Make money with cryptocurrencies – is that possible? And if so, how? In this article, I will show you smart ways to make money with cryptocurrencies.
Here we go!
SMART WAYS TO MAKE MONEY WITH CRYPTOCURRENCIES
Method 1: Buy and Sell
By far the most common way to make money with cryptocurrencies is to buy and sell cryptocurrencies. A distinction is essentially made between the long-term “buy & hold” ( “HODL” ) approach and frequent buying and selling, the so-called “trading”.
Regardless of your preferred approach, you can buy and sell cryptocurrencies on different trading platforms.
Method 2: Watch tutorial videos on Coinbase Earn
A very easy way to earn money with cryptocurrencies is the offer “Coinbase Earn”. With this program, Coinbase offers its users different, short learning videos and content. These videos are very short at around one to two minutes and explain the latest cryptocurrencies. A short quiz will appear after each video. If you answer the question correctly, you will usually receive a US dollar in the form of the respective cryptocurrency as a reward, which Coinbase will credit directly to your account.
Even if the rewards are only small amounts: Coinbase constantly publishes up-to-date educational videos on new cryptocurrencies. However, there seems to be a limited contingent of rewards per learning video. So, it’s worth checking back on Coinbase Earn from time to time to check out the latest videos.
Method 3: Mining
The so-called mining is practically the oldest way to earn money with cryptocurrencies. For this, you need special mining hardware in the form of a very powerful computer. You then make the associated computing power available to a blockchain network in order to maintain and secure it. In return for the provision, you will receive the so-called “Mining Reward”, which the blockchain network will pay you in the form of the respective cryptocurrency.An initial coin offering is a funding mechanism by which cryptocurrencies are obtained or raised; which allows the launching of a new service or a new currency. So that the investor delivers the cryptocurrencies and receives a token from the company in exchange.
Important: Before you finally decide to start mining yourself, you should do your research and calculate the expected profitability. You can use one of the many online calculators available to do this. Because especially in countries with very high electricity costs, the costs incurred for your mining computer and the electricity used can quickly exceed your income. In this case, an effective loss of money would result.
Method 4: Staking
Another method of making money with cryptocurrencies is what is known as staking. This mechanism is related to mining and is used in blockchains that follow the energy-efficient “proof-of-stake” approach instead of the energy-hungry “proof-of-work”. You deposit a number of cryptocurrencies in a special smart contract. Depending on the amount, you will then receive virtual voting rights. These, in turn, are automatically used to maintain and secure the respective blockchain. In return, you receive the so-called “staking rewards” in the form of cryptocurrencies.
Depending on the exact form, staking can be very technical, complicated, and error-prone. As such, the most common approach for many today is to join what is known as a staking pool. Here you make your cryptocurrencies available to the pool operator, who includes them in his pool and does the staking for you. If you have registered with the Coinbase trading platform, this can be done very easily using the “Coinbase Staking” offer. You can add your cryptocurrencies to staking with just a few clicks, but they must be located at Coinbase.
Method 5: Lend cryptocurrencies
Unlike staking, which uses cryptocurrencies for the proof-of-stake mechanism, you can also lend your cryptocurrencies directly. There are now a number of borrowing & Lending platforms for this. In the associated app of the selected platform, you can bring your cryptocurrencies into a smart contract with just a few clicks, which will then be used to lend them to other people.
In normal times, you can remove your stored cryptocurrencies from the pool at any time. However, both depositing and removing requires a blockchain transaction, which costs you money. You should take these additional costs into account in order not to lose money. The expected returns are dynamic market values that are constantly changing.
Method 6: Buy and sell NFTs
An increasingly interesting method of making money with cryptocurrencies is trading with so-called NFTs. These NFTs are not cryptocurrencies themselves, but so-called “non-exchangeable” tokens. So, they are a kind of digital representation of another digital or even real asset on a blockchain. In practice, this means that these tokens can represent trading cards, digital game items, art, or Ethereum domains, for example. In addition, I assume that in the future conventional valuables such as shares, gold or real estate will also be represented via these tokens without a doubt.
Method 7: NFT staking
In addition to buying and selling NFTs, it is now also possible to stake your own NFTs in a similar way to cryptocurrencies. In this way, you can deposit your NFTs in special smart contracts and thereby receive passive income.
However, unlike cryptocurrency staking, which is used directly for the proof-of-stake algorithm, the purpose of NFT staking is less clear. Why would anyone pay you to deposit your NFTs?
I see two reasons for this at the moment: In the first case, there are already platforms where you can borrow money yourself and deposit your NFTs as collateral. If the repayment fails, the NFT is handed over to the lender as security. However, this case corresponds more to a normal lending process, in which the NFT serves as security. In the second case, platforms artificially reduce the supply of certain NFTs by rewarding you for depositing your NFTs. This can be observed, for example, in blockchain-based games that pay out your staking reward in the form of their own (game) cryptocurrency.
It remains to be seen whether this still-young trend of NFT staking will establish itself in the long term. Should it prevail, however, this is an exciting opportunity to generate passive income with your NFTs – instead of just hoping for a possible price increase.
