There are many ways to increase your savings using Bitcoin and other digital assets. For example, investing, trading, mining and other methods. We tell you about all the options
2020 may well be the year that interest in cryptocurrencies reaches the end of 2017. Bitcoin, according to forecasts, is again torn to historical highs, and altcoins are also growing in price. It's time to remember the most popular ways to invest and make money on cryptocurrencies.
Trading involves short-term speculation, making a lot of transactions. Exchanges are best suited for this. Here, the easiest way is to quickly buy or sell cryptocurrency. There is also an option for margin trading with leverage. However, it is suitable only for professionals, since it is much more risky.
Cryptocurrencies are extremely volatile, so it's better to start trading them with a practice account. It allows you to get acquainted with the exchange and its instruments, get an internship on a virtual balance sheet. Then it is better to start a small amount and, no matter how strange it may sound, survive the first losses. This will help you understand if you are able to remain calm and make informed decisions in a stressful situation.
It is worth reading specialized trading literature, listening to lectures, and taking courses. This will help you better understand the market situation and learn different trading strategies. We have discussed in more detail how to start trading cryptocurrency in the previous article from the series "Instructions for a beginner".
There is also algorithmic trading. Most transactions on world exchanges are carried out using high-frequency trading instruments – a method of trading in which special programs automatically look for opportunities to make money, sell and buy positions in a split second. Due to the strong fluctuations in cryptocurrency rates, bots in this area are becoming more and more popular.
Algorithmic trading systems are used by both professionals and amateurs. Programs vary in degree of complexity and principles of the device. There are three main categories of software for working with crypto-exchanges:
- Simple bots with predefined logic;
- Trained trading robots based on AI and machine learning technologies;
- Robots-advisors (do not make deals, but give recommendations).
This option is hardly suitable for beginners. System performance is difficult to predict and impossible to guarantee. It is not worthwhile to completely surrender exchange operations to the outsourcing of software, but you can try robots-advisors and independently assess their effectiveness.
Earnings on referral programs of crypto exchanges
A referral program is a type of cooperation in which a company pays its client (referral) for attracting new users (referrals). As a rule, both the one who brought and the one who was brought receives bonuses. Each organization chooses the method and amount of remuneration independently.
Among crypto exchanges with permanent affiliate networks: Binance, BitMEX, EXMO, OKEx, Huobi and Bitfinex. The amount of remuneration depends on the total volume of all attracted referrals. It happens that companies launch "one-time" referral programs, for example, as part of an IEO or in honor of a major update.
In March, Bittrex Global announced big changes to the mobile platform: the site began to support credit cards for buying digital assets and pending orders on smartphones. At the same time, the company introduced a new referral program, which allowed customers to receive an additional commission percentage from the transaction of customers who came via a special link.
The alternative to trading is hodle or investing. This approach implies the execution of long-term transactions. It is more suitable for non-professionals, since it does not require knowledge of technical analysis, trading ability and other skills.
Investing has less potential than trading. The price of cryptocurrencies can change by tens of percent every day, and the investor, accordingly, misses the opportunity to make money on these fluctuations. The "hodl" has one more essential nuance. It is extremely important to find the right moment to purchase an asset, it is better to wait for a strong decline in its rate. For example, users who invested in bitcoin in 2017-2018 at a value above $ 14,000 have still not been able to close the deal with a profit.
Stablecoin is a cryptocurrency backed by traditional assets like US dollars. Such tokens are often used on crypto-exchanges as a convenient trading pair and adaptation tool. For traders, they are one of the main tools for taking profits. After completing a successful transaction, the user does not need to withdraw funds to fiat.
In April of this year, the balance of USDT and USDC stablecoins on the balances of users of all crypto exchanges exceeded $ 1 billion. An analyst at the Longhash portal explained that traders did not withdraw money, as they were going to invest it back in cryptocurrency, they were just waiting for the right moment. Recall that at the beginning of the month bitcoin traded at $ 6,200, since then it has risen in price by 57%, to $ 9,700.
On trading floors, anomalies occur when the price of a certain asset drops or rises by tens or even hundreds of percent, and then immediately returns to the previous level. For example, in November 2017, on Coinbase, the Ethereum rate dropped from $ 317 to $ 0.10 for a few seconds. This happened due to the fact that one of the traders sold more than 96 thousand coins in one order.
Often, such movements occur in pairs to stablecoins, such as BUSD, PAX, USDS and others. In order to try to catch the "lumbago", you need to buy a stablecoin, place an order to buy a cryptocurrency paired with it at a favorable rate. It is advisable to do this so that there are no other orders between your position and the current price.
