There are many ways to increase savings with 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 when interest in cryptocurrencies will reach the level of the end of 2017. Bitcoin, according to forecasts, is again rushing to historical highs, altcoins are also growing in price. It's time to remember the most popular ways to invest and earn money on cryptocurrencies.
Trading involves short-term speculation, making a lot of transactions. Exchanges are best suited for this. Here it is easiest to quickly buy or sell cryptocurrency. There is also an option for margin trading with leverage. However, it is suitable only for professionals, because it is much more risky.
Cryptocurrencies are extremely volatile, so it is better to start trading them from a training account. It allows you to get acquainted with the exchange and its tools, get practice on a virtual balance sheet. Then it is better to make a small amount and, no matter how strange it may sound, survive the first losses. This will help you understand whether you are able to remain calm and make informed decisions in a stressful situation.
It is worth reading specialized literature on trading, listening to lectures, taking courses. This will help you better understand the market situation and learn various trading strategies. We have analyzed in more detail how to start trading cryptocurrency in the previous material from the cycle "Instructions for a beginner".
There is also algorithmic trading. Most transactions on world exchanges are made using high-frequency trading tools â€” high-frequency trading) - a method of trading in which special programs automatically search for earning opportunities, sell and buy positions in a fraction of a second. Due to strong fluctuations in the exchange rates of cryptocurrencies, bots in this area are becoming more and more popular.
Algorithmic trading systems are used by both professionals and amateurs. The programs vary in the degree of complexity and the principles of the device. There are three main categories of software for working with crypto exchanges:
Simple bots with pre-defined logic;
Trainable trading robots based on AI and machine learning technologies;
Expert Advisor robots (do not make transactions, but give recommendations).
This option is hardly suitable for beginners. The efficiency of the system is difficult to predict and impossible to guarantee. It is not necessary to completely give stock exchange operations to the software, but you can try in the case of robot advisors and independently evaluate 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 receive bonuses. Each organization chooses the method and amount of remuneration independently.
Among the crypto exchanges with permanent partners: Binance, BitMEX, EXMO, OKEx, Huobi and Bitfinex. The amount of remuneration depends on the total volume of all referrals attracted. It happens that companies launch "one-time" referral programs, for example, within the framework of the IEO or in honor of a major update.
In March, Bittrex Global announced major changes in the operation of the mobile platform: the platform began to support credit cards for the purchase of digital assets and pending orders on smartphones. At the same time, the company introduced a new referral program that allowed customers to receive an additional commission percentage from the transaction of customers who came by a special link.
An alternative to trading is "hodl" or investing. This approach involves making long-term transactions. It is more suitable for non-professionals, as it does not require knowledge of technical analysis, trading abilities 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 another significant 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 exchange rate. For example, users who invested in bitcoin in 2017-2018 at a cost above $14,000 have not yet had the opportunity to close the transaction with a profit.
A stablecoin is a cryptocurrency backed by traditional assets, for example, US dollars. Such tokens are often used on crypto exchanges as a convenient trading pair and an adaptation tool. For traders, they are one of the main tools for fixing profits. Having made a successful transaction, the user does not have 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. The analyst of the Longhash portal explained that the 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 was trading at the level of $6,200, since then it has risen by 57%, to $9700.
There are anomalies on trading platforms when the price of a certain asset drops sharply or rises by tens or even hundreds of percent, and then immediately returns to the previous level. For example, in November 2017, the Ethereum exchange rate on Coinbase dropped from $317 to $0.10 for a few seconds. This was 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 a "bullet", you need to buy a stable coin, put an order to buy 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 a "lumbago" happens, you buy cryptocurrency at a favorable rate. If not, the money remains in the stablecoin, the value of which is equated to the US dollar. The only, but very unlikely, possible danger is if the company issuing the token announces the termination of its activities.
ICO and IEO
The peak of the fame of ICO projects took place at the beginning of last year. They were remembered for both large losses and huge earnings of investors. Perhaps the Telegram Open Network, a project of Pavel Durov, which was discussed much more than others, put an end to this method of attracting funding in the spring of 2020. An American court banned the release of Gram, after which Durov announced the completion of work on the blockchain platform.
ICO was replaced by IEO-primary exchange offers. They differ in that it is not the project developers who are 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 included in the listing. That is, there are no deceived investors who have not waited for the appearance of their coins.
No one guarantees investors a high profit, but most of the IEO projects showed multiple growth at the start of trading. Last year, this method of earning money was so popular that some fundraising campaigns were completed in a matter of 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 sites, customers need to keep exchange tokens on the balance for a certain time before the tokensale. In this case, people can participate in the lottery and try to get an allocation for the purchase of new coins. Often, the percentage of winning tickets does not exceed 20% of the number of applicants.
One of the most popular ways to earn money on cryptocurrency is mining. Now, after the May halving, bitcoin mining has become even less profitable. For beginners, mining of the first cryptocurrency is hardly suitable. Large companies that have a large amount of necessary equipment, access to cheap conditions for renting premises, electricity and maintenance often earn money on it. It makes sense to mine digital coins only if it is possible not to sell most of them to cover transaction costs.
It is better for beginners to start mining altcoins. This is cheaper and makes it possible to resell video cards in case of failure. ASIC is much more difficult to implement after operation. 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 stacking. This is a way 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 on PoS and, a little, on luck.
In PoS, the functioning of the network is provided by remote servers on which the software is running. They are also called masternodes. In fact, this is a home computer or laptop, on which a special wallet is installed and there is a certain amount of coins. For example, in order to participate in the ETH 2.0 stacking, which can be presented as early as this fall, you need to hold a minimum of 32 ETH.
In order to earn money on stacking, you need to top up 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 operation. It should be active and synchronized, and the coins should not be used to make transactions for a long time.
Stacking is similar to a bank deposit, when a user deposits funds into an account at interest for a certain period of time. The more money in the account, the higher the profit. The power of the computer in the case of stacking does not affect the income in any way, only the balance of the wallet and the storage period are important.