Cryptocurrency has become quite the buzzword over recent years. Especially since Bitcoin hit the headlines after surging to new heights in 2018 and then 2021 respectively. The news is full of stories regarding those who have cashed in hugely. As well as those who have lost their fortunes through some ill-fated decision to throw a hard drive in the trash or for choosing a password which is too tough to guess.
If you’ve got extra cash from your day job, or extra cash coming out of your business that you want to put to work, crypto might just be for you. At least for a portion of your cash.
The burning question that all people want answered is: How can I make money from cryptocurrency?
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The problem is, there’s no easy answer, and those who tell you that there are likely have an agenda.
The internet is full of people selling courses or content which promises to send the recipient to the land of eternal riches. It doesn’t work that way. Stocks, Forex, and Crypto all work in the same way. You need to put months if not years of research into it if you’re going to make any decent money. If you got in early, like a lot of people, you might have gotten lucky and already be sitting on a huge amount of leverage. But if you’re just arriving to the game now you need to study, and study hard or you’ll see any capital wiped out. This short and punchy guide seeks to help you make money in a real, down to earth way. I’m not selling you anything. There’s no affiliate marketing on this page, nor is there an agenda. But I am going to tell it to you straight and I’ll start now. It’s hard, gruelling work. If you’re going to do it properly, you have to put the time in. There’s no getting rich quick unless you’re properly clued up, informed and, in some cases, maybe a bit lucky.
What Is Cryptocurrency?
It’s a digitised virtual currency protected by cryptography. It means crypto, of all kinds, cannot be replicated or duplicated. They’re decentralised. This means they exist outside of governments. For example, the dollar is regulated by the US government, the pound the UK government. Whereas something like Ethereum isn’t regulated. Instead, they’re distributed over a huge number of computers.
Most cryptocurrencies use Blockchains to secure and ensure the integrity of the coin in question by securing transactional data. You can find a brilliant Blockchain definition here.
Crypto does have it’s issues. The fact it isn’t regulated is one, but it also had connotations with illegal activity due to the relative anonymity the coins can breed. A key example can be seen with the use of Bitcoin on the SilkRoad, an illegal transactional marketplace eventually shut down by the FBI.
There are many cryptocurrencies out there which you can buy. The most talked about and highest value is, of course, Bitcoin. The others can be known as Altcoins, among which some of the most popular are:
- Stellar Lumens
As this is a business Blog it would be remiss to miss out aspects concerning business, and how businesses can fit into cryptocurrency or vice versa. For a start, Cryptocurrencies themselves are mainly businessnesses of their own. For example, Basic Attention Token, known as an AltCoin is a web browser called Brave. As businesses link with other businesses all the time it’s quite clear to see how cryptocurrency fits into various business dealings and models.
But how will crypto change the face of business? The speed in which cryptocurrency transacts can be quite appealing to business owners. Especially those who make multiple payments on a B2B basis every day. It also lends itself to a certain anonymity. Not that a business will be looking to do something illegal, more that it’s doing something it doesn’t want competitors or the news to find out about. It can also be a brilliant yet secure way of transferring incredibly large amounts of money around the globe. From a customer facing point of view, it gives businesses flexibility in payment. People can easily pay with cryptocurrency. Of course, whether or not your business should accept these payments is another matter and one you’d need to look at in depth.
How Can You Buy Cryptocurrency?
There are many crypto exchanges on the internet, finding the right one for you needs research. Some charge holding fees, others charge purchase fees. Some may be local, others may be based abroad.
The first step to making money is by buying the Cryptocurrency. Some popular exchanges include:
Again, on your part you need to decide which best suits you. They may not be available in certain countries too. Some offer metrics that others don’t, where others have been around longer and can be seen to be more reputable.
You acquire crypto by exchanging it for currency. Remember, depending on your exchange, there may be exchange rates in play depending what your functional currency is. You can check this with your bank but in most cases it’s whatever currency your country uses. When you add this on top of a service charge or process fee the extras can add up.
You may also have heard of crypto mining. You can earn crypto this way and won’t have to put down actual cash for it. Sounds great, but there is a catch.
Mining comes in the form of two functions
- Add transactions to the blockchain (essentially verifying transactions, remember, its decentralised).
- The releasing of new currency.
Miners are rewarded for their work in crypto. However, you need a pretty impressive rig to do it. Complex mathematical equations are needed to be solved, to get to the all important Hash Value. You need multiple GPUs, cabbling, fans, and high end graphics units which can easily run into the tens of thousands.
So How Can You Make Money?
Making money off cryptocurrency isn’t easy, although the basics are simple. With money, you purchase the crypto. Then, you sell the crypto when it’s worth more. You pocket the difference. That’s it. Think about Forex. You may buy USD against GBP, then the USD shoots up in value, so you sell it for a profit.
