With the rise of Bitcoin over the past decade, and new alternatives like Ethereum and Litecoin springing up in recent years, cryptocurrency, as a whole, has become an investment category that more are considering. If you’re new to the asset class, however, you may be wondering just how to make money with Bitcoin or other cryptocurrencies.
There are numerous ways to potentially make money with cryptocurrency. Read on for some suggestions on how to make money with cryptocurrency, blockchain, and Bitcoin.
Ways to Make Money in Crypto
1. Investing in Cryptocurrency
Investing is, perhaps, the most obvious and common way that some people are making money with cryptocurrency.
The idea here is simple, though: Investors buy cryptocurrencies like Bitcoin, Ethereum, etc. with a traditional account or a Bitcoin IRA. Then, they let it accrue value over time, with the goal of selling it for more than they purchased it. That is, this really only works under the assumption that cryptocurrencies will continue to see their values increase.
However, cryptocurrencies are a risky and volatile investment, so it’s important for investors to consider that before undertaking this strategy. In general, crypto investors may want to make sure that their crypto holdings are just one part of a diversified portfolio that includes other types of investments.
2. Day Trading Cryptocurrency
One could make the argument that trading and investing are the same thing. But they’re often differentiated, to a degree, by time horizons—traders are looking to make a relatively quick profit, while investors may only make a handful of changes to their portfolios per year.
Nonetheless, day trading can be another way to make money with cryptocurrency, just like it is with stocks or other securities. Day traders buy and sell assets within the same day, in order to try and score a quick profit. This is a risky strategy, since it’s hard to know how cryptocurrency values could change in any given day or over time. It should be noted that day trading is an extremely risky activity, and most day traders tend lose money. As with any investing strategy, it is smart to consult with an advisor, and only ever trade with extra money you don’t need to cover your lifestyle costs.
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3. Stake Your Crypto
The process of crypto staking is similar to locking your assets up in the bank and earning interest—similar to a certificate of deposit (CD). You “lock up” your crypto holdings in exchange for rewards or interest from the platform on which you’ve staked the assets.
Crypto miners use any available processing power to solve complex equations, producing the next block in a blockchain, and earning new coins or tokens as a reward. If you don’t have the computing power to become a Bitcoin miner on your own, you may be able to join a Bitcoin mining pool—in which numerous miners “pool” their resources—to mine Bitcoin.
Recommended: How Bitcoin Mining Works
5. Earn Crypto Dividends
Another way to make money with your crypto assets is to earn dividends. If you’re at all familiar with trading stocks or bonds, you’re probably at least somewhat familiar with dividends. In short, dividends are small cash payouts to shareholders. If a company turns a profit during a quarter (or year, it depends on the individual company), it’ll chop those profits up and return them to the company’s ownership (shareholders!).
While it’s unlikely you’ll see a huge proverbial tidal wave of dividends hit your crypto account without a huge balance, it can be a way to make money with cryptocurrency that you already have. That said, you’ll need to do some research to see which cryptos indeed pay dividends, and if the dividends they do pay are enough to make it worth it to you.
Some cryptocurrencies that do shell out dividends in the form of more coins (or tokens) include VeChain, NEO, Reddcoin, NAVCoin, Decred, and Komodo—and their annual dividends vary wildly. So, crypto dividends differ from stock dividends in that they’re not paying out cash, but rather, additional tokens.
Recommended: What is a Crypto Token? Tokens vs. Coins 101
6. Earn Dividends on Crypto-focused Funds
There is another way to earn crypto dividends, however, and it involves investing in mutual funds or exchange-traded funds (ETFs) that invest in the technology or platforms powering cryptocurrency. (To date, the Securities and Exchange Commission has not approved any ETFs that invest directly in cryptocurrency.)
While investing in crypto-related funds is not technically making money with cryptocurrency directly, it does allow you to generate passive income from the crypto and blockchain markets.
7. Crypto Lending
A final way to make some additional coin from your crypto investing activities is to get into cryptocurrency lending. Crypto lending basically involves a borrower and a lender, and an agreement between the two. There are several platforms that facilitate crypto lending, including Nexo, SALT lending, Oasis, and Celsius.
More specifically, cryptocurrency loans involve a borrower who offers their own crypto holdings as collateral, a lender who accepts the terms and offers either cash or another cryptocurrency, and an agreement that the borrower will pay the lender interest.
Generally, the lender and the borrower in a crypto lending agreement are both individuals, not institutions like banks. The key point is that a cryptocurrency is the focal point of the loan, either being used as collateral, or as the primary source of value that’s being borrowed.
So, for lenders, it’s possible to lend out crypto assets or holdings, and in turn, generate returns via interest payments in the form of additional crypto assets. This isn’t without its risks, of course, and it may take some time to research platforms that connect potential borrowers and lenders together. But again, if you’re looking for ways to put your cryptocurrency to work and earn you some additional money, lending it out is one possible avenue worthy of exploration.
8. Work for a Cryptocurrency Company
As crypto has expanded into the mainstream consciousness, so has the opportunity to work in the crypto industry. You could work for any of the hundreds of cryptocurrencies themselves, or for other companies or industries looking to take advantage of the crypto boom. In addition to developers, crypto companies need to hire for all the other roles of a growing business, including marketing, human resources, and cyber security.
There are several ways to put crypto holdings to work to earn returns and additional money. All have their risks and potential rewards, but for enterprising crypto investors, there can be more to a return-boosting tactics than simply a “crypto HODL” strategy, or starting up a Bitcoin IRA.
Photo credit: iStock/filadendron
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Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
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