How to Make Money With Cryptocurrency?

If you’ve ever wondered how to make money with cryptocurrency, you’re not alone. Many people are trying to earn money through digital coins like Bitcoin and Ethereum. 

There are different ways to make money, like mining, staking, and even playing games where you earn crypto. It might sound confusing at first, but once you understand the basics, it gets easier. In this guide, we’ll look at some simple ways you can start making money with cryptocurrency and what you should watch out for.

Key Takeaways:

• Passive income in crypto is when you earn free money by holding or staking your coins without having to do much work.
• The best ways to make money with cryptocurrencies are yield farming, mining, staking, play-to-earn games, airdrops, day trading, and ICOs.

7 Best Ways to Make Money With Cryptocurrency

1. Yield Farming

Yield farming is earning interest on your money but using crypto instead. You deposit your digital assets in liquidity pools on decentralized exchanges like Uniswap or PancakeSwap. These pools help traders swap tokens. For letting your crypto sit there, you earn rewards in the form of extra crypto or fees.

For example, if you deposit $1,000 worth of Ethereum and USDT into a pool, you might earn an annual percentage yield (APY) of 4% to 10%. That means you could earn $40 to $100 in a year. Higher-risk pools sometimes offer even higher rewards, like 100% or more, but the risk of losing money is big too.

In 2024, the total value locked (TVL) in DeFi protocols reached over $110 billion, showing how popular yield farming is. If you’re starting, choose well-known platforms like Uniswap or Aave to reduce risks.

2. Mining

Crypto mining was the first way people earned Bitcoin. It involves solving complex math problems to verify transactions on the blockchain. For this, miners get rewards in Bitcoin or other coins.

Mining Bitcoin used to be simple. In 2010, you could mine using a regular PC and earn several bitcoins daily. Now, you need specialized hardware like ASIC miners, which can cost $2,000 to $10,000. Electricity costs are also high. For example, mining 1 Bitcoin can use 1,449 kWh, costing around $150 in countries like the U.S.

A better option for beginners is joining mining pools. These are groups of miners who combine their computing power and share the rewards. Popular pools include Slush Pool and F2Pool. Another option is cloud mining, where you rent mining power online. Be careful, though – scams are common in cloud mining.

3. Staking

Staking in cryptocurrency is a way to make passive income by locking up your crypto to support a blockchain. This process works with cryptocurrencies using the Proof-of-Stake (PoS) system, such as Ethereum, Cardano, or Polkadot.

Here’s how it works:

When you stake your coins, they are locked in a network to validate transactions and secure the blockchain. In return, you get rewards, usually in the form of more crypto. 

Some networks, like Ethereum, require a minimum amount to stake (32 ETH, which is a lot!), but smaller amounts can be staked through staking pools or crypto staking platforms like Coinbase or Binance. The rewards depend on how much you stake and the blockchain’s rules. On average, annual yields can range from 5% to 20%.

The best part about staking is you don’t need fancy equipment like miners do in Proof-of-Work systems (used by Bitcoin). It’s also more energy-efficient. Once staked, your crypto might be locked for weeks or months, so you can’t use or sell it during that time.

If you’re a beginner, centralized exchanges are easiest. They handle the technical stuff for you, but they charge fees, and there’s always a risk of hacks.

4. Play to Earn

Play-to-earn is one of the best ways to make money with cryptocurrency. It’s playing games but also earning real money while having fun. They are called play-to-earn games, where you can earn crypto coins or tokens just by completing missions, battling with other players, or building stuff in the game.

For example, games like Axie Infinity are super popular. In this game, you need to collect creatures called Axies. You battle with them, and if you win, you get a token called SLP (Smooth Love Potion). People can sell this token for real money. Some players even make up to $300 a month, which is pretty good if you’re just playing a game.

Another example is The Sandbox. It’s like Minecraft but with a twist. Here, you can create your own stuff like buildings, sell them to other players, and earn a token called SAND. Some people made thousands of dollars by selling their creations. To start, you usually need a bit of crypto to buy stuff in the game, like Axies or Land in The Sandbox. But once you start earning, it gets easier to make money without spending more.

5. Airdrop

Crypto startups use airdrops to promote their new coins and get more people involved. Airdrops are one of the top ways to make passive income with crypto. it’s getting free tokens from a new crypto project just for participating in some simple tasks or meeting specific requirements.

Here’s how it works. A project announces an airdrop and shares the steps to join. This might include things like creating an account, following them on social media, or using their platform. 

For example, some airdrops ask you to hold a certain cryptocurrency or provide liquidity on their network. Others might want you to test their features, like creating NFTs or completing trades. Once you’ve done what’s needed, they send free tokens directly to your wallet.

Many airdrops reward early adopters, which is a smart way to grow a project’s community. Big names like zkSync and Shardeum have offered airdrops, with participants gaining tokens that rise in value as the project grows. However, the rewards vary; some tokens become very valuable, while others may not hold much worth.

6. Day Trading

Day trading cryptocurrency is a way to make money by buying and selling digital coins within the same day to profit from price changes. It’s fast-paced and works best for people who can monitor the market closely. Crypto markets run 24/7, unlike stocks, so you can trade anytime.

To succeed, you need to know about market trends and technical analysis. This means using charts and tools to figure out if prices will go up or down. Many traders use indicators like the RSI (Relative Strength Index) or MACD (Moving Average Convergence Divergence) to decide when to buy or sell. 

