Crypto adoption has been rapidly accelerating in recent years, with the prospect of inflation-busting returns and a dash of FOMO driving interest among investors.
Some 2.3million people in the UK are now thought to own crypto, whether it be mainstream coins such as Bitcoin and Ethereum, or meme coins (Doge and Shiba Inu are just two examples).
Globally, it’s estimated that more than 300 million people now own or use cryptocurrency, with the average crypto ownership per country standing at 3.9%.
If you’re one of these people and have built up a crypto portfolio you may be wondering how to make money with your cryptocurrency, or how to increase your holding.
So, what are the best ways to make money from your cryptocurrency, and how easy is to make a profit in what is an extremely fast-moving and volatile market while avoiding the scams?
Here are some of the ways you can earn money and profit from the cryptocurrency boom.
Remember, this is not financial advice, and you could lose your entire investment so always do you own research first!
1. Investing cryptocurrency for long term gains
Most people start their crypto journey by signing up to a major exchange, such as Coinbase, buying some Bitcoin and ‘hodling’.
There is no real strategy involved, other than the belief that the cryptocurrency will increase in value over time, in the same way as say, a pension fund. It is considered a passive investment.
This is probably the ‘safest’ form of crypto investing, although whether any crypto investment can truly be considered to be secure is up for debate.
Having said that, if you look at the performance of Bitcoin since its inception in 2009, I’m pretty sure it’s been the best performing investment on the planet, despite the roller coaster ride investors have endured.
Some people put a lump sum into crypto and sit back and wait, while others employ the popular investing strategy of regular investments over time.
This is known as pound-cost averaging (or dollar-cost averaging to much of the world). The idea is to buy small chunks of an asset on a regular basis to iron out the peaks and troughs in the market.
If you were to invest a lump sum at the peak the potential for a large and possibly unrecoverable loss is high. Pound-cost averaging aims to solve this.
Many crypto platforms offer the facility for investors to set up regular purchases, with some throwing free crypto incentives into the mix to encourage people to do so, such as free Bitcoin when you make a deposit.
You may also like: Coinbase review
2. Trading cryptocurrency for profit
Trading is the dream for many keen investors. But despite what you may have seen on social media, it can be difficult to master and very few people actually make money this way.
To be a successful trader – whether it be cryptocurrency or stocks and shares – takes a lot of skill.
You need to be able to analyse reams of market data and have the technical skills required to consistently trade profitably.
However, given the volatility in the cryptocurrency market, it is possible to learn these skills if you put the time in, and the potential to profit from the large price swings over short periods of time is there.
Day trading cryptocurrency is even more nerve-wracking. It involves attempting to profit from short-time price movements in any given crypto.
It’s no different from day trading stocks and most people agree that developing a solid strategy from the outset is the best way to make money.
If you don’t have the time to devote to learning this skill, you can always use a bot. There are dozens of bots available to buy – mostly through a monthly subscription.
Be warned though, there are many scammers offering bot services so make sure you do plenty of research and choose a well-reviewed service before parting with any funds.
3. Making money by staking cryptocurrency
This area of making money with cryptocurrency has exploded in recent years and is definitely an opportunity for anyone with cash to spare.
Staking involves you purchasing a specific crypto then lending it to a Proof of Stake (PoS) based network.
Doing so allows the network to validate transactions and maintain its security using the crypto you’ve locked into it.
In return for doing so you effectively earn interest which is paid in the form of the original token you’ve staked.
Staking often involves locking your crypto away for a period of time during which the value of the coin can rise and fall in value.
When the locked-in period ends you can redeem your crypto. At this point its value may have risen or fallen, or the crypto may have failed completely meaning staking is definitely not for the feint hearted.
Although the profits can be eye-wateringly high, another downside is that you need to risk a fairly large chunk of crypto in order to profit from staking.
4. Lending cryptocurrency and earning interest
Platforms that offer appealing rates of interest on your cryptocurrency do so because they are lending your coins at an even higher rate.
This can be as high as 12% for the Tether stablecoin, or 5% on Bitcoin deposits.
Considering that banks are offering around 0.5% at the time of writing, you can see why this is tempting many investors away from traditional high street institutions.
However, you don’t get any of the protections offered by traditional financial institutions, namely the Financial Services Compensation Scheme (FSCS).
There are several other major companies paying interest on your crypto, so it’s important to shop around and do your research before committing your funds.
It’s also worth considering that regulators around the globe, such as the Securities and Exchange Commission (SEC) in the US, are increasingly putting crypto lending platforms and cryptocurrency in general under the spotlight.
This has the potential to impact how these accounts operate in the future.
You may also like: The top 5 interest paying crypto investment accounts
5. Mining cryptocurrency at home
This isn’t really a top way of making cryptocurrency, but it’s on here because everyone asks if it’s still possible to profitably mine cryptocurrency at home.
It used to be the case that a small mining set-up in your bedroom could earn you a sizeable chunk of Bitcoin, but not anymore.
Vast warehouses filled with specialist ASIC mining hardware are now required to profitably extract the most precious of cryptocurrencies.
However, there are still a few altcoins that you can mine, and it’s even possible to grab some Ethereum (ETH) if you’ve got the right graphics card in your PC.
However, most people don’t have the technical knowledge required to set up a crypto mining farm at home, and it’s questionable how much those that do actually make after equipment and electricity costs.
Unless you’re a keen hobbyist, it’s likely to be more profitable and a lot less stressful to simply buy the cryptocurrency you’re interested in from an exchange.
You can then use it to earn more cryptocurrency by staking, lending, trading, or simply by stashing it away and hodling in the hope that it will rise in value in the future.
You may also like: Nebra Helium (HNT) cryptocurrency miner month one review
Adam is the founder of The Crypto Adviser which offers experts guides and reviews on all things related to Bitcoin and cryptocurrency.
Adam is Diploma for Financial Advisers (DipFA) Level 4 qualified, a Member of the London Institute of Banking and Finance (MLIBF), and has worked for many years as a journalist and PR consultant, having studied with the National Council for the Training of Journalists (NCTJ).