenization, and receive contributions in crypto. There can be some more ways where investors and businesses can utilize crypto to their advantage, but the above are the main methods currently in play to generate profits from crypto. Hopefully, some of these will work for you too.