How to Make Money with Cryptocurrency: A Detailed Guide

A Brief Overview

Let’s list all the ways you can capitalize on the information described in this article. You can skim over directly to the point of your specific interest or understand them in succession. 

How to Make Money with Cryptocurrency: The Trading & Investment Approach

How to Make Money with Cryptocurrency: The Building & Engagement Approach

How to Make Money with Cryptocurrency: The DeFi Ecosystem Approach

Now let’s break down how to make money with cryptocurrency in detail, so that you understand what is the best way for you to benefit.

Popular Ways to Capitalize on Blockchain Technology

The digital economy rivaling traditional money, a volatile market of cryptocurrencies, and daily blockchain innovations stack up to supply opportunities to make money in the crypto space. Be it a multimillion-dollar transaction in digital collectibles, a crypto game marketplace, or something completely outside of crypto — you now have more opportunities than ever. 

Let’s break down how you can make money:

1. Without being stuck within the crypto space for months 
2. By dedicating and deepening your crypto knowledge over time, 

We start with trading and investment and touch on other ways to make money later on.

Trading & Investment Approach: How to Make Money with Cryptocurrency Day Trading 

This short-term set of strategies capitalizes on daily cryptocurrency price volatility. Traders enter and exit all their trading deals within one single day, implying no overnight trades whatsoever. The trade count can be quite significant, as traders rather focus on quantity than profits per single trade. 

Compared to other trading strategies, day trading is quite sensitive to any market changes — be it news, black swan events, or anything else. Day trading requires self-control, high endurance, and patience — traders should not overreact to failures. Stress resistance is one of the main qualities of a successful day trader either, as intense pace and quick decisions may exhaust faint-hearted ones. 

Here’s a quick take on how to trade cryptocurrency and make profit using day trading strategies.

• Set trading strategies in stone
• Pick the best day trading cryptocurrency exchange 
• Keep an eye on trends
• Use protective orders
• Secure your profits with a regular cadence
• Avoid trading volumes you’re afraid to lose
• Consider the best-case scenario, but be prepared for the worst
• Don’t make your trading sessions over 4 hours at a time
• Keep track of wins/losses. Update your trading journal daily

Keep an eye peeled for day trading strategies to trade effortlessly from day one. 

How to Make Money with Cryptocurrency: Swing Trading

Swing trading is a type of trading style that stands between price action trading and long-term trading. Swing is a major impulse movement that can be caught and exploited. The main advantage of the approach is an increase in the profit/risk ratio.

Unlike day trading, swing trading takes less time, there is no need to stare at the monitor during the entire trading session. In addition, you can make the same profit as when you are trading. The average position holding period is about two weeks. But there are situations when a stock grows in a trending direction for 4-6 months.

Features of swing trading include the following.

• Longer position saving time as compared with day trading
• Saving of time for trading
• Careful selection of entry points
• Less leverage

How to Make Money with Cryptocurrency: Automated Trading

Suppose an investor can express his investment intuition, vision, and strategy in computer code. In that case, he can fully automate his investment decisions by entrusting the computer with everything from analyzing incoming market data and calculating potential gains-losses to generating buy-sell orders. 

In those hot moments when the investor's hands are shaking and doubts are burning, the computer will dispassionately give a verdict to buy or sell and buy or sell in exact accordance with the set of rules laid out in it. 

This style of trading is called "automated trading. You may also encounter other names like rule-based trading, systematic trading, trading robots, etc. If the set of rules used for making investment decisions is kept in a special secret by the developer from those who use it, such a system is called a "black box," and trading with its help is called "black-box trading. Some traders refer to the algorithmic trading name as automated trading strategies rely on algorithms. However, algorithmic trading is a slightly different alternative. 

How To Trade Cryptocurrency And Make Profit — Algorithmic Trading

Algorithms are used to execute large orders with minimal losses. The goal of algorithmic trading is to effectively reduce execution costs by reducing the order's impact on the market (reduce market impact). The exact description for this trading type would be algorithmic order execution. It does not matter exactly where the order reaches the algorithmic engine — the main thing is that the algorithmic engine does not create it. In most cases, the provider's algorithmic engine works on large orders received from the user. Simply put, it's high-volume automated trading with some additional features. 

In essence, algorithmic trading involves automated trading bots that trade on your behalf based on specific predefined algorithms. A way of earning in which cryptocurrency trading occurs automatically on the basis of algorithms. Special programs analyze tiny price changes and fix the short gap between the rates of different cryptocurrencies. Sometimes the imbalance lasts for several milliseconds. During this time, the robot, acting on the algorithm, buys and sells several cryptocurrencies, earning interest on the difference in the rate.

