Become a crypto master

Become a crypto master

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Learn everything about crypto, trading and bots
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how to make money with cryptocurrency

How to Make Money by Trading and Investing in Cryptocurrency

JUL 14, 2020
24 MIN

Investing in cryptocurrencies is currently one of the most profitable Internet investments strategies available. Trading digital money has grown exponentially in recent years, and shows no sign of slowing down. Whilst it is possible to earn significant amounts of money, it can be a risky game to play.

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Bitcoin is a decentralized cryptocurrency sent over a peer-to-peer network that allows people and organizations to bypass legacy financial institutions. After launching the Bitcoin whitepaper in 2009, the currencies price began to grow in 2011 from $1 to $10 and back down to $5 by the year’s end. By 2013, the cryptocurrency gained 6,600% growth when the price peaked at $1,100. In 2017, the price grew 20 times in less than 12 months soaring to $20,000. Fast forward to 2021, the price of Bitcoin was hovering around $46,000. Experts predict that by the end of Q1 in 2022, Bitcoin will pass $100,000.

PROS

CONS

INVEST

  • Valuable trading  software
  • Anonymity
  • Autonomy
  • Volatility
  • Theft risks
  • Security concerns
  • Mismanagement concerns

TRADE

  • Convenient
  • Mobility
  • Fluctuating rates
  • Brands are finally accepting cryptocurrency
  • You can’t trade 24 hours a day

EARN

  • Easy to start
  • Delayed or completely waiving payments
  • Necessity of spending much time and attention
  • The minimum amount of money to be withdrawn for a long time
  • Hard to find a good project

3 Ways to Make Good Money with Cryptocurrency 

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It is often thought that because cryptocurrency is virtual, a magical spell must be cast to make significant money – without demanding much effort. Whilst cryptocurrencies offer a new revenue opportunity (including the making of Bitcoin) the basics are familiar to other trading formats: invest time and funds to generate profit. Three basic ways to earn money using cryptocurrency are; Investing, Trading, and Earning. 

Investing in Cryptocurrency 

There are several ways to invest in cryptocurrency; long-term investing, passive income, and arbitrage investments (extraction of cryptocurrency). All options have benefits. Some require significant investments whereas others are available for users with minimal initial capital. However, crypto money is yet to be officially recognized by many state structures, and because of the lack of centralized control, it is therefore deemed a risky investment. Cryptocurrencies are highly volatile and change course daily leading inexperienced investors to panic causing them to lose capital during downward trends.

Strategy #1:  Long-Term Investing – Buy and HODL Cryptocurrency

The fundamentals of long-term investing are to ride long-haul bull inclines and kill the market ‘noise’ related to lower time periods. Short-term traders often feel disappointed when the market forces them out of their exchanges as it whipsaws on the smaller time allotments (for instance, the one-hour time span). The value activity, on a week-by-week diagram, is often unstable over a specific timeframe. At that point, when a similar period is breaking down on smaller time periods, the image is typically significantly more worn out and flighty than on the week after week time allotment. Buy-and-hold strategies require traders to be in practice for months, even years. Such investors often don’t typically wait for significant reverses against the latest bull market as they may miss the chance to get to the spot they want.

Reduced Costs for Transactions 

Traders who partake in long-term buying and holding trades typically do not overtrade as this can significantly reduce transaction costs. A broker that is in and out of business daily or weekly will contribute to the value of the cumulative sale. The distribution of some cryptocurrencies is much higher than the main currency pairs, making short-term trades expensive and inefficient in favor of a few long-term trades.

Time Efficiency

Cryptocurrency trading tips are perfect for investors and traders seeking significant returns with a low time investment. Long-term cryptocurrency traders interested in buy-and-hold investing are not restricted to tracking the market close each day or engaging in technical research. However, it is wise for cryptocurrency traders/investors to stay informed of fundamental news and always be aware of their positioning.  But – it is much less time-consuming than short-term trading.

Strategy #2:  Passive Income from Dividend Payouts

Passive income is characterized as a regularly collected source of income that does not require maintenance. The traditional dividend payments from holding stocks are a source of passive revenue. Passive income is generally generated from a rental property or a partnership with a certain time limit. It can also come from another organization where a person has no active participation. Some analysts believe that ‘portfolio income’ is passive income, and therefore dividends and interest are static. Few traders realize that some cryptocurrencies are also a source of dividends as there are some similarities to traditional financial market approaches. Income is generated from owning shares that pay dividends or through buying a bond that charges a periodically fixed interest.

