4 Legit Ways to Make Money with Cryptocurrency
Here’s the most straightforward answer on how to make money with cryptocurrency?
There are MAINLY five legit ways you can do it – trading, HODLing, mining or putting your crypto to work (passive income).
When Bitcoin first started booming around 2015-2016, everyone dismissed it, saying it was a bubble. Some still think that. But every year, more and more people get into crypto out of fear of missing out.
According to this study, 86% of Americans say they have heard about cryptocurrency but don’t know much about them.
Maybe you’re one of these people.
Maybe you have that friend or family member constantly telling you how cryptocurrency and Bitcoin will change the world and how they can make you filthy rich.
So, you finally decide to give it a shot and find out how to make money with cryptocurrency.
In this article, you’ll find out:
- What you need to start your crypto journey
- The 4 legit ways you can make money with cryptocurrency + 1 bonus.
- What most people overlook when getting into crypto
Things you Need to Make Money with Cryptocurrency
On a basic level, these are the only three things you need to get started –
- An internet connection
- A crypto wallet – It’s like a digital wallet where you store your crypto funds.
- A crypto exchange – This is where you buy and sell Bitcoins and other cryptocurrencies.
Opening a crypto wallet and an exchange account is pretty straightforward.
However, make sure the exchange you use is available in the country or state you live in. For example, some states are more crypto-friendly than others, while some have very tight regulations around crypto, like New York.
Here’s a list of the best crypto exchanges in the US.
Depending on the exchange you use, you may have to complete KYC to verify your identity, though No-KYC exchanges are also available.
1. Trading
The first thing that comes to our mind when you ask how to make money with cryptocurrency is trading.
Trading crypto is pretty similar to trading stocks and securities.
You need to know how to do a technical and fundamental analysis of cryptocurrency and learn about different trading strategies like margin trading, leveraged trading, options, etc.
There are different ways you can trade crypto. You can do day-trading, swing trading, or scalping.
As you can imagine, if you’re not already well-versed in the trading world, you need to put a lot of time and effort into learning all of this. It’s like a shift in your career path.
Not just that, but crypto trading is a high-stress, time-consuming job. You have to sit in front of a computer, analyzing candlesticks and chart patterns all day. It’s not for everyone.
If you’re someone who doesn’t wanna leave their job and start a new life as a trader right away, this might not be for you.
Swing trading is probably the least stressful and time-consuming of them all. It’s possible to do swing trading as a hobby or, more like, a part-time job to earn some extra income.
2. HODLing
HODLing is probably the best way to make money with cryptocurrency for beginners. It basically stands for Hold On to Deer Life.
It’s a long-term investment strategy where you hold your crypto assets for years before finally selling them for a huge profit.
This is the example we give to illustrate the potential of HODLing –
Imagine someone bought 10 BTC in 2015, which would have cost him around $3000.
Do you know how much his Bitcoin would be worth today as of writing this article?
$399798.
HODLing is the safest and easiest way to make money with crypto. All you need is PATIENCE.
To get started with investing in crypto, you can buy some Bitcoins and Ethereum every now and then, as they are the safest to invest in.
You can play around with other altcoins, but make sure you do your research and don’t just jump on trends.
3. Passive Income
If you want to go one step further, you can try putting your crypto to work. So, instead of letting your crypto sit idle in your wallet, you can use them to earn passive income.
There are different ways to do it, the most popular being – staking crypto, lending crypto, liquidity pools, DAOs and yield farming.
These are all very complex ideas but somewhat related. It’s better if you read about them separately. We’ve articles written for all of them.
Though we call them passive income, they actually require quite some time and research. Also, these are high-risk strategies, so only put what you’re willing to lose.
4. Mining
We’ll try to explain mining without getting too technical.
Miners are tasked with validating blocks of transactions. They do it by trying to solve a complex mathematical equation and whoever does it first gets a reward in crypto. This is called the Proof-of-Work (PoS) mechanism.
There’s also another consensus mechanism to validate blocks called Proof-of-Stake (PoS), but that’s a different topic covered in the DeFi staking.
The problem with mining cryptocurrency is there’s a big barrier to entry.
Since so many miners are all trying to solve the problem at once, whoever has the most computational power will likely win. So, if you want to start mining crypto, you’ll have to invest in a lot of expensive equipment.
Plus, it requires a lot of time and effort, and if you’re looking for ways on how to make money with cryptocurrency, you’re probably just looking for things that don’t require a lot of investment and time upfront.
BONUS – Social Media, Games and Some Other Ways to Make Money with Cryptocurrency
These are not the best way to make the most money with cryptocurrency, but you can make a few hundred dollars doing these regularly.
Social Media – Many blockchain-based social media platforms reward you in crypto to create and post content. Steemit is one such example.
Play-to-Earn Crypto Games – Many play-to-earn crypto games reward their players for playing their game. Axie Infinity is one such example.
Airdrops – Every day, hundreds of new cryptocurrencies and tokens launch. Some of them do airdrops, which basically means giving away free coins.
You can collect these free coins but keep in mind that they are new, so they aren’t worth much. But you never know.
Flip NFTs – Many people are making thousands of dollars every week by flipping NFTs. Though NFTs are not exactly the same as cryptocurrency, they are closely related, so it’s worth mentioning.
Is Making Money with Cryptocurrency Taxable?
Yes. It’s a common misconception that since cryptocurrency is decentralized and anonymous, it’s also non-taxable. But that’s not true.
Crypto is taxable, and if you wanna know how to make money with cryptocurrency, you should also know its tax consequences.
The IRS considers crypto as property. So, every time you sell, spend or swap your crypto, in other words, dispose of it, you’ll be liable to capital gains taxes.
On the other hand, if you receive crypto as payment for your service or product, you’ll be liable to ordinary income taxes.
Read our guide to crypto taxes to know more about different taxable events.