How To Trade Cryptocurrency And Make Profit — High-frequency Trading 

The web is full of yet another confusing term addressing automated trading variation called high-frequency trading. It’s the next pillar of automation narrowed to the following principles.

• Bots that work by algorithms
• Trading robots with machine learning function
• Robots-advisors that tell you where to sell and where to buy
• Extremely high volumes, multimillion-dollar transactions, mainly institutions

High-frequency trading is associated with high risk, and mainly fits either whales or corporations. In August 2012, an algorithm error in the U.S. company Knight Capital Group led to the stock exchange's loss of $400 million. The failure lasted about 45 minutes. 

How to Make Money with Cryptocurrency: NFT Trading

If you’re looking for answers on how to trade cryptocurrency and make profit but don’t want to deal with Bitcoin, Ethereum, and other coins, NFTs might be your pick. NFT, or non-fungible token is a digital asset created on a blockchain. It can come in the form of digital artwork, character cards, things in games, photos, videos, and more. In essence, it’s a token, guaranteeing the uniqueness and ownership of the item.

A digital artist, an author of a meme/tweet, creates an NFT work on a blockchain, which serves as the database for all transactions. The blockchain guarantees the originality of the NFT. Anyone can check the history of a particular NFT through the blockchain. Purchasing an NFT, the user receives a certificate for that work, tweet, or meme. This certificate confirms that the owner has received the original copy of the object and is entitled to it.

Despite many criticizing NFTs for anything from bid-rigging scams and phishing to harming the environment, you can still use them to generate solid profits. In fact, it’s a trendy way to make money selling and supporting independent authors and artists. While doing so, you should be aware of two key points — scam projects and the risk of losing liquidity [freeze your money in NFTs for a long time/forever loss]

The easiest way to monetize on NFTs offering plenty of money-making opportunities is the OpenSea trading platform. It has easy onboarding [decentralized payment method and payment with a debit card], and a straightforward user experience to make a transaction in digital collectibles as easy as possible. Check the trading on OpenSea guide to getting started.

How to Make Money with Cryptocurrency: Investing in Crypto Assets

One of the least demanding ways to benefit from crypto. Instead of making money trading cryptocurrency, you buy an asset and hold it over the long run. Whether the market is up or down is not your concern, as you're here to play a long game. A stunning example of holding would be a Norwegian Christopher Koch — he bought 5,000 BTC at $27 and forgot about them for a while. Several years later, each BTC bought made almost x10, reaching $266. The price of cryptocurrencies may rise even more, depending on several factors [think of Solana’s x973].

Essentially, a buy-and-hold strategy in the stock market is analogous to a HODL strategy. While most speculators are preoccupied with chasing rate hikes, long-term investors bet on companies' future. Warren Buffett prefers this strategy. In 1988, Buffett's company Berkshire Hathaway purchased 14 million shares of Coca-Cola for $600 million. Since 1988, the price of Coca-Cola shares has risen by 2000%. The word HODL itself is a typo that gained notoriety and became part of the crypto slang. HODL later became a backronym that stands for Hold on for Dear Life.

How to Make Money with Cryptocurrency: Investing in Cryptocurrency Companies 

Yet another great alternative to making money trading cryptocurrency. Instead of buying crypto assets directly, you can buy crypto-oriented companies. Considering most companies don’t have the volatility of the crypto [cryptocurrency in question], and the stock market allows investors to make money with cryptocurrency with a different set of risks, this tool might fit some investors. 

In fact, this is a method employed by crypto whales across the globe. Instead of relying on the value of the crypto-coin itself, they diversify risks while keeping plenty of money-making opportunities. 

Here’s the list of some crypto mining companies available on the stock market.

Even though the returns are negative, you might still want to consider such an approach. These numbers are not typical for the stock market, as 2022 was quite intense in terms of economic pressure, and the global markets tumbled, showing performance never seen before. In fact, the returns across several markets, including the largest bond market, were quite the opposite of the logical market behavior. 

How to Make Money with Cryptocurrency: Initial Offerings

We already covered how to trade cryptocurrency and make profit  — now it’s time to shed some light on alternatives. Initial offerings are one of them. Let’s dive.

When a product, project, company, or startup launches its own cryptocurrency, the crypto community, traders, and investors invest their money in the project at an early stage to bootstrap the company. When you buy a coin at the initial coin offering [ICO] event, you will need to wait for a listing on an exchange, which can take anywhere from a few days to a few months.