Advantages

Some cryptocurrencies pay dividends between 5% and 10% per annum

You can make greater profits if the coin price rises over time

Disadvantages

Big risks of losing money in case of large investments 

The need for constant diversification of your deposits

Strategy #3:  Cryptocurrency Arbitrage

Cryptocurrency money arbitrage between various trades is the most transparent kind of exchange since it is fundamentally the same as Forex arbitrage and sports trades. The thought is primary: benefit from the distinctions in costs for a similar coin yet on various trades. For example, one cryptocurrency exchange sells coins for $8,000, the other for $10,500. Your job is to use this difference in exchange rates to your advantage and make money. But do not forget to take into account the commission of each of the trade markets!

Distinguishing Arbitrage Features

To identify cryptographic money arbitrage features in comparison to trading, a couple of elements should be considered, for example: 

  • Liquidity: As in the distinction in the exchanging volumes on various trades, as the difference in market interest influences the costs. On progressively settled trades, prices vary, not like on small or new ones. 
  • Topography: Depending on the time-zone, it may be simpler or harder to sell during specific occasions of the day. 
  • Postings: Value contrast, when a crypto coin gets recorded on one of the significant trades like Binance.

How to Make Money Trading Cryptocurrency 

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Trading in cryptocurrencies is not significantly different from trading in precious metals, currencies, and shares. The main task remains the same: buy as cheaply as possible, sell at a higher price, and make a profit. The main difference between cryptocurrency trading and the stock market is the high volatility of the exchange rate. Trading is putting money on a short-term stock. Traders buy and sell rapidly to achieve higher retail revenues. Missing the right time may lead to a loss. They look at the company’s current results to achieve higher prices and book profit in the short term.  Investing, on the contrary, is staying away from the market trends and counting on the value. Investors play in a long-time game, keeping an eye on their stocks. Investing is waiting patiently for the stock to reach its potential.

 Here are the most common and profitable trading strategies: 

Intraday Trading 

Swing Trading 

Scalping 

Position Trading 

Trend Trading

We will touch upon each of the trading strategies in detail later in this article. 

The choice of strategy should not be made at random. Before earning on the difference of rates of cryptocurrencies and turn crypto into cash, it is necessary to analyze the possibilities: 

  • the size of the initial capital for the trades; 
  • psychological qualities – for example, whether you are capable of restraining yourself at a choice of long-term strategy of earnings for a long time; 
  • propensity to rash actions. 

It is not always possible to determine these nuances on your own, as it is challenging to evaluate your own abilities objectively. Therefore, before earning on the exchange cryptocurrency and getting cryptocurrency profit, always consult with experts to calculate the risks and approach trading wisely. 

Advantages

Low entrance fee 

Round-the-clock bidding 

Independence from politics and the global economy

High volatility

Disadvantages

Risk of losing the deposit if the approach is illiterate 

The need for in-depth knowledge of the Blockchain techniques 

Intraday Trading 

Otherwise known as Day Trading, intraday trading is a strategy used in both the stock and crypto market which involves the buying and selling of crypto currencies on the same day. The purpose is to benefit from the price movements during the day or before the market closes and can be performed on online platforms. Due to the volatile nature of crypto assets, small changes in the market can result in a huge impact on the value of assets. It is a risky strategy, so it is essential to invest in a trusted crypto currency trading platform that offers a safe and transparent trading environment that includes multiple crypto markets – including crypto-cross and crypto-to-fiat paris and low commissions. 

Advantages

Easy money management

It is easy to know the profitability of the strategy used

Minimal risk of losing the entire deposit

No commissions

Disadvantages

You need to monitor the market constantly

Requires patience and accurate planning of all actions

Swing Trading

Popular among traders of all experience levels, swing trading strategies appeal to longer timescales compared to day trading. The idea is to catch ‘swings’ in the market that occur over days, weeks or months. Separated by high swings; when the market peaks before pulling back – providing a short trade opportunity, or low swings; when the market dips and bounces, providing a long trade opportunity. Successful crypto swing traders typically use technical analysis to observe short to medium time frame charts in order to catch daily and weekly trends. The use of fundamental analysis is also essential, as economic events can often occur over days or weeks.