The problem being that the opposite can happen too. You could buy Ethereum, for example, and then the value could dip significantly thus wiping out your position. It’s a scary concept, but there are methods you can use to hedge your position and limit losses.
But first, there are two main methods for trading crypto, long style trading, and day trading.
- Day Trading
The hardest is day trading. It’s essentially where you make multiple trades on each day. Cryptocurrency is extremely volatile, meaning its value can change drastically, quickly. It means day trading crypto is pretty tough.
Day traders are experts. It isn’t something you can just pick up and be successful with, no matter what various online courses tell you. It takes a long time. Start buy picking up a book from someone you trust. Someone who has been in the industry for years.
Even then, with stocks, people have years of data to dig into and learn from. Crypto is new. It means it’s harder to predict. The drivers for fluctuation aren’t as standard. Consider using a demo account, if possible, to see how it all works.
If you’re new to the game, I would certainly encourage you to spend about three months studying before you part with any significant cash where daytrading is concerned. This article isn’t about the particulars of day trading, which warrants its own article concerning pivot points, entry points, and general theory of swing trading.
Day traders argue around the best strategies too. Some like to trade the news, others use the bars and technical analysis alone, whereas others like a blend of both. Volume price analysis is another popular method, also used when trading Forex.
The key point here is that there is so much involved in day trading. To be successful you need:
- Completely understand the fundamentals of the coin your trading.
- Know the platform inside and out.
- Use tried and tested methodology which you’ve put to practice in demo accounts.
- Have a “feel” for the way the coin acts. Can only be done with experience.
- Study and continue to study techniques for day trading crypto, there’s more coming out all the time.
Trading crypto as a day trader is certainly possible, and it’s lucrative. But it isn’t easy. It’s something you have to work hard for.
If you’re a business owner, this method most likely won’t be for you. Primarily because you won’t have the time. If you did, you wouldn’t be doing it full time and as such may miss certain opportunities. It can work if you focus on trading the same slot each day. You learn over time.
- Going Long
Most people hold. It’s the simpler and more stable method. Sure, you can easily get wiped out but if you’re holding long, the price may rise again and if you weren’t completely wiped out you could regain some ground.
Long depends on what you want. Putting some extra cash into Cryptocurrency is simply an investment. One which may or may not pay off. The standard theory is that over time, value will increase. This is true in most markets. However, most markets can be disrupted by serious events. For example, when Covid first got into full swing in 2020, Bitcoin tanked. Long term investors may have panicked and sold.
However, if they bought when Bitcoin dipped instead of sold, they could have made some serious money in 2021. Potentially around 25k if they bought when Bitcoin was at its lowest.
Going long depends on your appetite for risk, and how long you can hold off taking the money out. The golden rule is that you should never invest what you can’t afford to lose. If you’re wiped it, you just start again. The other is knowing when to bite the bullet and cash out. This can be tough too.
One of the biggest problems with going long is on the buy in. if you had 10k to buy in, and spent it all on Bitcoin, and the next day Bitcoin tanked, you’d lose out massively.
However, if you instead kept that 10k in an account, and bought around 1k of Bitcoin every month or two, you’d be buying in at different rates.
This is called dollar cost averaging and essentially protects you from massive dips. The only downside is that it stops you from making the most out of some of the bigger troughs which appear.
It hedges your amounts. An even better way would be to spread your crypto investments over a few different coins. There’s an issue here in that altcoins kind of tend to follow the trajectory of Bitcoin, but there are outliers and some can quickly raise in value, often seeing increases in the thousands of percent.
You don’t just have to buy a coin and be done with it. Most do, but there are other ways. You can buy into a fund. THese are accounts which are managed by someone else on your behalf.
In general, a fund is usually split up of differing investment opportunities tailored to your aversion to risk.
The chart below shows a low risk investment portfolio in which only 10.9% is in crypto…for some that would be too adventurous.
For others, it wouldn’t be enough. You can buy into specialist Crypto funds designed by specialists. The fund will be managed by them for a small fee. One of those would look like this:
Buying into a fund is the way to go for some. It’s certainly a viable way to spend some of your additional cash. In the future, the money can be used for you and your family, or you could spend it on further investment opportunities.
The issue here is in finding the perfect fund for you. Your bank may offer funds. Or you might invest somewhere else. Just make sure their aversion to risk is the same as your own. You also need to double check the fund and the person running it. Do they have the expertise to do so?
Crypto can be a good bet for your extra cash. Be it from personal work or your business. Just make sure it’s money you actually have and don’t mind losing or you could end up disappointed. This can happen even if you’re in a fund. Remember, it’s extremely volatile.
If you’ve got extra money running out of your business, buying some crypto could certainly yield return in future years so long as you do it right.
Lastly…don’t get suckered in by these free courses promising to make you thousands. Do the work and research yourself and you’ll save money in more ways than one.