Everybody is talking about crazy crypto success stories; some people are even talking about that the most significant wealth transfer in history is happening right now. Maybe you just heard about Bitcoin first time, or you know a friend how got rich and made some life-changing income because he forgot his Bitcoins that he bought a couple of years ago, and they are worth millions, or maybe another friend is making a steady passive income by mining or staking cryptocurrencies. They profit from the Crypto Industry and make money with Bitcoin or Ethereum, or some other digital assets.
It does not matter if you are close to the crypto scene or not if you have heard about this kind of story yet or not, everything is still fresh and just started. With this article, I want to give you an overview of the most common ways to ride the wave and make money out of Cryptos.
Of course, there were winners and losers; many people are losing money as well with their investments. There are many ways to make (or lose money) in the Cryptocurrency space; in this article, I give an overview of your possibilities and how to avoid the most common pitfalls.
Do not forget this article is for educational and informational reasons only, I am not your financial advisor. You need to do your market research; my content can give you an entry point to get started with that.
0. Know your limits
Everybody's situation is very different when it comes to
- how much money do you have available to invest
- how much time you can and want to spend on investing
- and how your risk profile looks like
I get asked how much money I need to get started, and I do not have a lot; does it even make sense for me to get started?
In my opinion, it does not matter if you start with 50 Euros / Dollars per month that you take away from your income, or you invest millions into virtual currencies and start building your investment portfolio. If you can not save more than 50 Euros per month, try to put that aside and start with that. Never play with money that you need to put food on your or your family's table, but try to pay yourself first and put at least 10 % of your monthly income away for your investments.
Let's look into the different and some of the most popular methods to make some Dineros. In many cases, Crypto Investors will combine some of the ways above or even switch between them during different market situations.
1. Hodl - Buy and hold your Cryptocurrency
The principle is simple you pick your favorite Cryptocurrency and wait. You are not checking the charts daily, do not need to get nervous if there is a 20 % correction and your investment is growing.
Let's have a look at how Bitcoin and Ethereum were developing over the years.
If you do not want to spend too much time researching and dealing with your investment, investing and HOLDING is an excellent way to start. A good practice does not put all your spare money for investment at once, but if you try to Dollar Cost Average (DCA) into the market.
💡 Why HODL? What does it mean, and where does it come from? On Dec. 18, GameKyuubi posted, "I AM HOLDING,". This was probably a typo, and he meant he would hold his Bitcoin long-term from that point on.
💡 Dollar-cost averaging is the process of spreading out an investment purchase by investing equal dollar amounts at regular intervals (e.g., as a monthly investment). Instead of buying a Cryptocurrency all at once, dollar-cost averaging involves portioning the purchase out over time.
You have $1200 USD to invest, and monthly you are saving away 10 % of your income away which is 100 $ a month; instead of putting $1300 into your favorite Crypto Currency, you decide to invest $200 every 1st of the month after getting a salary. In that way, you buy the average price over time, which can be essential to reduce the risk, especially in volatile markets like the Cryptocurrency market.
It would be best if you were a pretty good trader to beat the holding strategy in a market like the cryptomarket.
TIP: DCA is Recommended for beginners.
Depending on where you are located, there are also different ways of getting taxed for your Crypto profits. In some countries, the gains you make from Cryptos are tax-free if you hold them over a more extended period. In Austria, Crypto Profits are tax-free after having a currency for more than a year.
If you are more advanced in doing fundamental Analysis and Product research, maybe you can find a coin that you believe in in the long term, which can be the new Bitcoin from a growth perspective. In that case, it's a great way to invest early, maybe in the Initial Dex Offering (IDO) or even as an investor, and hold over a more extended period.
💡 IDO represents Initial DEX Offering. It is a community sale on a decentralized exchange.
💡 Retail investors are nonprofessional investors who buy and sells cryptocurrencies
Click here to visit Binance (one of the leading cryptocurrency Exchanges to buy cryptos), and purchase Bitcoin or another favorite coin.
2. Income through Cryptocurrency Trading
Cryptocurrency Trading means that you take advantage of the current market situation and profit from it. You could sell something now because its value has increased and then buy back later at lower prices.
The first rule of Trading is
Buy low and sell high.
Simple right? Unfortunately not as simple as you might think. Especially when you start and emotions drive your Trading, you will find yourself in a situation where you buy high and sell low. Just try to learn, and you will be fine.
2.1 Day Trading
Daytrading is not my cup of tea. First, it is pretty time-consuming, and you need to build some particular knowledge. It is time consuming, but also can be very lucrative.
Daytrading is basically if you sell and buy within one working day and try to capitalize on short-term price moments.
2.2 Swing Trading
The main difference between Swing Trading and day trading is the time window trades are open. With day trading, you are buying and selling within one workday.
