How To Make Money With Cryptocurrency?: Different Methods

Cryptocurrency is gaining significance for its ability to help traders and investors make money. From buying and selling these digital assets on exchanges to profiting from price fluctuations, digital tokens have opened new avenues for you to make money. 

Moreover, the cryptocurrency market is growing quickly. This means that both opportunities and difficulties await you when treading this market.

Making Money In This Market Depends On Several Factors— 

• Increasing energy prices that impact mining.

• The recent Bitcoin halving event.

• There is a need for efficient equipment and careful planning.

The rules and legalities constantly change because the market is unpredictable and volatile. Therefore, to successfully make money with cryptocurrency, you must learn about all the different methods and stay updated. 

This guide will help you learn these methods and make the right choice for your cryptocurrency passive income goals. 

Cryptocurrency Trading 

This is one of the oldest money-making techniques for all financial fields. The same goes for crypto. To make money with cryptocurrency trading, you’re essentially betting on whether the price of a digital currency will go up or down. 

There are three types of crypto trading, and they all come with the same market constraints. The infographics below will help you understand these different crypto-trading techniques and the barriers they face. 

To make a trade in cryptocurrency, follow these general steps: 

Choose Your Trading Type 

When considering the three types of trading we’ve discussed, think about which aligns best with your money-making goals in cryptocurrency. Once you’ve figured that out, it’s time to choose how you want to trade. Here are a few options you can explore: 

– Traditional Exchanges: This involves directly buying and selling cryptocurrencies on an exchange. You’ll need to create an account, deposit funds, and then purchase the cryptocurrency, which you can store in a digital wallet.

– Contracts for Difference (CFDs): With this method, you can speculate on price movements of cryptocurrencies without actually owning the assets themselves. 

– Indices: This option lets you trade cryptocurrency indices that monitor the performance of a group of cryptocurrencies.

Choose the method that suits you best!

Open A Crypto Exchange Account

You can pick a crypto exchange and set up an account. You’ll need to provide some personal details, including your date of birth, address, and social security in the U.S. 

1. Fund Your Account 

To do this, you must connect your bank account to your trading account. This helps you transfer funds via bank deposit, debit card, or wire transfer. Remember that wire transfers are typically the cheapest. Also, pick the cryptocurrency you wish to trade. 

2. Trading 

Once you have funded your account and selected a cryptocurrency, you can start trading actively. Also, there are platforms that allow you to automate the process. In these cases, trading bots help execute orders based on your strategy. 

3. Trading Methods

When you want to buy or sell a crypto asset, you can either do it at the market price or at a specific price target. Again, this depends on your goals. 

However, market orders are filled at the prevailing bid or ask price. On the other hand, limit orders only execute the order if they reach a certain level. 

4. Selling Your Coins

When you’re ready to sell your cryptocurrency, follow these steps: 

– Go to your wallet. 

– Select the coin. 

– Click the “sell” button. 

– Specify the amount.

The exchange will process the sale, and the funds will be credited to your wallet. 

Consensus Mechanism 

You can earn cryptocurrency through consensus mechanisms. These protocols ensure every node in a blockchain network agrees on a single set of data, which helps verify transactions and keeps the blockchain secure.

The two most popular consensus mechanisms for making money with cryptocurrency are Proof of Work (PoW) and Proof of Stake (PoS). However, to make the right choice, it is important that you learn these techniques. Here’s an infographic to help you with that. 

Another important factor to consider when making money through the mining or staking process is hardware consideration. The three major types of hardware for crypto mining/staking are— 

– ASIC 

– CPU 

– GPU 

The image below will help you choose the best hardware for your crypto-mining requirements. 

Once you understand these basics, develop a sound trading strategy. Subsequently, you can participate in different consensus mechanisms and potentially make money with cryptocurrency. 

Yield Farming And Liquidity Mining 

Much like crypto staking, yield farming uses various DeFi protocols or dApps to maximize profits. These strategies help you earn a passive income from cryptocurrency.

