Top 5 Methods to Making Money With Cryptocurrency

Cryptocurrencies are among the hottest assets in the market today, thanks to the rise of coins ranging from Bitcoin to Dogecoin. However, concerns about the durability and value of cryptocurrencies in the long term exist. Putting the risks aside, cryptocurrency provides several ways of making money. In this post, we will talk about the top 5 methods of making money with cryptocurrency. Read on for more details.

What is a cryptocurrency, and how does it work?

Cryptocurrencies are decentralized forms of payment that can be used to purchase goods and services online. These digital currencies run on the blockchain, which functions as a digital ledger of transactions for a specific currency. It ensures that every single coin is never spent twice.

Users can convert dollars into cryptocurrency through wallet apps or exchanges and watch their investments grow like stocks. Like in the stock market, crypto does not attract tax unless you decide to sell and cash out. According to CNBC, most investors in crypto do so because of the ease of purchasing, selling and trading on websites and apps.

Putting crypto to work

Decentralized finance (DeFi) is a peer-to-peer finance tool that offers options such as loans, advanced trading, and interest accounts for crypto holders. The system is disrupting traditional finance through the elimination of middlemen like brokers and bankers from finance processes.

Proponents of DeFi indicate that it makes finance more transparent, eliminates in-person discrimination, is more democratic and more affordable.

Why own crypto?

Despite the risks associated with cryptocurrencies, the blockchain industry is growing stronger. The development of financial infrastructure for the blockchain industry is delivering institutional-grade service to investors. Individuals and professional investors are gradually getting access to the tools they need to safeguard and manage their crypto assets.

Financial giants are making it easier to trade crypto on their platforms while other companies are making significant investments in digital assets. The increasing rate of adoption shows that the crypto industry is maturing. Companies and individual investors are investing large quantities of money.

Case in point, according to Forbes, the launch of a new service by PayPal in 2020. The service allows PayPal users to buy, hold, or sell cryptocurrency and even use it to purchase stuff across different merchants.

5 methods of making money with cryptocurrency

1. Staking

Staking provides one of the best ways of earning a yield on crypto-based assets. The method rewards users for locking their assets in a cryptocurrency wallet to validate transactions. Crypto staking can generate extra income for investors. Staking is similar to lending, allowing investors to get rewards for validating transactions on a proof of stake network.

Rather than mining, the proof of stake (PoS) algorithm selects transaction validators depending on the number of coins committed to the stake. Staking provides a way for investors to lend coins to the network, which helps verify transactions and maintain network security. Through the PoS, cryptocurrency locked in nodes compete to actively engage in transaction validation to receive rewards.

Staking in cryptocurrency is comparable to deposits. In a blockchain, large holders of cryptocurrency can form blocks that contain transactions. Such users are known as validators and are formed in a process known as validation. Staking provides an annual income between 5% and 15%, with rate exceptions. The likelihood of losing your crypto investment is minimal.

2. Crypto lending

The development of decentralized finance (DeFi) gave way to a diverse cryptocurrency lending ecosystem. It allows users to deposit their crypto to several lending protocols to earn rewards. Crypto lending involves a lender and a borrower with an agreement between them. Several platforms facilitate crypto lending.

The borrower provides their crypto holdings as collateral in exchange for another cryptocurrency or cash from the lender. In the agreement, the borrower accepts to pay interest to the lender. Usually, the borrower and lender in crypto lending are individuals instead of institutions such as banks. The focus is on cryptocurrency either as collateral or a source of value.

So, crypto lending allows lenders to earn interest in the form of extra assets for lending their crypto holdings. It has its risks and can take a while before finding the right platform to connect potential lenders and borrowers. Suppose you are looking for a method of putting your cryptocurrency to work and earn extra money. In that case, lending is a possible avenue.

3. Day trading crypto

Another way holders of cryptocurrency assets can make money is through day trading. Similar to stocks and other securities, day traders purchase and sell assets the same day in an attempt to earn a quick profit. The method is risky since it is difficult to establish how the value of crypto could change over time or in a day.

Regardless, you can purchase and sell crypto each day through online brokerage platforms to capitalize on price fluctuations. The aim is to ultimately earn more money than the amount you initially invested.

4. Investing in crypto

The most obvious way of making money with crypto is through investing. It is a simple method where the investor buys cryptocurrencies such as Bitcoin. The investor then lets the crypto assets accrue value with time, intending to sell them for more than they purchased. This method only works when cryptocurrencies increase their value.

The fact that cryptocurrencies are volatile and risky should inform investors before buying. You can also earn money with cryptocurrencies through direct partnership/investment, initial coin offering, or exchanges. So, it is possible to earn returns besides waiting for price appreciation of your assets.

5. Work for cryptocurrencies

This method is ideal for merchants willing to accept cryptocurrencies such as Bitcoin in exchange for goods and services. For this, the merchant needs a digital wallet to be able to accept the preferred cryptocurrency. After getting the payment, the merchant can use the crypto to pay others or hold it until its value increases. When the value increases, the merchant can see a substantial profit by trading it for the U.S. dollar.