Cryptocurrencies have generated their fair share of headlines in the last few years but as investors have become more accustomed to this reasonably new investment option the attention has turned more to the question of how to make money in this area of trading and whether there are profits to be had.
The good news is that there is likely to be a cryptocurrency investment strategy that fits your risk profile and investment objectives.
Here is a look at some of the ways you could potentially make money by investing and trading cryptocurrencies and related markets.
Secured lending option
If you are concerned about stories relating to fraud and other risks attached to trading bitcoin there is a potential option that helps to greatly reduce that risk while still offering an opportunity to generate a profit.
A secured lending platform works by creating a legally binding agreement between a borrower and a lender, reducing the level of risk exposure significantly in the process.
What happens is that rather than exchanging bitcoin for cash the borrower receives bitcoin in the form of a loan and provides the equal value of money to the lender, which acts as collateral.
This scenario means that if you act as a lender you will be enjoying the protection of collateral plus the ability to generate a profit by charging interest on the loan.
Check out an explanation of this option if you want further information on this opportunity to profit from bitcoin in a way that comes with some extra assurances.
Applying a stock market mentality to bitcoin trading
If you invest in a stock there is a fair chance that you may have to wait some while before you see the value of that company rise to a level that allows you to cash out for a profit.
Many investors tend to take a medium to long-term view and you will soon discover that a good number of cryptocurrency traders adopt the same strategy in this sphere.
In fact, it is such an established practice that HODL has quickly become a highly-recognized industry term. The acronym stands for “Hold On to it for Dear Life” and the term is self-explanatory in that it suggests the way to make a profit is to take a long-term view.
If you are not familiar with arbitrage, the simple explanation is that it is a strategy where you buy something for a lower price and then sell it at a higher price on a different platform, taking advantage of market pricing anomalies and differences to lock in a profit.
Bitcoin is considered a great medium for this strategy and is viewed by a number of traders as one of the most obvious ways of generating a quick profit.
You have to have eyes like a hawk and be able to act quickly if you are going to spot and profit from an arbitrage situation, but it is possible to make money this way.
Mining is the process of creating new bitcoins.
It should be remembered that each cryptocurrency has a finite number of coins and that means that there is an end game, albeit at some point in the future, when all the coins will have been mined and in circulation.
It is estimated that the last bitcoin will be mined at some time around 2140, so there is plenty of time left to join the mining community if that is what you want to do.
All transactions are subsequently approved by a computer that is connected to the blockchain and there is a public ledger for accountability.
It is possible that you could generate a profit from mining cryptocurrency but you will need to fully explore the best way to do this and understand how the process works.
The potential to earn free coins
Everyone likes something for free and a way that you could earn some free cryptocurrency is through what is called Airdrops.
You might see Airdrops referred to as crypto freebies but they are one of the same things.
How this works is a blockchain project decides to distribute free coins or tokens to the cryptocurrency community, much like a promotional tool to generate interest in their product.
It may well be a requirement that you already own a specific token to qualify for an airdrop but that’s likely to be the only caveat attached to the offer of free coins.
Become a day trader
Day trading is not for everyone but it is an option that is worthy of mention as a strategy that could earn you money.
In much the same way as day trading on the stock market works, trading bitcoins and other cryptocurrencies involve buying and selling on the same way, hopefully, with a view to locking in a profit if you can get the timing and movement of the price right.
There are days when the price of cryptocurrencies can fluctuate significantly and these fluctuations tend to be influenced by economic news or just rumors.
It is possible to trade bitcoins against other cryptocurrencies and even against fiat currencies such as the US dollar, so there are opportunities if you can develop a viable day trading strategy.
Using a computer to trade for you
There are a lot of transactions completed across various stock and currency markets every day that is actioned by a trading bot and you have the same option with cryptocurrencies.
It should be noted that running a bitcoin trading bot is still considered an advanced trading method that is not for novices but with the right guidance and a willingness to learn the ropes it is possible to generate some decent profits with this approach.
This is not an exhaustive list of strategies and methods that you can use to make money from cryptocurrencies but it should give you a good flavor of the opportunities that exist to profit from this from of investment.
If you are an active investor and want a spread of investment vehicles to help you generate a profit, bitcoin and other cryptocurrencies should be on your radar.