Method 8: Airdrops
In an airdrop, cryptocurrencies are automated and distributed to a variety of accounts for free. Such airdrops are often used by operators of a new crypto project as a marketing tool to publicize the project. For some time now, various projects have also been using airdrops to retrospectively reward early supporters of the project.
In the first case, you don’t actually have to do anything special. However, the prerequisite for this is usually that you already have a wallet address, for example on the Ethereum Blockchain. Finally, the airdrop happens according to a defined logic, such as: “Send a small number of the cryptocurrency to all Ethereum wallet addresses that have been active in the last 6 months” – or something like that.
In the second case, the prerequisite is that you were already actively using the project in question before the airdrop. This form of retrospective airdrops can be incredibly lucrative: For example, if you had already registered a single domain of the Ethereum Name Service for a few dollars in 2017, you would have $ENS tokens worth tens of thousands(!) of US dollars this year received via the ENS Airdrop.
However, finding suitable projects is not easy. Not every promising project later plans an airdrop. Therefore, unfortunately, it is not certain that you will receive a later reward for an early contribution.
Method 9: Crypto Social-Media
There are increasingly decentralized or blockchain-supported social networks. With a major advantage over previous social networks: Content created by users also benefits them directly. Through different actions, such as posting, commenting, or referencing, users can earn credit, which can then be paid out in the form of the platform’s own cryptocurrency. In this way, such platforms try to stimulate the creation of – ideally high-quality – content.
A well-known representative of this new type of social media is the Steemit platform, for example. Another prominent example is the social network Reddit, which is following a similar path with the introduction of so-called “Community Points”.
Method 10: Working for crypto companies
A more conventional way to make money with cryptocurrencies is to work for a company that deals primarily with cryptocurrencies and blockchains. Even if your income does not depend directly on cryptocurrencies, the general acceptance of cryptocurrencies does influence the environment of the respective company. Some of the many companies that work exclusively on these topics are, for example, Consensys or ChainLink.
If you work for such a company, it may also be possible to receive part of your salary directly in the form of cryptocurrencies.
Method 11: Liquidity Provider Tokens
A definitely more advanced method of making money with cryptocurrencies are so-called “Liquidity Provider Tokens” (LPs). The associated concept can be explained as follows:
A new crypto project, for example, a new computer game, wants to establish its own cryptocurrency and make it tradable on different trading platforms. Especially at the beginning, there are simply not enough people who act as trading partners and offer the respective cryptocurrency for exchange. The result is low liquidity.
In order to increase liquidity, the operators of the project are therefore issuing additional tokens. These tokens provide an additional incentive to provide your own cryptocurrencies as liquidity.
It basically works like this: First, you buy some tokens for the – new computer game. You then open a so-called liquidity pool and provide your new cryptocurrencies there as liquidity. This mostly happens on a decentralized trading platform, such as Uniswap. The next step is to go to the crypto project’s website which was specially set up for this purpose. There you can deposit your Liquidity Provider Tokens received from the provision of liquidity via a form of staking in the system of the operator.
Sounds complicated, right?
In fact, this process is more complicated than, for example, simply depositing your cryptocurrencies via the Coinbase Staking program mentioned above. Such additional tokens are often extremely worthwhile and can easily achieve an annual return of over 100%, especially at the beginning of the project. In addition, the procedure described here should only be understood as an exemplary scheme. Each project that offers additional tokens usually provides its own instructions on exactly which steps have to be carried out.
Method 12: Crypto Arbitrage
A special form of buying and selling cryptocurrencies is the use of so-called “arbitrage” effects. This is based on the fact that the same cryptocurrency sometimes has different price levels at the same time on different trading platforms and in different countries. In the recent past, this was the case, for example, on South Korean trading platforms, on which Bitcoin was at times significantly more expensive – calculated back to the euro – than on European and US trading platforms.
One way to use the arbitrage effect is to register accounts on different trading platforms at the same time. In this way, you can buy cheaply on one platform and sell more expensively on the other platform.
In addition, there are now also providers who promise to automate this arbitrage.
Method 13: Create content about cryptocurrencies
Similar to what I do on this blog, you could create your own cryptocurrency-related content. By presenting them on your own blog or on your YouTube channel and monetizing them in a suitable way, you can also make money with cryptocurrencies in this way.
Possibilities for monetization can be, for example, partner programs, switching affiliate links, or displaying advertising.
Method 14: Play to Earn
One particularly promising way to make money from cryptocurrencies is a new approach called Play to Earn. This method is based on a new type of computer games where players receive cryptocurrencies just by playing. These cryptocurrencies primarily represent the respective game currency, with which, for example, digital items, equipment, or other advantages can be bought within the game. However, unlike in the past, these game currencies are also cryptocurrencies that can also be exchanged outside of the game on marketplaces and trading platforms.
In this article, I have shown you some ways through which you can make money with cryptocurrencies. Some of these methods may be very easy for you to use and lucrative. Others are more complicated and may not always be financially worthwhile. Therefore, consult your tax advisor and find the approach that works best for you.