If you are swing trading, trade can be available for a couple of weeks, but not more than a couple of months. Swing trading is less time-consuming than day trading and is mainly based on technical analysis (TA) and sometimes fundamental analysis. It is all about analyzing price trends and patterns and taking profits based on stop loss and profit target. This usually happens based on technical indicators or price movements.
With Swing trading, you are more exposed to overnight and weekend risk (in stock trading) since your positions stay open. If you are a beginner, be careful not to get wrecked.
💡 Technical analysis is an analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume. Wikipedia.
💡 Doing fundamental analysis in Crypto means taking a deep dive into the available information about a financial asset or cryptocurrency project. This can include looking at the Value Proposition, the technology the project is based on, the team, advisors, and investors behind the project, the Tokenomics, the competitions, and much more information.
3. Income through Crypto Mining - Proof of Work (PoW)
Mining is used as a metaphor for bringing new bitcoins into the network circulation. This requires a computational effort compared to the physical effort needed to mine gold, silver, or other precious metals. If you are Mining, you can earn Bitcoin in Exchange for your computational power instead of buying it for FIAT money.
💡 Fiat money is a currency (a medium of Exchange) established as money, often by government regulation. Examples are the US Dollar, EURO, or Mexican Peso.
Besides generating new Bitcoins, Mining is a way to confirm recent transactions by the network. This is crucial because there is no central instance like central banks, government entities, or anything else that can decide if a transaction is valid or not. Consensus is achieved through proof-of-work (Pow)
If you are Mining, you are trying to solve computational math problems, and the first one to solve this cryptographic puzzle is rewarded with the block reward paid out in Bitcoin. Miners who verify transactions help prevent the double-spending problem, which means that you help make it impossible to spend the same Bitcoin twice. This problem does not exist with physical FIAT money; if you spent your $10 bill at the shop to buy food, you can not spend it again and give it as pocket money to your kids. With digital money, this double-spending is theoretically possible. Miners are preventing that.
When everything started in 2009, it was possible to start mining with a regular home computer equipped with standard Hardware. Today you need a bigger initial investment to buy a high-end GPU (graphic processing unit), or specialized mining equipment called an application-specific integrated circuit (ASIC) to set up a mining rig and start Mining. Here at Cryptocompare, you can estimate how much Bitcoin profits you could make with your Hardware.
Today (27. Sep 2021), there are 18.827.787 of the total supply of 21.000.000 Bitcoin mined. Estimations say that the last Bitcoin will be mined around in the year 2140.
Is Bitcoin Mining still profitable?
If Mining is profitable or not depends on different factors, and most probably, you need to join a mining pool to have a chance. Besides Bitcoin, you can also mine other digital currencies like Ethereum, Ravencoin, Monero, Litecoin, and many more if you figure out that Bitcoin Mining is not profitable anymore for you. Be careful not every piece of Hardware is as good to mine for each of the coins.
Here are some factors to consider before you make your decision if Mining is for you or not.
- Cost of electricity: In most central European countries, the power prices are too high, so it is maybe not worth it to mine. Research the cost per kWh (kilo Watt hours) and make a calculation.
- The efficiency of your mining hardware: How much power does it consume? (in Watts)
- Mining Period: Over what period do you plan to mine? Calculate your break-even point. When did you pay for your initial investment and start making profits?
- Value of the Crypto Asset: What are the cryptocurrency prices of the assets you are Mining, do you believe in the project, and how will the price develop over time?
- Is it legal to mine in your country?: This depends on your geographic location. Bitcoin threatens classical fiat currencies and governmental control, a good reason for government authorities to try to regulate the markets heavily. There are and will be more regulations in place in the following years. Algeria, Bolivia, China, Colombia, Egypt, Indonesia, Iran, Iraq, Nepal, North Macedonia, Russia, Turkey, and Vietnam already have substantial restrictions for Bitcoin and Co. Do your research before starting.
Mining has risks but is an excellent way to get started with a passive income after putting down some money for the initial investment for Hardware.
Bitcoin consumes about 119.87 terawatt-hours per year, which is more than countries like the United Arab Emirates and the Netherlands consume annually.
4. Staking Cryptocurrencies - Proof of Stake (PoS)
Many modern cryptocurrencies are based on Proof of Stake instead of Proof of work nowadays.
After buying proof of stake and smart contract platform Cryptocurrency like Ethereum 2.0, Cardana ($ADA), Avalanche ($AVAX), Fantom ($FTM), Mina ($MINA), you can join a staking pool and get an interest rate (around 2 to 10 % annual return APY) or also run your Validator node if you are a bigger investor. Every coin has a different limit for running your node.
