How To Make Money With Cryptocurrencies?

One often asked question is whether one can make money with cryptocurrencies. The answer to this question is not necessarily straightforward. Different methods exist to make a profit with crypto-assets, yet it remains up to one’s approach and determination to make the most of them. 

The Short Answer Is “Yes”

It does not take a degree in rocket science to figure out that cryptocurrencies can prove very profitable. This doesn’t automatically mean that every investor, trader, or speculator will make money, however. Thousands of crypto-assets exist, and all of them are incredibly volatile. Depending on one’s risk appetite, trading strategy, or long-term strategy, the return on investment may vary. 

One tried-and-tested approach is investing in Bitcoin for the long run. HODLers have achieved significant profit over the years, no matter at which price they bought initially. When you invest, the time to accomplish a profit may range anywhere from hours to years. Eventually, Bitcoin’s value will trend higher and set a new all-time high value. 

Many people assumed the 2017 Bitcoin price of $19.700 was the highest value to be reached. Fast forward to early 2021, and Bitcoin trades at over $35,000. It has taken a few years to revisit the $19,700 level, and Bitcoin’s price kept rising since. These market cycles will occur regularly but may take years to materialize. 

Future Outlook Is Promising For Cryptocurrencies

Many factors influence the value of one BTC. Macroeconomic events, such as COVID-19, quantitative easing, stimulus packages, and ongoing unemployment, will contribute to more robust demand for Bitcoin. On the other side of the spectrum, institutional investors and traders show a growing interest in BTC. Demand for Bitcoin outweighs the amount of new BTC added to the network by miners every day. 

Judging by the number of companies creating a “Bitcoin Treasury“, the coming years will prove interesting. Every time a company acquires BTC, they hold onto it for the long term. Doing so helps reduce the liquid supply on exchanges and other trading platforms. Less liquidity will often push prices higher as long as demand remains strong. 

Furthermore, there is also the involvement of well-known companies such as Square and PayPal. Both firms let users acquire Bitcoin through a convenient experience, lowering the barriers to entry.  These companies can increase demand for Bitcoin globally, which may impact the BTC price in the process. 

Different Ways To Make Money With Cryptocurrencies

Different methods exist to not only acquire cryptocurrencies but achieve a healthy return on investment from them. Whether any of these methods appeal to you is a matter of preference. They can all provide satisfactory results, although some may require a bit more effort than others. 

Buy Bitcoin and HODL

As mentioned earlier, the most straightforward option is to buy Bitcoin – either a full BTC or a part of one – and hold onto it for a few years. Long-term HODLers don’t need to keep an eye on the price chart every day. Whenever the Bitcoin price breaks out, social media and the media will be abuzz with these changes relatively quickly.

Bitcoin price 1Y – Source: CoinGecko

If you bought 1 Bitcoin on January 18, 2020,  you would have paid roughly $8,600. One year later, the same BTC is worth 306.9% more, or $36,234. Pocketing a profit of $27,634 by doing absolutely nothing for an entire year is never a bad investment strategy. If you decide to HODL for a few more years, the returns may increase exponentially or be much lower. Setting a personal price target and selling when that value is reached may be worthwhile. 

Maintaining a Trading Strategy

For those who prefer a more hands-on approach with cryptocurrencies, creating and managing different strategies can yield decent results over time. Trading cryptocurrencies requires executing trades regularly – often daily – to enter and exit positions accordingly. 

We have put together a comprehensive guide on creating a personal trading strategy for those who prefer trading cryptocurrencies. Exploring this option has a bit of a steep learning curve at first and can become rather stressful over time. However, prices of crypto-assets fluctuate hourly, creating a lot of room for potential profit. 

Whether one wants to engage in day trading, arbitrage trading, derivatives trading, or other methods, they all have their benefits and drawbacks. 

Mining Cryptocurrencies

Although it is still viable to mine specific cryptocurrencies today, you can mine only a handful of them with regular computer hardware. Mining Bitcoin or Ethereum, for example, is out of the question without a significant upfront investment. Additionally, enthusiasts need to keep the electricity costs in mind, as those can quickly eat into one’s profits.

 Another option is to opt for cloud mining, although that industry is rife with scams and shady companies. Hundreds of cryptocurrency cloud mining firms have come and gone, with most of them acting like a pyramid scheme that eventually ran out of funds. 

Even when using a reputable company, it is crucial to calculate whether you can recoup the initial investment. Buying a cloud mining contract often costs a lot of money, yet achieving a return on your investment is not always straightforward. Make sure to look at the overall platform fees, as those can negate any potential profit.

Conclusion

As outlined above, there are many different approaches to making money with cryptocurrencies. None of these methods will guarantee a profit over time, but some offer a better perspective than others.

If you prefer to avoid risks, trading cryptocurrencies and cloud mining will be out of the question. Recuperating the upfront investment will take a while and may not happen if the market conditions go south. 

That said, the “buy and HODL” strategy is often one’s best bet. it is pertinent to note this approach works best with Bitcoin only, as alternative cryptocurrencies don’t always lend themselves well to buying and HODLing. Altcoins are suitable for day trading and arbitraging, but ultimately, one’s goal should be to increase your BTC holdings. 

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Name Price24H %
bitcoin
Bitcoin(BTC)
$48,047.00
-5.97%
ethereum
Ethereum(ETH)
$3,768.25
-8.97%
litecoin
Litecoin(LTC)
$304.33
-8.49%
dash
Dash(DASH)
$346.09
-8.94%

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