The yield farming strategy functions within the DeFi ecosystem and helps you earn rewards by providing liquidity through the locking up of crypto assets. 

The diagram below will help you understand how this works. 

Yield farming, while it offers the potential for high returns, also carries significant risks. Therefore, it is important to note these risks before making your decision: 

1. Smart Contract Risks 

These are security flaws in smart contracts that can lead to fund losses from liquidity pools. Only a few DeFi protocols are thoroughly verified. Hence, research well before choosing a smart contract. 

2. Impermanent Loss 

Rapid price changes in crypto assets often cause the value of your deposited assets to drop. Therefore, you have to choose between holding your cryptos in a wallet and liquidity earning. 

3. Market Volatility 

The DeFi ecosystem’s lack of regulation can lead to sharp price swings. This can potentially result in substantial losses or liquidation for those borrowing against their holdings. 

4. Rug Pulls

Another third-party issue is with the developers. They often abandon projects and take off with liquidity. This leaves you with worthless tokens. 

5. Regulatory Uncertainty

The unclear legal status of DeFi applications can invite government crackdowns. These legal issues affect liquidity and increase costs. 

6. Scams And Ponzi Schemes 

Fraudulent schemes are rampant in the world of decentralized finance. Hence, if you find schemes that promise unrealistic profits through complex and misleading tactics, it’s best you avoid them. 

NFT Marketplace Earnings 

Another great scope of earning money with cryptocurrency is an online marketplace for artists. These digital spaces sell digital art as NFTs (Non-Fungible Tokens). Here, you can generate revenue in several ways: 

1. Listing Fees 

In this technique, artists pay you a fee to list their NFTs. This process helps you filter out spam and ensures serious creators participate. For running the marketplace, you can earn from these fees regardless of whether the NFT sells. 

2. Royalties

You can earn a percentage, like 10%, from future resales if you have your won NFTs. The marketplace processes these transactions for a fee. 

3. Commission

In NFT marketplaces, the platforms take a small percentage (2-5%) from each sale as a service fee. However, you can earn a 5% commission when an artist sells their NFTs on the marketplaces.

For instance, on a $500 sale, you can earn a 5% commission while the platform earns $25. 

4. Premium Profiles

Premium profiles make up for one great earning opportunity for NFT marketplace shareholders. Artists and collectors pay for premium memberships. But you can benefit from these commissions. These listings help artists enhance their visibility and commission earnings for you. 

Earning Through Affiliate Programs And Referrals 

Crypto affiliate programs and referrals present a great opportunity for you if you want to make money with cryptocurrency. All you need to do is promote a variety of crypto-related products and services.

To get started, you need to join a program by applying and receiving unique tracking links. Subsequently, your earnings come from commissions when users click on those links and take actions like making purchases or signing up.

Some Well-Known Programs Include The Following: 

– Binance: It offers commissions of up to 50%. 

– Coinbase: It gives a 50% commission on referrals.

– Kraken: It provides up to 20% of trading fees.

There are still some more platforms such as Ledger and Trezor that offer competitive commission rates.

With the global affiliate marketing industry projected to hit $27.78 billion, it’s clear that crypto affiliate programs are becoming increasingly important in the space. 

Conclusion 

All these avenues discussed above can help you tap into the world of passive income through cryptocurrencies. Moreover, you get a great opportunity to diversify your investments.

These interest rates often beat what banks offer. Thus, cryptocurrencies make for a pretty enticing source of passive income. If you play your cards right, you can enjoy both interest and investment gains. 

That said, it’s crucial to remember that any passive income from cryptos is taxable. However, the rules can differ based on where you live and how you earn it.

Moreover, there are some risks to consider too. Hence, keep reading and updating your knowledge to make the right decision.

It might even be a good idea to chat with a financial professional to help strike the right balance in your portfolio.