With all the hype thats going on around the cryptocurrency space, its actually very difficult to find a way to get in without losing the money you have invested.
In this post, I will outline all the possible ways that one can make a profit with cryptocurrency.
Its a little bit tricky to define ‘profit’ since you are talking about an alternative form of money, but for simplicity and mathematical logic, ‘fiat’ currency aka what we have considered money in the past is the only common denominator.
Anyhow, here are the 3 ways that people invest and ‘monetize’ the new age money we are in.
#1: Trading
If you view any of the coins as a commodity that is bought and sold, sometimes for fiat, sometimes relative to each other it is fundamentally no different to trading anything else: forex, stocks, gold etc.
You buy when its low, and sell when its high.
The 3 main ‘pairs’ are:
- Bitcoin/USD
- Ethereum/USD
- Bitcoin/3 million different altcoins
The range of trading goes from day trading to buying and ‘hodling’, aka, just doing nothing with it for a long time.
Ultimately, at some point to actually have a profit, you need to exchange the coins for either FIAT or services directly.
In my opinion trading is by far the most profitable and long term sustainable way to actually make a profit with cryptocurrencies.
It beats other commodities mainly because of its volatility and a general macro bull market tendency (for now).
I will however warn you, that its very nerve racking and unless you follow the principles you set out and invest time in educating yourself on the basics of trading you can get flushed out quite quickly.
For newcomers, I would advise to trade only ETH/USD or XBT/USD pairs.
Altcoins (aka shitcoins) are really a minefield. They pop out with big spikes and fall down just as fast. Unless you are in the know of the catalyst causing the spike in advance you will be too late to the party and miss out.
Atleast with BTC and ETH your losses won’t be permanent since any dip will most likely recover.
#2: Mining & Cloud Mining
I have never done any mining of my own, however based on the research I have done, currently its extremely difficult to walk away with a profit.
You need to real commit a large chunk of your time towards it, invest a serious amount of cash and even then you probably wont really kill it.
Cloud mining is even worse.
I have experimented with it extensively, across different platforms and my conclusion is simple: don’t do it.
The maths doesn’t work out and you are much better of trading, especially if you only have small amounts to play with.
#3: Pyramid Scheme Type Investments
Unfortunately the cryptospace is also filled with very sketchy arrangements.
The largest one currently is bitconnect.
Its a clasical ponzi scheme by the looks of it.
Its a very high risk and high reward type of investment, since although so far they have been paying out and people have been making plenty of money off of it, it can evaporate at any time.
I would advise either to stay away entirely, or if you feel like gambling to invest only once, get out and then only reinvest the profits you have made from the first cycle.
#4: ICO’s
Another thing that the space is filled with is these kind of scammers.
They literally popup like mushrooms after a good rainfall and shill like there is no tomorrow.
I hate to throw the baby out with the bath water, however majority of the ICO’s I have seen are just painfully, horrendously inflated beyond any reason.
With some of them, its literally nothing more than just a whitepaper written by some dreamer, with others, its investment into a business which no one would invest it had there not been a hyped up ICO word around it.
Conclusion
There is definitely a need to seperate the technology and the value and not fall for the ‘FOMO’ (fear of missing out) that is currently attached to to the cryptocurrency space.
Don’t fall for the hype, and start dabbling and learning.
Here are some steps which I think are essential for any newcomer:
- Learn how/where you can acquire/trade bitcoin
- Learn how you can store the bitcoin properly without giving custody of your keys to a cloud wallet
- Understand the basics of trading (this is useful knowledge for life anyway)
Hope this helps!
Timur
What do you think?