An IDO [Initial DEX Offering] is an initial decentralized offering similar to the ICO fundraising model. The listing and sale happen almost simultaneously. Projects do not need to be verified by the crypto exchange. Earnings can be very large if a promising coin is acquired early on. For example, the Solana cryptocurrency has grown 973 times since the start of trading.

There are several basic ways to participate in IDO/ICOs

• Holding coins of the platform where the IDO takes place
• Buy coins at ICO hosting website/platform
• Participate in the lucky draw for whitelist

Although an initial offering is a straightforward investment scheme, there are some risks. Cryptocurrencies drop in a bid due to multiple reasons ranging from team composition to the overall idea, to scams, and more. If you hold many crypto coin in anticipation of some event, you might be disappointed or even shocked. 

Always do your own due diligence and analyze the project you’re willing to buy into — research is your best tool to avoid scam initial offerings. 

The Building & Engagement Approach: How to Make Money with Crypto Mining 

The unique selling point of any crypto is its technology stack. Miners facilitate a new wave of rivaling traditional money using the power of the hardware. They backbone the whole blockchain infrastructure by fueling computations. You can get a set of hardware equipment — a.k.a mining rigs — to compete over rewards with other miners and join many making money with cryptocurrency.

Roughly speaking, the job of the miners is to pick up from millions of combinations a single hash (the result of some kind of mathematical transformation of the block) from the previous block — so you can "attach" another block. A lot of miners are fighting for the reward at the same time. Whoever did it first gets the reward.

Mining the most popular cryptocurrency Bitcoin is already impossible without special expensive equipment. If in the beginning and in the middle of zero years for this purpose was good, even a home computer with a powerful video card, now industrial computing power is required. The fact is that there can't be more than 21 million bitcoins. Most of them have already been generated, and each new bitcoin requires more and more power.

How to Make Money with Cryptocurrency: Staking

Major tokens rely on the concept of proof. Proof of work and proof of stake are the most common ones. Proof of Stake [PoS] is proof of ownership. It’s a method of protecting a blockchain from hacking and incorrect data in it. If you choose a PoS blockchain and store coins in your wallet, you can get rewards in return for staking. Stakers ensure the blockchain works by locking their assets. 

Staking is a full-fledged alternative or replacement for mining. Coin holders can make money from cryptocurrency without using specialized equipment. Staking is pretty similar to a banking system — the larger the amount and time you lock in your coins, the more you will earn on the way out. Staking is available on both centralized and decentralized exchanges, as well as on independent platforms. 

Types of Staking

• Fixed Staking. You freeze funds for up to 120 days and are credited with a % return. You can unfreeze funds whenever you like, but if you do it before the time expires, you will lose your income, not the frozen funds.
• Flexible Staking. There are no conditions for the withdrawal of your frozen funds. Your coins are returned to you within a day. Interest will be lower.

How to Make Money with Cryptocurrency: Making Cryptocurrency 

Instead of wondering how to trade cryptocurrency and make profit, founders and entrepreneurs from Web2 switch over to Web3 and capitalize on blockchain technology the world over.

However, creating your own crypto coin is a complicated process. After all, to implement your idea, it’s necessary to understand the principle of currency operation and have programming skills. The rewards pay off, though. Coins with a good reputation constantly grow in value and bring income to both developers and depositors. To create your own currency, you can follow some specific steps. 

How to Make Money with Cryptocurrency: Affiliate Marketing 

Going one step away from how to trade cryptocurrency and make a profit, affiliate marketing implies building your own brand to promote crypto services. 

Building Personal Brand — How To Trade Cryptocurrency And Make Profit 

Small to big, many companies are launching a crypto push with massive web3 hiring sprees. One of the ways to monetize this trend is through the personal brand. You may build your own blog, YouTube channel, social media page, newsletter, podcast, and much more to get a reputation within the niche. 

Once you do so, you may build your own crypto products or promote something you value for profits. Some projects are willing to pay in fiat, while others agree on crypto transactions. The latter implies you’ll have to either trade some income for tangible profits you can use in real life right now or wait for mainstream adoption [real businesses started accepting cryptocurrencie, crypto wallet integrations, and more]

Ambassadors — How To Trade Cryptocurrency And Make Profit

Cryptocurrency networks are willing to reward individuals that create and curate their content. Ambassador programs offer almost unlimited opportunities for making money with cryptocurrencies. The scheme offered by cryptocurrency projects is pretty simple — such cryptocurrency networks encourage you to make interest in the crypto through contribution. It can be a social experience, technical skills, or anything else.

The most exciting ambassador programs up to the moment are DeFi projects. Considering the total volume in decentralized finance is fairly low compared to traditional businesses and relatively low number of advanced users, you can benefit from such programs not only as a strategic investor but also as an early participant. 