You can check out coins that have the best rewards at StakingRewards.com. Of course, higher rewards are better in general but be careful. At the same time, you stake your coins, and maybe you even have them locked up for some period, you can not sell them, so if the coins lose in value while staking, you may lose money even if you have a high yearly APY. That's why I wouldn't say I like to look at high APY and the coin's potential. The total return is yield + capital gain/loss.
Total return = Yield + Capital gain / loss
Stablecoins, in general, are the least risky but are also not gaining value.
Long-term investors see staking as a way to make their assets work for them and make capital gains through increased coin prices over time.
By staking your Tokens, you help to secure the proof-of-stake network. Proof of Stake (PoS) means that you can mine or validate more block transactions depending on how many coins you hold. That means the more coins you stake, the more mining power you have and the more rewards you get.
The first functioning use of Proof of Stake for a cryptocurrency was Peercoin in 2012 and Next in 2013. Some of the benefits of PoS are they are way more energy efficient than PoW; there is no need for specialized hardware to participate in the network. This could improve network decentralization.
What are the risks?
Of course, there are also some risks if you are staking your coins. Staking often requires some kind of lockup (vesting) period. This means that during this period, your Crypto can not be transferred or traded. If the price dumps and your Cryptos are locked up, there is no way to sell them before the end of the vesting period.
How to get started?
You can start staking on centralized Cryptocurrency Exchanges like on Binance, Kraken, Coinbase, BlockFi, Celsius Network, Nexo, etc. This kind of service is much easier for beginners than getting started with a DeFi solution. If you are a beginner, I would suggest getting started with Binance or another Exchange.
What you will hear a lot from experts is that you should not leave too much money on one single centralized Exchange, because "Not your keys, not your Cryptos," which refers to the fact that, when you signup with an Exchange like, e.g., Binance you are not getting your private keys, you are not holding your keys in your private crypto wallet, and if they get hacked or have another issue you can lose your coins theoretically. I would not worry too much about it if you get started, or at least it should not stop you from getting started. Just pick more trusted exchanges and set up the highest security setup available. (2 Factor-Authentication etc)
Also, decentralized Finance solutions (DeFi) have their risks and are not easy for beginners to get started. They can be hacked or even be a rug pull, and your investment is gone. You are fully responsible for your actions in the DeFi world. There is no central instance that can help you. Do not forget you are your own bank.
💡 Rug Pull - is a theft in which the owners of a cryptocurrency project abandon it after stealing investor money. The term vividly conveys the feeling of investors who were promised a bright future in cryptocurrency riches.
5. Helium Mining - Proof of Coverage (POC)
The Helium Blockchain is a new blockchain built from zero to create a decentralized, public wireless network. It is based on a unique algorithm called Proof-of-Coverage (PoC). People who help to develop this new network are rewarded with HNT tokens. HNT is the native Token of the Helium Blockchain. As a miner, you have to buy a Hotspot that provides and validates wireless coverage and earns HNT for that service. There is also a reward when devices on the network connect to the Internet through Hotspots.
How to get started?
All you need is a Helium Hotspot and an internet connection. After receiving the Hotspot (at the moment, there are long waiting times), you can just download the mobile App and activate your miner. The Hotspot will start transferring device data and earning HNT.
What are the costs?
The hotspots use radio technology and a not expensive GPU. Compared to PoW Miners, there is almost no electricity used. It uses around 5W (compared to a Graphics Card that uses 240W) per hour, which sums up to around 10 USD / year of electricity costs. ( calculated with 20c/kWh)
The price of the devices and different miners varies between $300 and $600 depending on the model you choose and in which region you are in. Be careful when choosing; for example, you need different models if you are mining in Europe, Asia, or America. At the moment, there are long waiting times to get a miner. (a couple of months)
The profitability depends on the number of miners in your area and the data transfer your Hotspot is handling.
How much can you earn?
At the moment, many Hotspots earn $1000 (some $2000) in a month, and it will not stay like this. Is it still worth it to start Mining, considering that you will wait a couple of months for your Miners after ordering them? The more Hotspots are going live, the less each Hotspot will earn. At the moment, contributors are incentivized to build the network.
Only in September 2021, 57.000 new Hotspots came online, adding up to 204483 hotspots worldwide. The location and state of the local Helium network are crucial when it comes to estimating the profitability per month. You can check the profitability of your region here at Helium Explorer.
To fully understand how the payouts are calculated, have a look here.
In my opinion, a great passive income opportunity to get started and generate a crypto income.
6. Invest Launchpads and Initial Coin Offerings (ICO) or Initial DEX Offerings (IDO)
The best way to make 10 X on your investment or life-changing income is to get in as soon as possible as an investor into the good projects, which needs a bigger investment most of the time or try to get in at ICO or IDOs of projects you like. To do so, there are a couple of different launch pads available where you can attend IDO's ( Initial Decentralized Exchange Offering).
