How to Make Money with Cryptocurrency

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February 21, 2022

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Let's get one thing out of the way: Cryptocurrencies have established themselves as a major asset class since bitcoin's nascent days in 2009. Institutional investors and major university endowments are starting to make significant cryptocurrency investments, and according to one estimate, bitcoin's growth will outstrip that of Microsoft, Amazon, and Toyota by 2024. Tesla, the electric carmaker run by Elon Musk, sells products that can be bought using dogecoin, a meme stock started initially as a joke.

We've all heard stories of people minting millions of dollars by investing early and then cashing out during a bull run. But not everyone scores a win. Many people lose money because they do not properly understand how to make money with cryptocurrency.

Crypto assets are inherently volatile, and most involve a high degree of risk. That said, if you play your cards right, you can make money with cryptocurrencies in a variety of ways. You can earn passive income with cryptocurrencies or take a more hands-on approach.

Jump To

What is a cryptocurrency?

Cryptocurrencies are digital assets, meaning they only exist virtually; there are no physical crypto coins or bills. Think of it as cash in digital form.

Cryptocurrencies are created not by a central bank, like U.S. dollars and other fiat currencies, but through a process that involves volunteers from across the world using their computers. This is why cryptocurrencies are often referred to as being "decentralized." No single entity controls them. As for the "crypto" in cryptocurrency, that refers to cryptography, a process to encrypt and decrypt information used to secure all transactions on the blockchain, a digital list of data records that keeps track of all transactions across the network.

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How to make money with cryptocurrency

Investing

Investing is the most common method of earning money from cryptocurrencies, which are prone to massive price swings. You buy coins such as Bitcoin, Litecoin, Ethereum, Cardano, or any one of your choosing, and wait until their price appreciates. Once that happens, you sell it for a profit. Crypto assets are generally well suited to a buy-and-hold investment strategy given their volatile nature.

You don't need to select an expensive crypto; there are several altcoins to choose from. Just make sure you do your homework before committing capital.

Day trading

Day traders ride the market volatility and utilize short-term opportunities. They enter and exit positions frequently, compared with a long-term investor. As a result, a trader's return will be smaller than an investor's. Trading cryptocurrencies requires analytical and technical skills. You'll need to study each crypto, analyze market charts and cryptocurrency signals, and use technical analysis.

Coinbase and Binance are among crypto exchanges that offer cryptocurrency trading but they charge transaction fees. Both also offer a crypto wallet. Robinhood offers a trading platform with zero commissions.

Once you want to calculate your crypto profit, you’ll need to do a few simple calculations by hand. And sometimes, you need a crypto trading profit calculator to save time when there are hundreds of transactions with many variables.

Microtasking

As the name suggests, microtasks are small tasks that can be done in your free time in return for compensation in crypto. They could be apps testing, viewing advertisements or taking online surveys.

Playing games

Do you like to play games? How about earning crypto by playing a game? Thanks to cryptocurrencies and the advent of non-fungible tokens, play-to-earn crypto games are now a thing. But there's a learning curve, especially for anyone unfamiliar with how to use digital wallets.

Crypto arbitrage

The crypto sector is largely unregulated, and most exchanges decide for themselves the price of a listed crypto asset. As a result, the price of a crypto on one exchange could differ from its price on another exchange. Crypto arbitrage is buying new coins from cheap sources and selling on overpriced exchanges and pocketing the difference.

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Extremely simple user interface
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Crypto mistakes to avoid

Beware of scams

According to a survey of securities regulators, investments related to cryptocurrencies and digital assets are the top threat to investors in 2022. New crypto projects should be heavily scrutinized as fake airdrop and initial coin offerings (ICOs) are common scams used by hackers. The telltale sign of a crypto scam is a guaranteed high return with no risk.

Going all in

It's never a good idea to commit vast swathes of capital to crypto. Only use a certain proportion of your investing capital for digital tokens.

Volatility

Crypto is extremely volatile and wild price swings are common. It's important to not lose your cool and be able to digest high volatility. Spread your money among different digital currencies to hedge against risk. That way, you won't lose your money when a token's price plummets.

Service providers

Before you begin to make money with crypto, it is important to decide which platform to use. Each platform's security features should be carefully studied to be able to make an informed decision. And remember: you should always use different, complex passwords for each platform and enable two-factor authentication.

Thinking short-term

Crypto investment is a long game, and rookies often panic-sell when prices drop. If you leave your investment untouched for a few years, you'll fetch healthy gains.

Pros and cons

Pros

There is a potential for a windfall.
Cryptocurrencies are decentralized and they're not tied to a single currency or economy.
The technology underlying cryptocurrencies is inherently secure.
Unlike traditional trading avenues, crypto markets are always open.

Cons

Crypto is prone to wild price swings and you could lose money.
Scams are rampant.
Requires a high-level technical knowledge.
Cryptocurrencies have yet to prove themselves as a long-term investment.

FAQS

Does crypto provide stable returns?

The price of a token can reach dizzying highs or fall to terrifying lows. If a stable return is your main investment goal, crypto wouldn't be the right choice for you.

As someone new to crypto, which token should I buy?

If you're a rookie, it's best to focus on established, well-reputed names like bitcoin and ethereum. Don’t get tempted into buying obscure altcoins solely because you can buy a lot of them at a low price.

Can I trade crypto outside of normal business hours?

Yes, crypto exchanges operate round the clock.

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Get $5 in free Bitcoin for signing up

Trade popular and trusted cryptocurrencies like Bitcoin, Ethereum, and Dogecoin among dozens of others
Earn up to $35 worth of crypto with their Coinbase Learn video tutorials
Extremely simple user interface
Easy to take money out of investments - high liquidity

Get Up to $5 Bitcoin to Invest In Crypto With Coinbase

The bottom line

Crypto isn't for everyone, and you should only enter if you can digest very high volatility. But once you decide to take the plunge, invest only what you are willing to lose and stick to blue-chips like Bitcoin and Ethereum. In order to make your investment safe and to generate a profit, you must research before investing. And don't fall for promises of free coins.

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Jasir Jawaid is Joy Wallet's Assistant Editor. He has more than 13 years of experience as a journalist covering Wall Street, equities, financial policy and regulation, and cryptocurrency and blockchain.

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