The cryptocurrency space is probably the best place to generate more profits. There are many ways and strategies to get exposure to this fast-growing industry, each with its specific risks. In the present article, we’ll discuss the three most popular approaches to benefit from digital currencies.
Even though each method sounds attractive, you should do your due diligence before investing real money. The first thing you should pay attention to is the risk/reward ratio of each yield-generating activity. We know that making easy money is everyone’s dream, but cryptocurrencies are not about that. There is nothing easy about crypto farming or trading digital currencies.
Even though there is excellent potential to generate substantial profits, you should spend a lot of time educating yourself on these matters. The crypto industry has been around for only about a decade, but the investment options abound.
That being said, here are the most common approaches to earn money with crypto.
The most straightforward method is to trade digital currencies on the platforms provided by cryptocurrency exchanges. Crypto traders speculate on the price of Bitcoin and altcoins in an effort to buy low and sell high or vice versa. Achieving consistent profits is challenging because cryptocurrencies are extremely volatile. Thankfully, there are many ready-made strategies based on fundamental and technical analysis.
You can earn crypto or fiat money by buying and selling digital currencies or trading derivatives, which are financial products that depend on the price of an underlying asset, e.g., futures contracts or options. Derivatives, especially perpetual contracts (a type of futures), can be easier to trade because they don’t involve physical cryptocurrency and enable margin trading with high leverage. With margin trading, you can get exposure to any cryptocurrency with borrowed funds to maximize potential profits. However, this approach is much riskier.
Whether you trade actual cryptocurrencies or aim to earn crypto online by trading derivatives, there are three main trading styles you should know about:
- Short-term or day trading — day traders don’t leave their positions overnight, i.e., they open and close all positions during the same day. Thus, they have to be alert to market changes and spend several hours per day analyzing the markets and handling their positions. The benefit of this approach is that there can be many trading signals during any day. However, day traders are exposed to more risk given the high volatility of digital assets. As a rule, day traders rely on technical analysis.
- Swing trading — swing traders usually leave their positions overnight, as they aim for larger trends to earn money. This style is about catching a larger trend and benefiting from it until it reverses. Thus, swing traders can leave their positions open for several days or up to two weeks. This style is not as time-consuming as day trading, but it implies higher deposits.
- Long-term trading — long-term traders operate with much larger time frames, as they can keep their positions for weeks and months. You may include the so-called hodlers in this group. Most long-term traders rely on fundamental analysis and are not disturbed by the short-term volatility.
Mining and Staking
If trading is not your strength, you can consider mining or staking. The former is a reward-generating activity related to Proof of Work (PoW) blockchains, while staking is an approach to earn crypto by becoming a validator in Proof of Stake (PoS) blockchains.
Speaking about Bitcoin, securing profits through mining is difficult for the average person, as you would need to invest in expensive ASIC equipment. Still, there are mining pools that you can join at any time, though don’t expect high yields from that.
When it comes to the PoS algorithm and its variations, it’s difficult to tell what the best crypto for staking is, but most of them can provide an annual yield ranging from 3% to 10% and higher. The great thing about staking is that it involves lower risk compared to trading. PoS staking is getting more attention thanks to Ethereum’s upgrade.
While the staking rules differ from case to case, you will have to lock up a minimum amount of the native token in a special digital wallet in order to become a validator.
Joining the DeFi Trend
Another great approach to earn crypto is to jump onto the DeFi bandwagon. DeFi, from decentralized finance, has been the fastest-growing crypto sector during the last few months. It proposes a wide range of lucrative strategies that can be implemented by both retail and institutional investors.
The most popular DeFi activity is yield farming, in which investors lock up two different cryptocurrencies in a liquidity pool to contribute with liquidity and earn the native token or a given one as a reward.
Another common approach is DeFi staking, in which users lock up an amount of cryptocurrency or token to support the native ecosystem.
One of the best ways to earn with DeFi is by staking tokens and participating in yield farming schemes through Eidoo, a digital wallet application that integrates many DeFi perks. Eidoo benefits from the partnership with pNetwork — a DeFi-oriented project that connects different blockchains through special bridges that revolve around so-called pTokens. It currently hosts by far the largest number of bridges in the entire blockchain ecosystem.
You can earn pNetwork Token (PNT) and other tokens via the Steroids program, which can be accessed from Eidoo. For example, you can deposit pBTC (the Ethereum-based pTokenized Bitcoin) directly on the Eidoo app and earn PNT. Alternatively, you can add liquidity to PNT/USDT, ETH/PNT, and other pools. The Steroids program helps you implement the best crypto farming strategies. It enables investors to better manage their staking activities and rewards directly from the Eidoo app, with yield figures reaching up to 140%.
So far, investors have locked a total of about $40 billion in DeFi projects as of March 1, 2021, up from $15 billion at the beginning of 2021. This demonstrates that the DeFi trend is only growing. While DeFi staking and yield farming strategies involve some risks, the risk/reward ratio is still higher than trading.
You can earn money with any of the three approaches, but we believe that DeFi strategies are the most interesting and lucrative methods to secure passive income as of today.
The article does not contain investment recommendations, or recommendations to use the service described in this article. All the opinions expressed express exclusively the personal opinions of the author and the respondents. Any activity related to investing and trading in the markets carries risks. Make your own decisions responsibly and independently. Neironix is not responsible for the safety of your investment and does not make any recommendations