How to Make Money in Crypto

The crypto market is full of profit-making opportunities, but in order to take advantage of these opportunities, you need to understand how they work.

Cryptocurrencies are a highly volatile asset class, so it’s easy to invest your money in crypto and lose it quite fast if you’re not careful. Before engaging in any crypto investment activities, you should take the time to learn the characteristics of different cryptocurrencies and how the market works.

In this guide, we’ll explore the most popular ways to make money in crypto. We’ll find out how each of these methods works, their upsides, and potential risks. 

The Best Ways to Make Money in Crypto

Investing and Holding Crypto

Probably the most popular method for making money in crypto is by investing in digital currencies and holding them until they rise in value for a profit. Millions of crypto enthusiasts rely on this method, but in order to recognize which projects to invest in and at what moment, you need to have a thorough understanding of the market.

You should always invest in projects that have considerable growth potential based on their development roadmap, popularity, and utility. Many projects from the top 100 list, according to CoinMarketCap, are high-potential projects that might yet grow in value and market capitalization.

Some cryptocurrencies with low market capitalization have an even higher growth perspective in terms of percentage, but they are far riskier investments than well-established, market-leading cryptos. 

It’s important to keep in mind that the best time to invest in cryptocurrencies you wish to hold as a long-term investment is during a bear market. That’s when crypto prices are massively dropping, and it presents a good time to buy a specific crypto, which might increase in value later during the bull market.

When you invest in crypto, you can’t possibly know how much it will rise in value over time or whether its value will increase at all. That’s why you should only invest what you’re prepared to lose.

Also, if your selected crypto does increase in value, you need to have a profit-taking plan when you sell your crypto or convert it to stablecoins. It’s a good idea to set yourself a selling price threshold in advance. 

Crypto Trading

Holding crypto as a long-term investment can take months or years to pay off. That’s why many crypto enthusiasts engage in crypto trading as a method to potentially earn more profits in a shorter period of time.

The most practical way to engage in crypto trading is by making a user account on one of the reputable crypto exchange platforms, such as Binance, KuCoin, Coinbase, or Kraken.

These platforms are among the most reliable crypto exchanges, and you can rest assured you won’t get scammed. These platforms are fiat-friendly and allow users to fund their accounts with fiat currency. 

Crypto Trading Strategies

Crypto trading is quite complex. You need to know which crypto to buy when the price is low and then sell it for another crypto when it’s high. There are numerous crypto trading strategies along with various trading order types.

For example, crypto arbitrage is a strategy whereby you compare crypto prices on multiple exchanges before you buy a specific crypto for a low price on one platform and sell it for a profit on another exchange where its price is higher.

Another popular strategy is scalping, where traders look to profit from small, daily price changes. When scalping, traders buy a specific crypto whose price was dropping during the last few hours or days, and then they immediately sell it once the price increases a bit. 

With crypto trading, you need to learn how technical analysis works to analyze crypto price charts and understand what specific price chart patterns indicate. Without understanding price charts, you can end up making a series of bad trading decisions that could lead to considerable losses.

Crypto Staking

The Proof-of-Stake (PoS) consensus mechanism has become very popular among blockchain developers, and an increasing number of top crypto projects use this operational mechanism.

PoS cryptocurrencies use network nodes that validate transactions with the help of staked crypto coins. If a node validates a false transaction, it loses all the staked coins. This is why PoS is very secure because network participants don’t want to risk losing their assets by validating illegitimate transactions. 

The users who stake their crypto through a PoS network node get rewarded with a portion of the transaction fees. The transaction fees are calculated based on the number of coins staked by individual users. The more coins you stake, the higher the rewards you’ll receive. It’s like earning free crypto, which is why crypto staking is becoming very popular among crypto enthusiasts.

Staking is a great way to earn additional income on your crypto while holding it as a long-term investment. There are numerous crypto wallets that operate staking pools for various cryptocurrencies and allow users to easily stake crypto with a few clicks, such as Atomic Wallet, Exodus, and Trust Wallet.