Before you invest, you should do your own research about the project you are looking for or delegate the due diligence process to another party for you if an Exchange like Coinlist is listing a project to launch on their page. They already did due diligence for you. For smaller amounts, those investments are a no-brainer for me, after I did a little research myself. Here you can read more about Coinlist's past successes and new projects in the pipelines.
Almost every coin they launched made a significant increase, so it is comparable safe trying to get into one of their launches. The thing is that it is tough to get into one of the launches.
For the launch of the MINA Token, there were 375.000 people registered, and only 12 % came in. The motto does not give up. One of these investments can make a big difference.
There are also many so-called Launchpads in the decentralized world; almost every Blockchain Ecosystem has some of them.
Here are some examples can how you can attend the launches and what past successes.
Ecosystem: Ethereum, Huobi, Matic, BSC
Token: DAO Maker ($DAO)
Price: $2.69 (29. 9. 2021)
Minimum Holding: You need to hold at least 500 $DAO to enter the lottery when a coin is launching.
available at: Uniswap, Gati.io, XT.com
Daomaker claimes to be Venture Capital recreated for the masses. They are creating growth technologies and funding frameworks for startups while reducing the risks for investors. Notable here is that DAO Maker offers a Dynamic Coin Offering (DYCO), which gives you the chance to return your coins if you are unhappy with the performance. There is also something called Strong Holder Offering (SHO), which rewards long-term holders with allocations to sold-out projects.
Some of the most successful previous launched projects are:
- Vent Finance with a 42x increase to the All-Time High Return on Investment
- DeRace with an 86x increase to the All-Time High Return on Investment
- Infinity Pad with a 33x increase to the All-Time High Return on Investment
- My Neighbor Alice ATH IDO ROI: 318,43x
- Orion Protocol: ATH IDO ROI: 293,75x
Ecosystem: Ethereum, BSC
Token: Paid Network ($PAID)
Price: $0.54 (29. 9. 2021)
Minimum Holding: You need to hold at least 1000 $Paid to enter the lottery when a coin is launching.
available at: Uniswap, PancakeSwap
Some of the most successful previous launched projects are:
- Star Atlas ATH IDO ROI: 195x
- Aioz ATH IDO ROI: 185x
- Beyond Finance ATH IDO ROI: 175x
Token: Solanum ($SLIM)
Price: $2.27(29. 9. 2021)
available at: Gati.io, MEXC Global, Serum Dex
They are relatively new and just launched four projects, which made 8 to 37 X to their IDO price. This ecosystem is for sure hot and worth a look.
Some other established launchpads are.
Coming soon or new Launchpads
There are many more launchpads in different ecosystems coming up.
Some of them are:
- Occam is a launchpad on Cardano. Here is the information at Coingecko.
- Vent Finance is another launchpad where you can invest in early Cardano and Polygon Projects. Coingecko.
- Fantom Starter for investing in any blockchain like Bitcoin, Ethereum, Heco, Polygon, Binance Smart Chain, xDai, Fantom, Avalanche, and Fusion.
- Enjinstarter for games and Metaverse Tokens
- AnyPad Multichain IDO Launchpad
It's not very beginner-friendly to join the different launchpads. You usually need to hold the native token to join the lottery and have a chance to enter a Tokensale. It sounds like a hustle but it may be worth it to make life-changing money since the returns can be huge if you pick the right project and get in early.
7. Work in the Crypto area - Make money with Cryptocurrency.
There are many methods to earn Cryptos in Exchange for your work. You can sell your Services in Exchange for Cryptocurrencies e.g., through integrating a payment gateway that supports cryptos into your Website. You can work as a Solidity Developer and indirectly get paid through the Cryptocurrency Ecosystem; you can produce content and join Crypto Affiliate Programs or get paid in your favorite Virtual Currencies.
Cryptojoblist or even Upwork are many job pages where you can find a job paid in Cryptos. There are also some micro-tasks pages like CoinBucks or Bistro where you can do small tasks like filling out an online survey, test an app, debug a website, or something similar and get paid in cryptos. The options are endless.
Here are more platforms where you can get paid with digital assets.
Just figure out what suits you and start earning cryptos.
We went through a couple of methods to get started with Cryptocurrencies and make money with them. All of the ways we have been looking at have different difficulty levels, with some a more profound understanding is needed, and some are less other riskier. More experienced investors are most of the time combining different methods to invest. For example, HODLing and Staking combine nicely to generate a nice regular passive income.
A word of caution at the end be aware of Ponzi Schemes and Rug Pools. Do not get greedy and always do your research. If some return rates look too good to be true, have a closer look, especially MLM structures often use the new money to pay out cash to existing investors. Also, if anything is guaranteed, be careful; no investment is very 100% guaranteed.
Leave me a comment if this was helpful in any way for you; this truly can make my day.
Enjoy yourself and stay weird!
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