People these days want to make money with cryptocurrency. Success stories flood the news and social media with people earning millions of dollars through Bitcoin mining. Maybe, you know people who generate passive income by mining crypto or other people who buy bitcoin and trade them.
Many people try to make money with cryptocurrency, but not all earn. Most of them give up when things get rough. What’s worse, they lose cash due to falling into some crypto scams.
The crypto industry is still in its early stages. Yet, more people enter the crypto market as these digital assets shoot up in price. In addition, even newbies who don’t have enough knowledge in finance seek new ways to earn crypto coins.
Thankfully, there’s no shortage of ways to make money with cryptocurrency. Creators, social media, and startups have influenced the crypto industry’s growth since 2011. As 2022 showed, crypto coins can be our hedge against inflation and the breakdown of our current banking system.
With the recent crypto crash, you don’t want to miss the next price shoot-up of these digital assets. But still, the cryptocurrency market is so volatile, and we don’t want to lose our hard-earned cash. Gladly, you can still make money with cryptocurrency with minimal risk.
So how do we earn money with cryptocurrency? Let’s talk about what crypto tokens are first.
What Are Crypto Tokens
Crypto tokens refer to virtual currency showing digital assets while living on its native blockchain. Also, these tokens work to store value, make purchases, or for any investment objectives. In other words, crypto tokens refer to the denominated versions of the actual crypto they represent.
These tokens act to raise funds, make crowd sales, or as a proxy for other deals. Also, designers create, trade, and spread these tokens through an initial coin offering process. Crypto tokens also refer to crypto assets.
Crypto refers to the encryption and cryptography that protects any asset or data it holds. On the other hand, cryptocurrencies refer to the systems that help secure online payments. Then, a blockchain ledger system defines the denomination value of these tokens. Cryptocurrency is the US dollar in real life, and the tokens are its denominated bills and coins.
These crypto tokens work as the blockchain’s trading units in modeled templates like the Ethereum network. Moreover, blockchain technology relies on smart contracts. Hence, smart contracts write the terms between parties within the blockchain network and self-execute once the blockchain meets the terms.
For instance, a crypto token can hold client loyalty points from a retail chain. Then, another token can hold a voucher that allows 5 hours of streaming content on a video-sharing chain. Another token can also hold 15 bitcoins that people can convert to another cryptocurrency. People then can trade and transfer these tokens across the blockchain network.
Now, let’s talk about the contrast between crypto tokens, cryptocurrencies, and altcoins.
Crypto Tokens vs. Cryptocurrencies vs. Altcoins
You might hear people use crypto tokens, cryptocurrencies, and altcoins mutually. But, these three terms don’t mean the same thing. They are very distinct from one another.
Cryptocurrency refers to the standard currency for payments on a blockchain, Bitcoin’s biggest of which. On the other hand, altcoins refer to crypto coins other than Bitcoin. In other words, cryptocurrency is the parent term, while altcoins and crypto tokens are its two subsets.
Altcoins came from the term “alternative coins” that creators launched after the massive triumph of Bitcoin. Creators made altcoins to solve the pain points of using Bitcoin as more people adopt it. These new coins include Litecoin, Dogecoin, Bitcoin Cash, Namecoin, and other crypto coins. Crypto enthusiasts made more coins, but no one reached the success of Bitcoin.
Altcoins and cryptocurrencies have their dedicated blockchain and act as a medium for their payments. Meanwhile, crypto tokens run on top of an existing blockchain and act as a medium for making dApps. These tokens also help execute transactions and smart contracts of the chain it connects to.
Creators make tokens through an initial coin offering (ICO), a direct version of a cryptocurrency’s initial public offering (IPO). First, crypto firms make tokens to raise cash. As a result, investors buy these tokens if they like the firm.
Investors can use tokens by holding them as a stake for a crypto firm. They can also use these tokens to buy and sell goods or services. For instance, Bluzelle allowed investors to stake their tokens to secure their network as investors earn rewards from gas fees.
Investing in these tokens still comes with its risks. But with a better grasp of these concepts, let’s look at how to make money with these tokens.
5 Ways to Make Money With Crypto Tokens
Although crypto tokens aren’t the same as cryptocurrencies, how the latter makes money is almost equal to the former. Investors who bought a token during its ICO can expect 82% returns from SSRN research. This is as long as the token appears in the crypto exchange within 60 days.