Advantages

requires less time to exchange than day exchanging 

boosts momentary benefit potential by catching the central part of market swings 

dealers can depend only on specialized investigation, disentangling the exchanging procedure

Disadvantages

exchange positions are dependent upon medium-term and end of the week showcase hazards

unexpected market inversions can bring about generous misfortunes 

swing traders regularly miss longer-term inclines for momentary market moves

Scalping

Scalping trading involves profiting from minor price changes. Traders often implement this strategy anywhere from ten to a few hundred trades in a single day, believing that small moves in price are easier to catch than longer ones. These traders are known as ‘scalpers’ and the main goal is to buy or sell a number of shares at the bid—or ask—price and then quickly sell them a few cents higher or lower for a profit. The holding times can vary from seconds to minutes, and in some cases up to several hours. The position is closed before the end of the total market trading session, which can extend to 8 p.m. EST. Scalping is a fast-paced activity for nimble traders. It requires precision timing and execution. However, scalping requires account equity to be greater than the minimum $25,000 to avoid the pattern day trader (PDT) rule violation. Margin is required to execute short-sale trades.

Within a given trading period, scalpers can make thousands of trades. Scalping techniques have three characteristics:

  • short positions, 
  • small profit margins  
  • high leverage

Scalpers try to target price differences and other “loopholes” in the short-term exchange, helping them to turn a large position rapidly for the profit. Scalping allows traders to gain practical experience very quickly. Profitability from single operations can be high, but on average, they show low results of earnings. Often used by large trading companies and investment departments of banks with top-class professionals in the composition, vast amounts of money on the balance sheets and the use of automated trading, in which the slightest fluctuations in the rate and changes in trends instantly respond to special programs – robots, experts, who conclude transactions to buy/sell currencies.

Advantages

It’s possible to trade with a small deposit

There’s no complex analysis. Losses are offset by profitable transactions

You don’t have to wait, there’s always a way to trade

Disadvantages

Great nervous tension during the work, because you need to make quick decisions and constantly open new positions

Position Trading

A longer-term trading strategy, position trading requires purposefully sitting in a position for several weeks or months waiting for a big price move. A very different philosophy to a day trader, position traders ride out the short-term ups and downs of market prices and patiently wait for a longer-term objective. Position traders utilize simple moving averages (lagging indicators): 50, 100, 200-day SMAs whereby the trader relies on crossovers as an entry or exit signal. They will also use specialized investigation, essential examination, macroeconomic variables, and general market patterns to find reliable information to make trade decisions. 

Advantages

Ability to wait calmly for the target price level to be reached

The ability to track what is happening in the market and make any changes if necessary

Disadvantages

You should have a deep knowledge of the market to plan a strategy

Trend Trading

Trend trading attempts to capture gains through the analysis of an asset’s momentum in a particular direction. When the price is moving in one overall direction, such as up or down, that is called a trend. Entering a long position when a security is trending upward, and a short position when an asset is trending lower. There are many different trend trading strategies, each using a variety of indicators and price action methods.

Advantages

Trading in the direction of the current trend allows a trader to clearly identify market entry and exit points, get the most out of the price movement and minimize trading risks

A huge number of trend trading strategies and trend indicators

Disadvantages

Trend reliability depends on the size of the timeframe – the older the timeframe, the more reliable it is, but, accordingly, its formation takes much longer time

How to Earn Cryptocurrency 

Many people now consider buying and selling cryptocurrency much like a trip to the casino. Whilst there are risks associated with the unknown of something new, the trajectory proves that cryptocurrency is the future of investment and significant earnings. 

Mining Cryptocurrency

Crypto mining is the process where specialized computers (known as nodes or mining rigs) validate blockchain transactions for a specific cryptocoin and receive mining rewards for their computational effort. This method of verifying transactions on a digital ledger for a blockchain requires machines with extensive computing power and is possible for any individual or organization to partake in – providing they have the adequate software and hardware resources. However, the expansion and increasing costs are making it progressively difficult for newcomers to engage in.