You can also stake crypto on numerous centralized crypto exchange platforms, but keep in mind that these platforms require users to deposit their crypto into the platform’s wallet, which means you won’t have custody over your coins during the staking period.

Be extremely careful with staking and only use trustworthy wallets or crypto exchanges to stake coins. Stay away from shady decentralized apps (dApps) that offer high two-figure staking rewards from unclear sources because these platforms are often scams.

There are numerous popular cryptocurrencies that you can stake, such as Ethereum (ETH), Polygon (MATIC), BNB (BNB), Avalanche (AVAX), Cardano (ADA), Solana (SOL), and other altcoins.

Crypto Lending

Crypto lending is another popular way to earn additional money from your crypto holdings. You can do this with various cryptocurrencies regardless of the consensus mechanism they use. A lot of the popular crypto exchanges like Binance and KuCoin allow users to engage in crypto lending with the exchange platform as the middleman.

With crypto lending, you’re lending out your assets to users who are borrowing crypto for activities such as margin trading. Your profit comes from the interest rate paid out by the borrowers. The exchange automatically pairs your funds with potential borrowers and facilitates the whole deal, making sure you get paid back. 

The potential issue with crypto lending arises if you use an exchange platform that doesn’t guarantee you’ll get paid back. You should always check whether your service has a guaranteed payback feature.

Also, you should be very careful when using crypto loaning platforms because even huge crypto lenders like Celsius have had several meltdowns. 

Crypto Mining

Crypto mining can be a very profitable source of income if you use efficient mining hardware and accurately calculate your potential profitability.

Cryptocurrencies that use the Proof-of-Work (PoW) consensus mechanism rely on crypto miners and their mining rigs to verify blockchain transactions. The most popular PoW crypto is Bitcoin (BTC), but there are also various additional cryptos like Zcash (ZEC), Monero (XMR), Litecoin (LTC), Ethereum Classic (ETC), Dogecoin (DOGE), and others that use this consensus mechanism.

Miners use the computing power of their mining hardware to find the right hash for each transaction, and once they find it, they get rewarded with transaction fees and freshly mined crypto. 

In order to mine crypto, you need a strong GPU-powered mining rig or an ASIC miner machine. ASIC miners are the most efficient hardware solution for mining crypto, but they can cost several thousands of US dollars per device, so it’s more affordable to create a strong mining rig. A rig is a computer with multiple connected GPUs tasked with mining crypto 24 hours a day. 

When creating a rig, you should get the best GPUs you can afford, and you need to install an efficient cooling system to handle the excess heat produced by the GPUs. Mining rigs consume huge amounts of electricity, so you also need to consider electricity bills when calculating your mining hardware’s profitability. With the right hardware, you could earn solid returns on your crypto-mining investment.

However, crypto mining requires a lot of maintenance and some technical knowledge to manage the mining operation.

Airdrops

Crypto airdrops are also a viable way to earn money on the crypto market. Airdrops are a type of free distribution of crypto coins to users who fulfill certain conditions.

Some airdrops require users to hold a symbolic number of the target coin in advance, while others require you to fulfill a set of actions to qualify for the airdrop. These actions can include following a Twitter account, sharing a few posts, or signing up on the platform’s official website.

The value of these airdrops can go anywhere from a few tens of US dollars to more than 100 USD. However, the highest potential of airdrops is the price increase of the airdropped tokens. Airdrops are generally risk-free, and the worst thing that can happen is that you might end up with some worthless coins whose value won’t increase over time. 

Conclusion

These are the most popular methods for making money in the crypto market. As you can see, most of these methods require some degree of knowledge of how cryptocurrencies work. You can’t just start investing in random cryptocurrencies or engage in crypto trading without understanding how technical analysis tools work. 

That’s why it’s best to explore the money-making methods described in this guide and only use them once you thoroughly understand how they work.