How to Make Money with Cryptocurrency: Airdrops 

You might have heard a word or two about airdrops while searching for how to trade cryptocurrency and make profit. In essence, it's a way to become an early participant and contributor to get flexible rewards in the future. 

Although most projects don't promise anything specific, some, like Uniswap, have rewarded their communities quite generously. At peak, some airdrop rewards reached as much as $100,000 with little to no capital investments.

You may do various activities like design tasks, in-chat engagement, writing promotional articles, uploading YouTube videos, posting on social media channels, and so much more. The sky's the limit here. Projects target some activities more than others, though. More technical airdrops may require extensive resources like technical background, available liquidity, analytical skills, and beyond.

How to Make Money with Cryptocurrency: DeFi Ecosystem Approach

There are two main ways to invest in DeFi ecosystems.

• Investing directly in DeFi tokens such as UNI or AAVE. 
• Investing through DeFi products, which means earning through contributing your crypto assets to UNISWAP or AAVE liquidity pools.

Investing in DeFi assets, such as UNI or AAVE, means that you buy the token itself, which is a traded digital asset, and make or lose money depending on its rate fluctuations. This differs from investing through the DeFi protocol, where you use the DeFi platform to make money by earning interest or other rewards. Roughly speaking, investing in tokens is buying stock in your bank. And investing through the DeFi protocol is making a lucrative deposit into your bank [savings account]

How to Make Money with Cryptocurrency — Direct Investing in DeFi

Let's start by looking at how to invest in popular DeFi projects by buying UNI or AAVE tokens. Of course, there are many others, but we'll use UNI and AAVE as examples.

AAVE DeFi Protocol

AAVE launched in 2017 as ETHLend after raising $16.2 million in an initial coin offering [ICO], which allowed it to create the AAVE DeFi protocol lending platform. AAVE is a decentralized loan pool system that allows interest-bearing deposits [crypto-based savings account] and liquidity pools in exchange for a fixed or variable interest rate. 

Uniswap Protocol

UNISWAP is a decentralized exchange platform without intermediaries. In other words, it’s a DeFi crypto exchange analogous to traditional stock exchanges — the only difference being that there is no physical intermediary.

UNI token holders have the opportunity to help shape the direction of UNISWAP by being able to make proposals and vote on them. As a UNI holder, you get to vote on things like network updates and policies, with each vote proportional to the number of UNI tokens. It should be noted that to be able to submit proposals to UNISWAP, you must own at least 1% of the total UNI proposal. 

Buying UNI or AAVE tokens

Buying UNI or AAVE tokens actually means betting on the technology itself and the ecosystem. In the world of traditional finance, buying UNI or AAVE can be akin to buying shares of a publicly traded company such as Barclays bank or HSBC bank. As bank stocks rise in value, investors make money.

Similarly, if you have UNI or AAVE tokens and their price goes up, you profit from the increase. However, unlike stocks, you don't automatically receive dividends, but you can vote on a proposal to distribute some or all of the profits to the token holders. 

How to Make Money with Cryptocurrency — Investing Through DeFi Projects

If we make investments through DeFi by contributing cryptocurrency to UNISWAP or AAVE, the purpose of using their liquidity pools is to make money by earning commissions or interest.

UNISWAP's automated market maker is designed to make it easier for investors to trade crypto assets similar to a traditional exchange, except that there is no middleman like in traditional centralized exchanges. The platform connects the two parties in exchange for low commissions using smart contracts, which are a set of rules and conditions written into the software.

Commissions resulting from financial transactions are distributed to all liquidity providers proportionally based on their exact contribution to the liquidity pool [providing liquidity]. Let’s talk about liquidity and farming.

How to Make Money with Cryptocurrency — Yield Farming

The process of providing liquidity to a pool to generate passive income from its crypto assets is known as yield farming, or literally, growing money. If you look at it using a banking analogy, depositing cryptocurrency into an AAVE pool resembles making a yield deposit. The bank will use your funds within the larger pool to lend in exchange for paying you interest. 

Since interest rates at conventional banks are negligible these days, and no bank is willing to lend to people offering cryptocurrencies as collateral, this has created an opportunity for innovative DeFi startups to offer those with available capital in the form of digital assets a chance to get a reasonable return on them. 

Not surprisingly, investors are taking advantage of these high-interest rates through DeFi rates/deFi lending to increase the overall value of their assets. This is the main thing that makes investing in Defi so attractive.