 Advantages 

nice profit with the growth of the electronic currency chosen for mining

Disadvantages

substantial return on investment in components is required

huge electricity bills 

constant monitoring of the system is needed 

This way of earning will be suitable for people who are well acquainted with the principles of modern technology and have an impressive initial capital for the purchase of expensive equipment.

Cloud Mining

Cloud mining is a mechanism to mine a cryptocurrency, such as bitcoin, using rented cloud computing power and without having to install and directly run the hardware and related software. Since this form of mining is done via cloud, it reduces issues such as maintenance of equipment or direct energy costs.

Advantages

does not require significant investments 

quick payback 

Disadvantages

a large commission to receive funds

the possibility of losing the investment as a result of closing the site

Work for Cryptocurrency

There are no specific statistics on companies that use cryptocurrency to pay employees, but as a rule, such salaries are paid to representatives of ICO-projects, as well as blockchain and crypto companies. First, they are more loyal to innovation and can even welcome such a reward. Secondly, a company may not have sufficient fiat resources. Third, it is an additional way to promote the company – if, for example, the fees are paid in the tokens of the project. 

In the USA, the Bitwage payroll service has been in operation since 2014, allowing employers to make international payments in both national and virtual currencies: bitcoin, ethereum, litecoin, and DASH. The service supports 25 coins in total. Regular customers are Google, Facebook, GE, Philips, Airbnb, Uber, and even the US Navy. 

According to Bloomberg, European and American companies often use cryptocurrencies to pay employees from Latin America, as their national banks do not provide a convenient and reliable infrastructure for international transfers.

There are services that help find executors who are ready to work, for a fee, in cryptocurrency.

The most popular services are Dream, Jobs by Cointelegraph, as well as BitGigs and Coinality freelance exchanges. You can search for work with remuneration in cryptocurrency on the Crypto Jobs List, Crypto Jobs, and CryptoCurrency Jobs.

Faucets and Micro Tasks

A crypto faucet is an app or a website that distributes small amounts of cryptocurrencies as a reward for completing easy tasks. They’re given the name “faucets” because the rewards are small, just like small drops of water dripping from a leaky faucet. However, in the case of crypto faucets, tiny amounts of free or earned cryptocurrency are sent to a user’s wallet. In order to get free crypto, users need to complete tasks as simple as viewing ads, watching product videos, completing quizzes, clicking links (be careful!) or completing a captcha.

Size of Earnings

The most generous faucets are ready to give you a few Satoshi coins, up to 100 or more. From one visit to such a website, participants could earn from ten to 500 coins. For reference, however, 1 Satoshi is the equivalent of 0.0003549 USD as of today (23/01/22).

Micro Tasks

Clicks for Satoshi: very simple but very long micro tasks, they are the easiest but longest way to earn e-currency. The user enters a special site where advertisers leave task instructions by clicking on banners that jump to pages. For such simple actions, participants can receive small amounts of Satoshi.

Advantages

earnings without investments 

it is possible to spend the spare time with benefit (but more often without it)

Disadvantages

small profit

one coin can takes years to earn 

a lot of free time is required

This method is suitable for people who have a completely open schedule. For example, for women on maternity leave or security guards working in irresponsible facilities on night shifts.

Affiliate Marketing

Crypto subsidiary affiliate plans allow users to earn passive income and monetize from simply referring friends to a service. It’s a great strategy for companies to deploy for attracting new customers into the crypto space and rewarding existing ones. Users get a unique link from the crypto project which they use to invite their peers which is then used to determine how much business that one customer has brought in. From there, the users who generated the link are rewarded with a range of benefits from discounts to high monthly gains. Proving to be a very low risk strategy, easy to use and with potentially high returns, crypto affiliate marketing is a great passive income earner. 

Summary 

Whilst there are risks associated with crypto trading, the rewards can be exponential. Outcomes often depend on the volume of knowledge, level of skill in financial markets, the strategy deployed, volatility of rate, and sometimes it even comes down to luck. The crypto trading world has grown significantly over the past few years with both individuals and companies entering the market which increases the rate of exchanges. 

If you’re ready to start earning big money and start trading, then we recommend registering on 3Commas terminal.  Our online service supports all popular cryptocurrency exchanges, is simple and user-friendly both for professionals and novices. Click here and get your 7-day trial on 3Commas!

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