Cryptocurrency has been a hot topic within the financial world and has been hinted at as the future of currency. But, even with an attractive investment, such as crypto, there is always a possibility of loss. In this article we outline the top 5 ways to minimize risk and maximize your crypto investment’s returns by making money with cryptocurrency.
What Is Cryptocurrency?
Cryptocurrency is a digital currency that does not have a financial intermediary. Additionally, this form of currency can be utilized like traditional currency, where it can be used to purchase goods or services.
Many of these currencies have blockchain technology. This blockchain system makes it extremely difficult for others to hack or infiltrate its information which adds a layer of security for these cryptocurrencies.
Can You Make Money With Cryptocurrency?
Like any investment there is a possibility of profit or loss. However, you can make a sizable amount of return off of cryptocurrency. By trading cryptocurrency, similar to other asset classes, you are able to profit off of the crypto’s price movement.
Additionally, by investing your money in crypto it can generate you a passive income. In short, the answer is yes, you can make money off of crypto.
5 Ways to Make Money With Cryptocurrency
Here we will talk about 5 different ways investors can maximize their potential profits with cryptocurrency. These strategies span from investing to master nodes and various other strategies for crypto investors of all levels to utilize.
This is the most common way cryptocurrency is utilized within the financial world due to crypto’s high volatility. Investing is a great opportunity to gain profits by buying and holding onto these assets. Since the crypto market has been known to be highly volatile in the short-term, investing in a long-term strategy will allow the investor to maximize their profits.
- Great opportunity to have long-term gains
- No need to purchase expensive coins to make profit
- Finding a coin that is stable for long-term price increase is hard to do
- Volatile markets can be difficult for those who are risk-averse
Stake or Lend
Staking and lending are two strategies crypto investors utilize in order to passively profit off of their crypto. Lending is the strategy where one investor agrees to loan out their coins in return for interest payments. This is especially profitable if the investor uses a platform such as Coinbase where they can earn up to 5% of interest.
Staking is when an investor uses their crypto to support a specific platform and validate its transactions. In return, users that stake gain rewards such as tokens and can earn a percentage-rate reward. Some platforms require the user to stake themselves which can be quite difficult since they would have to make an underlying blockchain on their crypto. However, websites like Coinbase, assist in this process.
- Great way to passively gain interest on your crypto holdings and still claim ownership
- Helping maintain the security and efficiency of the crypto blockchain
- Staking is difficult on platforms that don’t assist in the process
- Crypto platforms are not as insured as traditional loans, meaning if the borrower defaults on their loan, the lender may have to deal with the loss
Mining is a complex process in which the user would have to solve challenging mathematical equations to create new crypto coins. Essentially, when one invests into crypto, this transaction is entered into the blockchain. However, this process is not finalized until a crypto-miner confirms that this transaction is valid. The first miner to solve these extremely complex equations is rewarded with a fraction of the transaction.
- Do not have to put money into gaining crypto
- Is a great opportunity for those who excel in mathematics
- Requires the use of high-functioning computers which can be costly
- Are presented with extremely difficult mathematical problems to solve in a short time frame
Cryptocurrency Master Nodes
Masternodes in cryptocurrency is used for the members within that community. It is also described as a governing hub which helps support the function of a digital currency through a personal server. Masternodes require a vast amount of technical knowledge and resources in order to set up. However, crypto networks have large financial incentives for masternode operators.
- Easy and efficient way to gain new coins when released
- Generate a substantial amount of profit from crypto networks
- Creator needs a vast amount of technical knowledge in areas such as mathematics and computer science
- Requires a substantial amount of tokens to be staked in order to create a masternode
Interest Paying Wallets
Similar to traditional banking, crypto platforms offer interest on their consumer’s savings. Usually, the rate of these bank’s interest spans from 0.01% to 2.15% APY, however with crypto accounts this interest tends to be substantially higher.
For example, Coinbase’s digital wallet can provide up to 4.00% APY on USD coins. This is a great option for those who wish to passively gain profit from cryptocurrency.
- Digital wallet’s APY can offer up to 3% to 7.5% depending on the platform
- Enhanced security due to blockchain technology and can seamlessly receive or purchase goods with multiple types of crypto
- Not federally insured or protected as much as traditional banks
- Risk of personal protection such as computer viruses or hacks
Why You Should Invest in Crypto
Cryptocurrency is a great way to passively and actively gain profit. These strategies showcase the various different ways an investor can maximize their crypto’s profit.
Start your investment journey with cryptocurrency now with Coinbase. This platform offers over 50 different types of cryptocurrencies and makes the user experience easy. Read more here about Coinbase and its perks.
Frequently Asked Questions
Yes, you can make a substantially high profit off of cryptocurrency. However, since crypto is a highly volatile market, it is dependent on the coin the user chooses to invest in. Since, like any investment, there is an element of risk.
Yes, you should invest in crypto due to its high growth potential. Starting in 2013 there were only a handful of cryptocurrencies available, however as of 2021 there are more than 6,000 different coins. This rise shows the high potential this investment has.
As an investor you can make money with crypto in various ways. This includes investing, staking, lending, mining, creating a masternode, or obtaining a digital interest bearing wallet. These methods can vary on technical expertise with mathematics and coding however.