- You can invest or trade on the crypto market through cryptocurrency exchanges/brokers. Owning the underlying asset is not necessary.
- You can use your existing coins to engage in staking and lend them to the system or other users.
- You can participate in the blockchain system by mining or earning rewards in the form of coins and tokens for the work you do within the blockchain system.
Ways to earn in crypto based on the three mechanisms mentioned above:
1. Investing in initial coin offerings (ICOs) with high potential.
2. Passive mining of cryptocurrencies.
3. Staking and earning interest as passive income from idle cryptocurrency tokens.
4. Day trading to earn money by trading cryptocurrency pairs.
5. Copy trading, which involves replicating the strategies of successful traders.
6. HODLing, which means investing in cryptocurrency and holding it for the long term in your portfolio.
7. Crypto gaming, where you earn rewards for playing crypto games.
8. Farming and lending, which involves transferring cryptocurrency to someone else for a predefined period with agreed-upon returns and fees.
9. Airdrops, which are free distributions of native cryptocurrency to current/potential users.
Advantages and disadvantages of earning with cryptocurrency
Pros of earning with crypto:
1. Diversification: The value of cryptocurrency is not closely correlated with stock prices, bonds, or other asset classes. While crypto usually falls/rises along with other high-risk assets, it often behaves independently.
2. Return potential: Cryptocurrency has shown strong performance in bull markets before 2022. During a strong upward trend, crypto has offered higher returns compared to stocks.
3. Additional utility: Unlike stocks, some cryptocurrencies have practical utility. For example, Bitcoin can be used for payment of goods and services. Other tokens may provide access to various blockchain projects or offer discounts on project services.
Cons of earning with crypto:
1. Regulatory nuances: The regulatory landscape in the cryptocurrency industry is not fully developed, with many gray areas and unclear aspects until the first precedents are set. This means you don’t have the same level of protection as investing in heavily regulated markets such as the stock market. On the other hand, increased regulation potentially risks stifling demand for digital assets, leading to decreased market liquidity. Therefore, the current situation may even be advantageous for investors, traders, and other cryptocurrency users in some sense.
2. High volatility: Cryptocurrency prices can experience significant fluctuations on a day-to-day basis. Some investors may find it difficult to handle the powerful price swings. On the other hand, for experienced traders, especially scalpers, this situation presents an ideal opportunity to profit from small price fluctuations.