How to profit from cryptocurrencies

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Cryptocurrency

The cryptocurrency industry has been around for nearly 14 years now, and ever since it was created, people have been looking for ways to earn money from it. Buying coins like Bitcoin for the purpose of spending them has always been an interest of crypto enthusiasts but earning more money with them is a much more attractive aspect of the industry.

If you are reading this, we expect that you, too, wish to learn how to make money with cryptocurrency. The good news is that there are many, many ways to do so currently, as the development of the sector has led to all kinds of new opportunities. Let’s look at some of the options.

1.    Investing

Most experts would tell you that the best way to earn from crypto is through long-term investments. This comes from the assumption that crypto will succeed and that its price will continue to climb over the years. So, you should simply invest now, lock your coins up in a personal, well-secured wallet, and forget about them for the next five to ten years. 

Holding on to one’s investment produced outsized returns for early investors as the price of Bitcoin rose from $1 to $68,000 in under 11 years. Those who invested at the pinnacle of the current cycle, however, face an 80% drawdown.

2.    Trading

While investing is generally considered the best approach, a lot of people wish to feel the effects of their dealings with crypto sooner rather than wait for years to become rich. If this is your idea as well, and if you have the time and the nerves for it, you could try out trading. Trading works similarly to investing but in a much shorter time frame. You would need to buy crypto, in anticipation of a price rise and sell it when you believe the price has reached its peak – before the price corrects and falls back down.

Trading crypto can be quite profitable thanks to the asset’s volatility, but it is also very risky, and if you miss the right moment to buy or sell, you could experience losses.

3.    Mining

Mining crypto has been the very first method anyone has ever used to obtain cryptocurrencies. Essentially, mining means providing your resources, such as computing power and electricity, to the blockchain network. The algorithm uses these resources to process transactions, and in return for contributing to it, you get a certain amount of cryptocurrency, depending on the project. Note that this can be a very expensive way to earn cryptocurrency, as some coins — primarily Bitcoin — require massive amounts of resources to be mined. From extremely expensive equipment to large quantities of electricity that is necessary to conduct crypto mining, it can be quite underwhelming to spend so much time, effort, and money on mining, only for the price to crash and deny you the pay-out that you expected. 

Of course, it can also be very profitable if you play your cards correctly and if the market behavior ends up being favorable, but remember that there are no guarantees of anything, including the fact that you will be able to mine coins like BTC on your own. Bitcoin has a massive following and huge numbers of people interested in it. This has also increased the mining difficulty to the point where special equipment needs to be used, and you can no longer mine with a simple CPU or GPU. With that said, we recommend that you keep mining for later, when you become more experienced and better acquainted with the crypto industry and look up some of the other methods first.

4.    Staking/Lending

With the rise of Decentralized Finance (DeFi) in 2020, several other ways to earn digital coins have emerged. Staking and lending are the main ones, and they both involve locking up your coins to either support the network (staking) or grant them to other users who need to borrow them (lending). In staking, you are rewarded for holding the coins, as the fact that they are held gives value to the entire project. In lending, you lock up your coins in a smart contract, and someone who needs a loan borrows them. You then get to profit over time as the borrower returns the borrowed funds with interest.

5.    P2E

Another popular way to profit from crypto is to play blockchain games. With the rise of the metaverse in late 2021 and 2022, a lot of games emerged that employ the P2E (Play-To-Earn) model, where you simply play games, do various tasks, and get rewarded with digital coins.

Other methods

You can also get crypto in a few other ways. For example, people have been known to receive BTC as payment for work, provided that they can find clients who are willing to pay with BTC. Next, you can also get the coins through airdrops where you get new coins as a reward for already having coins. This has been a common way for projects to reward faithful community members by granting them small amounts of crypto as thanks for holding onto the coins they purchased in the past. Sometimes, two projects would collaborate and organize an airdrop where users who hold one coin or token would receive coins/tokens belonging to the other project, which has been quite common for events where the goal is to raise awareness of the partnering project.

Lastly, you can even earn crypto by using blockchain-based social media platforms. Many platforms offer a decentralized version of established streaming services, social media platforms, video-on-demand services, and even blog websites. Creating and posting content on such websites can result in other users liking it and donating to it through “likes,” tips, and alike. This would mean that the community decides what is quality content — no algorithms or inner systems of the website. If your content is good and people like it, they support you and you get to earn. 

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Oscar is a technology journalist writing for Techweez. Covers disruptions and innovations in mobile and how that changes the face of the Africa continent. Stay in touch via Twitter on @Oscar_Adika