The advantage of a life hack is that it eliminates most of the market risks. If the "lumbago" happens, you buy cryptocurrency at a favorable rate. If not, the money remains in the stablecoin, the value of which is equal to the US dollar. The only, but very unlikely, possible danger is if the token issuing company announces the cessation of activity.
ICO and IEO
The peak of fame for ICO projects took place at the beginning of last year. They were remembered for both large losses and huge earnings of investors. Perhaps the end of this method of attracting funding in the spring of 2020 was put by the Telegram Open Network – a project by Pavel Durov, which was much more talked about than others. The American court banned the release of Gram, after which Durov announced the completion of work on the blockchain platform.
ICOs were replaced by IEOs – initial exchange offers. They differ in that the developers of projects are not looking for investors, but the cryptocurrency exchange selects promising teams and promotes their coins among its users. One of the main advantages of IEO is that tokens are necessarily issued and listed. That is, there are no deceived investors who did not wait for their coins to appear.
No one guarantees high profits to investors, but most IEO projects have shown multiple growth at the start of trading. This way of earning money was so popular last year that some fundraising campaigns were completed in seconds. Most investors did not have time to take part in the crowdsale, so the exchanges changed their approach and made a lottery out of it.
Now, on the vast majority of platforms, clients need to keep exchange tokens on the balance for a certain time before the token sale. In this case, people can participate in the lottery and try to get an allocation to buy new coins. Often, the percentage of winning tickets does not exceed 20% of the number of applicants.
One of the most popular ways to make money on cryptocurrency is mining. Now, after the May halving, bitcoin mining has become even less profitable. For beginners, mining the first cryptocurrency is hardly suitable. It is more often used by large companies that have a large amount of necessary equipment, access to cheap terms for renting premises, electricity and maintenance. It makes sense to mine digital coins only if there is an opportunity not to sell most of them to cover transaction costs.
It is better for beginners to start mining altcoins. It is cheaper and makes it possible to resell video cards in case of failure. An ASIC after exploitation is much more difficult to implement. It is even more profitable to work in a pool, that is, together with other miners. In this case, due to the total capacity of the pool, you can get a small but stable income.
An alternative to mining is staking. This is a method of mining cryptocurrency, but without farms or ASICs. Coins that work on the Proof-of-Stake algorithm are stored in the wallet, and while it is running, they bring a certain income. The amount of earnings depends on the account, the annual interest rate for PoS and, a little, on luck.
In PoS, the operation of the network is provided by remote servers running software. They are also called masternodes. In fact, this is a home computer or laptop with a special wallet installed and a certain amount of coins. For example, in order to participate in staking ETH 2.0, which can be presented as early as this fall, you need to keep at least 32 ETH.
In order to earn money on staking, you need to replenish your wallet with coins. Then wait for the blocks to appear, usually this process takes 1-2 days. After that, install the software client on the computer and start the storage. It must be active and synchronized, and coins must not be used for transactions for a long time.
Staking is like a bank deposit, where a user deposits funds into an account at interest for a specific period of time. The more money in the account, the higher the profit. The power of the computer in the case of staking does not affect income in any way, only the balance of the wallet and the storage period are important.
To search for coins on the PoS algorithm, there is the StakingRewards service. The portal has information about the approximate income that can be obtained for storing certain coins. Now there are more and more altcoins on the market that support staking. But the most anticipated is Ethereum. It is not yet known when the ETH 2.0 network will be launched, but many experts predict its success.
Earnings on masternodes
Masternodes are needed to ensure that transactions take place as quickly and anonymously as possible. Each owner of such a server, as in the case of staking, must be the holder of a certain amount in cryptocurrency. The earnings are made up of the part of the miners' remuneration.
The most profitable and risky option in this case is to look for new projects in which the masternode mechanism is implemented, and become the owner of the node in them. This does not require large investments, but, in the case of successful development of the startup, it allows you to get a high income. At the same time, you need to be constantly online and be able to negotiate in English.
According to Dmitry, a system administrator from Belarus, this way of earning money brings in $ 2000-3000 per month. It directly depends on the activity of altcoin users and its demand in the market. The main problem with this activity is regulation gaps. It is still impossible to correctly explain to the tax authorities what kind of business it is, how it works and where the money comes from.
Mining on the phone
Not everyone knows about the complexity and peculiarities of mining, so some users believe that it is possible to mine digital money on a regular smartphone with the Android operating system. There are several options in the Google Play app store, each of which promises easy money at no extra cost.
However, none of them really can bring real profits. And phone problems are easy. For example, the most realistic way to mine digital money on a smartphone is in an Electroneum wallet. However, as we thought earlier, in two months in this way you can earn no more than 40 rubles.
In 99% of cases, applications that offer mining on a smartphone actually do not mine anything. They can serve ads and use other methods of earning money from users. But now it is impossible to get real income in this way.