In addition, a token’s price often shoots up by 179% when a token enters a cryptocurrency exchange. Moreover, the price rises further by 67% within its first-month trading. Hence, investors love to get their hands on trading tokens with these rosy returns.
Crypto mining is also a way to make money but comes with caveats. For instance, bitcoin mining uses an application-specific integrated circuit (ASIC) miner. ASIC Miners are very high-priced and consume a lot of energy, making them not eco-friendly.
However, not all tokens make money. For any digital currency, only 8% make it in an exchange. Even fewer manage to launch a coin product or a project. Hence, make your research a substantial part of your investing strategy to make a profit in these tokens.
A handful of ways to earn money in crypto emerge every day. We have piled the most proven ways to make money in digital currencies. It may be few, but rest assured that most of these are easy to do. Since mining is hard to do, let’s start with the most obvious: trading them.
Crypto Trading
Crypto trading lets you profit on short-term price swings by design. A crypto trader knows how volatile the market value can be. Yet, they use these wild swings to catch high returns.
In day trading, you need to analyze market charts through technical analysis. You then use these data to predict price hikes and drops. In other words, you are timing the market as you buy low and sell high.
You can buy or short a position when day trading if you think the price will rise or fall. In other words, you can make money even when the market is bearish or bullish. The only catch is it takes a lot of work since you need to watch the market daily.
For instance, Trade Token (TIO) is the native token of the trade.io platform with a current price of $0.08. It runs on the Ethereum platform with a circulating supply of about 89 million tokens. If you trade TIO, you are trading a crypto token.
Crypto Staking
Staking means locking up your crypto tokens to earn interest payments or rewards. In other words, you own the coins but never spend them. Instead, you “lock” the coins in a crypto wallet.
A network under Proof of Stake (PoS) will then use your stake to validate transactions. The network will then give you rewards like a lottery game based on your staked amount. In other words, you let the network use your coins to maintain security and confirm trades.
In a Proof of Stake system, the network picks validators based on the total coins you stake. Hence, staking uses much less energy than bitcoin mining. You also don’t need to buy costly hardware since PoS doesn’t compute complex mathematical equations.
Staking looks like you deposit funds in a high-yield savings account. Your rewards are like the interest that a bank pays you as you keep a certain balance. Most investors use these crypto investments like savings accounts to earn passive income.
You can stake as many coins as you can in crypto exchanges, but you probably won’t get rich. Staking rewards are genuinely passive income like cryptocurrency dividends. You are just holding the crypto assets in a crypto wallet for a fixed time.
The longer you stake your coins, the better profit potential you can have because of compound interest. But, a few variables influence how many rewards you can receive. The block reward size, liquidity pool size, and locked supply amount affect how gainful a staking coin is.
Moreover, it would help if you considered your stake’s fiat money coin value. Staking can be fruitful only if the fiat value rises or keeps steady. But, gains could decline quickly if the coin prices fall.
Crypto Yield Farming
Yield farming uses decentralized finance (Defi) to make money. Users borrow crypto on a decentralized exchange (DEX) in a required minimum amount and earn the same coin. Furthermore, yield farmers increase earnings by using more complex techniques.
For instance, farmers keep moving their digital currencies across loan platforms to magnify gains. Thus, yield farming allows liquidity to various crypto tokens. But it’s a difficult habit in the advent of rug pulls, price volatility, and contract hacks.
In yield farming, users place two coins in a DEX to provide liquidity in trading. DEX then charges a fee to swap the new coins as payment in new liquidity pool (LP) tokens. The types of yield farming include lending, borrowing, and staking.
Lending means you can lend crypto to borrowers via smart contracts and farm yield from the loan interest. Moreover, borrowing means farmers can use one token as a pledge and get a loan from another. Then, users can farm yield with the coins borrowed while the farmer keeps the initial holding.
Staking in yield farming means staking LP tokens gained from supplying a DEX with liquidity. Then, the DEX pays users a free coin for supplying liquidity in LP tokens. Thus, staking LP tokens allows the user to gain yield twice.
