This post originally appeared on the Blockonomics Blog
Cryptocurrency is one of the fastest-growing industries in today’s market with a total market capitalization of $229 Billion USD.
If you already hold cryptocurrency there are several ways you can use it to earn some extra profits.
Let’s see how…
Invest and HODL
This method is perhaps one of the easiest ways to make money with bitcoin.
HODL a common slang within the cryptocurrency community means holding a cryptocurrency rather than selling it.
It originated around December 2013 when one of the crypto traders misspelled the term while using an online forum. Since then it has become a common occurrence in any crypto enthusiasts' vocabulary.
It is also interpreted as an acronym for ‘Hold On to your Dear Life’, said to describe the emotional rollercoaster ride one has to go through as a crypto trader.
Slangs apart, investing money into bitcoin and holding is actually a pretty nifty technique to see some returns.
In the past 10 years, bitcoin has proven itself to be a highly lucrative investment. The logarithmic progression of bitcoin shows that the coin is in an upward exponential trajectory.
Bitcoin Logarithmic Growth Curves [Source: Look Into Bitcoin]
If you invested in bitcoin 5 years ago on 14 Dec, your returns today would have been +4293%.
So, as you can see buying and HODLing bitcoin is a relatively easy yet lucrative way to earn some money using bitcoin.
But do bear in mind that this is a long-term strategy and carries heavy risk, so, do consider this before investing.
If you wish to buy bitcoin you can refer to this guide that will get you started in no time.
Trading
Trading is perhaps one of the most common activities seen within the cryptocurrency space. Majority of short-term crypto investors fall under this category.
Pros:
Crypto is a highly volatile market which makes it prime ground for traders to come in and use this volatility to make money.
It is easy to get started. Crypto trading industry is still highly unregulated which means that traders do not have to succumb to additional scrutiny and regulations to get started. One can simply sign up on a crypto exchange, complete the KYC, and get started.
Trading market is open 24x7.
Cons:
It is highly risky: Even though trading sounds like a fruitful opportunity with real earning potential, the reality is that is it pretty brutal. There is a common saying which goes like, “95% of traders lose money”, with 80% of traders quitting within the first 2 years.
It can get technical: Once you start using a trading platform you will realize that there is a lot of financial jargon at play there. It is always best to familiarise yourself with the platform and what the various functions represent.
So, if you have a knack for numbers and the ability to separate your emotions from making logical decisions then crypto trading might just be for you.
Some resources to get you started:
Crypto exchanges vary from country to country but the most common ones include:
Note: Please be aware of the risks involved with crypto trading. Crypto market is highly volatile and partaking in such activities can cause potential losses.
Staking
One of the lesser-known ways to earn some passive income using crypto is through Staking.
You can think of staking as an alternate to its more popular counterpart, mining.
Mining is the process through which coins such as bitcoin validate transactions and create new coins, it involves running complex mathematical problems that run on mining hardware, this method is called proof of work.
An alternate to this method within the crypto space is called proof of stake, which involves staking a certain amount on pre-minted coins in a node that is used to validate a new block on the blockchain. For every new block that is forged, a reward is added.
What is Staking?
Simply put, staking involves putting a specific amount of coin in a specialized wallet and holding it in that wallet. It is a very simple and straightforward method with almost all technical necessities taken care of by the platform that you are using.
Almost all major crypto exchanges allow you to stake coins and earn rewards from them.
Some popular ones are:
Lending
The concept of lending is strikingly similar to its fiat counterpart where banks/institutions give out currency loans at a specific interest rate for a period of time.
Think of lending as like loans given at interest but with crypto.
The same principle applies within the crypto market, where you can deposit your crypto to be given out as loans to people while you earn extra money from the interest generated on that loan.
There are many platforms that allow you to lend your crypto but do make sure to do your due diligence before using a platform.
A few points to look for when deciding a crypto lending platform include:
Interest rates: What interest rates would you earn from your loan.
Security: Do make sure the platform is reputed and employs strict security protocols to eliminate scammers & hackers.
Supported currencies: The platform must support the currency you wish to loan out.
Here are some popular lending platforms you can use:
Conclusion
Cryptocurrency is a great way to earn a living or make some extra cash on the side. There are plenty of options for all types of audiences and given that it still in its early stage the future looks pretty promising.
If you are looking to make some passive income then HODLing, lending, staking are some of the options you can choose from.
But if you are looking for a more active income source then go with trading.
Whichever option(s) you choose do make sure to do proper research and the associated risks involved before getting into it. Crypto is a volatile and nascent market and the risks involved are often times high.