Farming has become a very popular DeFi practice that works similarly to bank loans. You’re your own bank, earning interest on the money (cryptocurrency) that you invest in DeFi. Think of deposit crypto into a lending protocol or automated market maker to earn interest or commissions on the trade or borrowing.

How to Make Money with Cryptocurrency: Lending/Borrowing

You can use DeFi protocols to either lend or borrow assets. If you lend assets to the protocol, you basically lock your capital so that anyone can rent it for a small %. The protocol ensures you’ll get paid during the specified period and access your whole capital at the end.

Another way to make money is by borrowing. If you don’t have enough liquidity, you may use some of your illiquid assets as collateral to get more liquid ones. Say you hold BTC and don’t want to sell it. You may use it as collateral to get some stablecoins you can use instantly to make profits. Once you make profits, you pay back the initial amount borrowed + a premium to unlock your collateral.

This way, you can access trading, investment, and other opportunities otherwise impossible. However, your collateral can be liquidated [lost] in case of price fluctuations. Think of the recent LUNA & Anchor protocol crash as the brightest example.

How to Make Money with Cryptocurrency Tips 

1. Set your goals. What do you want from the crypto industry? How much money do you want to make, how?
2. Define your skillset, background, knowledge, and anything that may help you in money making
3. Analyze the market to understand what other people are looking for? What do businesses need, what is the pain point you can solve?
4. Pick any niche and start learning about it. You’ll understand whether it’s your niche as you go further.

How to Make Money with Cryptocurrency: Popular Questions Answered

Is It Easy To Make Money With Crypto? 

To understand how to make money with cryptocurrency and whether it’s easy, you have to start first. Some activities are fairly effortless while others require hard work and dedication.

What Is The Fastest Way To Make Money Out Of Cryptocurrency? 

How to make money with cryptocurrency fast is one of the most popular questions users ask on Google. Trading is one of the niches where users earn lots of money. Although you might be lucky enough to make a buck fast, it’s rather a one-time thing than a pattern. You can turn your luck into steady profits with some knowledge and tools like 3Commas.

How Do You Make Money With Crypto Daily? 

How to make money with cryptocurrency daily is yet another popular question related to crypto. If you’re looking for steady profits, you might want to try day trading. Learn more about day trading with 3Commas.

How Much Can You Make With Cryptocurrency? 

Once you settle on how to make money with cryptocurrency, how much is the second question to pop up. Crypto traders can earn anything from 0 to millions, depending on experience and other factors. Most traders earn slightly above six figures yearly.

Conclusion

As we move further into 2023, the realm of cryptocurrency continues to intrigue many with its multifaceted opportunities for monetary gain. It's evident from the detailed exploration above that there isn't just one route to harnessing the power of this digital frontier. There are diverse avenues to explore, and each comes with its unique set of considerations and potential rewards.

Cryptocurrency day trading stands out as a fast-paced venture, thriving on daily market fluctuations. It's essential to underline the importance of strategy, discipline, and a clear understanding of market trends for anyone keen on venturing into day trading. While the promise of rewards is substantial, the significance of preparedness cannot be overstated. With strategies deeply entrenched, traders must continuously evolve, staying attuned to market patterns, always being proactive rather than reactive.

Then there's the sophisticated world of automated trading. The beauty of this approach is in its objective nature, with decisions rooted in algorithmic logic rather than human emotion. Computers and software, when programmed effectively, can be significant allies in navigating the tumultuous seas of cryptocurrency trading. They offer the potential for precision, consistency, and speed that can be challenging for humans to replicate.

However, one must also note the existence of algorithmic trading and high-frequency trading. The former looks at executing large orders with minimal market disruption, while the latter focuses on vast volumes, often leveraging machine learning. These modes of trading further underscore the extent of diversification and sophistication the crypto realm has achieved. Yet, they also bring to the fore the risks associated with automating such processes. Events like the significant financial setback faced by Knight Capital Group in 2012 serve as reminders of the high stakes in these ventures.

Lastly, as we delve into tips and commonly asked questions, it becomes apparent that while cryptocurrency offers numerous possibilities, success is not guaranteed. It's crucial to set clear goals, continuously assess one's skills and knowledge, and commit to ongoing learning. The landscape of cryptocurrency is as dynamic as it is vast, and the way to thrive within it is by staying informed, adaptable, and, most importantly, cautious.

In sum, as we stand in 2023, cryptocurrency remains a compelling frontier for those looking to diversify their monetary strategies. While its allure is undeniable, like all ventures, it demands respect, dedication, and a clear understanding. Success within this domain is not merely about harnessing its tools but about embodying the ethos of continuous learning and adaptability.