For example, if Bitcoin (BTC) drops to $35,000 in the morning and climbs to $37,000 by noon, a trader who buys low and sells high could make a profit.

Popular strategies include “scalping”, where you aim for small, quick profits many times a day, and “range trading”, which involves buying when prices are low and selling when they hit a peak. Advanced traders might even use bots to automate trades for speed. Risk management is key, so always set a “stop-loss” to prevent big losses if the market moves against you. You’ll need a crypto exchange to start. The best day trading platforms are Binance, Bybit, and KuCoin.

7. ICOs

ICOs, or Initial Coin Offerings, are a way to invest in cryptocurrency projects. It’s a mix of crowdfunding and stock market investments, but it’s for new digital platforms or services. During an ICO, companies or crypto projects sell tokens to raise money. These tokens are not shares in the company, but if the project succeeds, their value can go up, and you can sell them for a profit.

To participate in an ICO, you usually need cryptocurrency like Bitcoin or Ethereum. You exchange this for the project’s tokens. The process happens on the blockchain, which keeps everything secure and transparent.

If you’re thinking about investing in an ICO, it’s important to research. Check the team behind the project, their goals, and if they’ve shared a detailed whitepaper explaining their idea. Some ICOs have given big profits, but there are also risks of losing all your money, especially with rug pulls.

How to Choose a Crypto Platform for Earning Passive Income?

If you want to make passive income with crypto investments, picking the right platform is very important. Here are some simple steps to help you choose the best one:

1. Check Security Features: Always pick a platform with strong security. Look for features like two-factor authentication (2FA), encryption, and insurance for your funds. Trusted platforms like Coinbase and Binance offer excellent security measures.
2. Compare Interest Rates: Different platforms offer different rewards. For example, staking on platforms like Kraken can give you annual rewards of up to 20% for certain cryptocurrencies. Lending platforms like Nexo offer varying interest rates depending on the crypto type.
3. Understand Fees: Some crypto platforms charge high fees for transactions or withdrawals. Ensure you review these charges before committing. Lower fees mean more earnings in the long run. MEXC is best for zero-fee crypto trading.
4. Look for Reputable Platforms: Stick to well-known platforms like Binance, Bybit, or Aave. These have been around longer and are less likely to have issues like fraud or sudden shutdowns.
5. Check Supported Cryptocurrencies: Make sure the platform supports the coins you want to use. Not all platforms support every cryptocurrency.
6. Read User Reviews: Look for honest reviews online or in forums. See if other users have had good experiences with the platform.
7. Ease of Use: If you are a beginner, go for user-friendly platforms. Crypto apps like Binance and OKX are simple and easy to navigate, making them great for new users.

What are the Risks of Crypto Passive Income?

• Price Volatility: Cryptocurrencies are known for their wild price swings. For example, Bitcoin’s price dropped from over $60,000 in 2021 to below $20,000 in 2022. This means if you’re earning passive income by staking or lending crypto, the value of your earnings could drop quickly.
• Scams and Fraud: There are many fake platforms out there that pretend to generate passive income opportunities. Always double-check the platform’s reputation and reviews.
• Uncertain Regulation: Governments around the world are still figuring out how to regulate cryptocurrency. In some countries, cryptocurrencies are banned or heavily regulated, which can affect the platforms that offer passive income options.
• Technical Complexity: Some crypto passive income methods, like running a masternode, require a lot of technical knowledge. If you don’t know how to set it up or manage it, you could end up losing money.
• Impermanent Loss: This happens when you provide liquidity to a pool, and the value of your crypto assets changes compared to when you first put them in.

Conclusion

To sum up our guide on how to make money in crypto, it can be done in different ways like yield farming, mining, staking, and even playing games. But it’s not without risks, such as price swings and scams. 

If you want to earn passive income, you should pick a trusted platform, check the fees, and understand how the system works. While some people have made good money, it’s important to know that things can change quickly in the crypto world.

FAQs

Is crypto safe?

Crypto can be risky. While the technology behind it, like blockchain, is secure, there are still risks involved. It depends on how you use it. Hackers can steal your crypto if you don’t store it in a secure wallet. In 2024, crypto scams cost people over $1.4 billion! That’s huge, right? Also, the prices of crypto like Bitcoin can change very fast. One day it’s up, and the next day it’s down.

Always use trusted apps and wallets Ledger or Trezor. Never share your private keys with anyone. If you’re careful, crypto can be safer, but it’s never risk-free.

Can I get rich with cryptocurrency?

Yes, it’s possible to get rich with cryptocurrency, but it’s not easy. Some people have made a lot of money, especially early investors in Bitcoin, Ethereum, or other altcoins. For example, Bitcoin went from less than $1 in 2010 to over $90,000 today. During the bearish market in 2022, if you bought Bitcoin at $60,000 and sold it at $20,000, you would lose a lot. Most rich crypto investors are patient and hold their coins for years. Some also trade, but trading is risky if you don’t know what you’re doing.

Is passive income from crypto taxable?

Yes, in most countries, it is taxable. If you earn crypto by staking, mining, or lending, that’s called passive income. For example, staking Solana or Ethereum gives you rewards. In the U.S., the IRS taxes digital currency rewards as income. You might pay 10%, 20%, or even more, depending on your total income. If you’re in India, you could pay a 30% tax on all crypto earnings. Always keep a record of how much crypto you earn.