Yield farming returns are measured annually. Earning passive income in farming is very profitable, but it depends on your effort in making money. Also, it would be best to farm only in trustworthy LPs until you gain confidence and risk tolerance.
However, farming is highly risky, and you may lose all your money. You must have deep knowledge of Defi to earn passive income in yield farming.
Crypto Lending
Crypto lending enables borrowers to use crypto-assets as collateral to get a fiat or stable coin loan. In other words, lending allows you to get cash without selling your digital tokens. Hence, you can use the money to meet your purpose and repay it later to get your assets back.
Crypto loans let you use the crypto you hold to gain perks by lending only part of your holdings. You can borrow up to 50% of your overall crypto tokens on lending platforms; some offer even more. Interest rates are up to 4% for non-stable coins.
The downside is that you lose all your assets if you default on your debts. However, variances in interest rates in different lending platforms attract users to stablecoin lending. For instance, stablecoin lenders can earn 8% in Nexo, but on Compound Finance, lenders can earn up to 12%.
Crypto lending is more like a mortgage loan. You hand over your assets to lending platforms, get the loan, and repay it over time. You remain as the owner of your coins, but you let go of the right to make trades using those.
Crypto loans appeal because of their low interest rates, lack of credit checks, and fast funding. Moreover, loans let you have your choice of loan currency and a chance of passive income for your idle cryptos. Lastly, you can earn high annual returns of 10% as you lend your digital currencies.
You may wonder if lending is safe. Note that lending platforms hold the right for those crypto keys when you lend your crypto, not you. What you have is the bond issued by the smart contract. Make sure to do your research before lending your coins.
HODL-ing
HODL is a term unique to crypto, which loosely means “hold on for dear life.” HODL came from a misspelling from a post on the Bitcoin Talk forum in 2013. Back then, Bitcoin prices fell so hard that a user posted he would still “hodl” bitcoins despite the -90% dip.
GameKyuubi, the post writer, said that he is a bad trader, and that’s why he’s holding. He said illusioned newbies only do selling in a bear market. The people wise enough in between just simply HODL.
The post has an overall drunk tone and a lot of misspellings. Hence, the misspelling quickly became a meme within an hour. Now, it’s a mantra of crypto investors to simply just HODL in times of wild swings.
HODL is now a long-term investment approach for crypto. Also, the HODL strategy feigns fear of missing out and emotion-filled trades. HODLers stay invested because they believe that crypto will replace fiat currency as inflation rises. If that happens, exchange rates between fiat currency and crypto will be meaningless as crypto becomes the new money.
HODL strategy is not limited to crypto. In other words, HODL mimics the buy-and-hold strategy for stock investing. HODLing stocks are more effective in the stock market since stocks don’t move as wild as crypto. Hence, HODLing crypto is harder because you have to stomach its volatility yet never sell.
HODL investors pick crypto with a high market cap, similar to blue-chip companies in the stock market. Since investors are in it for the long haul, they ensure that they buy bitcoin or crypto is that are valuable. In other words, HODLers believe in the intrinsic value of crypto in the future, so they simply HODL.
Completing microtasks in Crypto Faucets
Cryptocurrency faucets allow you to earn free cryptocurrency by just finishing tasks. Each website is different from another in terms of tasks and processes. For instance, some faucets use a captcha for their required tasks to finish.
Anyone can finish these tasks and doesn’t need prior expertise. Today, faucets can also come in mobile apps. You earn free crypto just by playing games and finishing milestones with it.
However, note that rewards are very few on faucet platforms. A task completed only yields a few cents of crypto in most cases. Yet, you don’t need to deposit funds, so faucets enable you to earn passive income risk-free.
Joining a Few Airdrops
Similar to faucets, Airdrops lets you earn crypto without making any crypto payments. Airdrops often happen with newly launched projects to create awareness. Creators spread their native coins into people’s crypto wallets to let their crypto enter circulation.
Airdrops oppose the usual launch in a crypto exchange. Hence, the project won’t raise any cash when starting an Airdrop. Few airdrops still became billion-dollar projects, even if it’s too good to be true.
For instance, Bitcoin Cash (BCH) launched in 2017 and airdropped its tokens to all wallets holding Bitcoin. The airdrop came on a 1:1 basis, which means 1 Bitcoin owned equals 1 BCH. Hence, Bitcoin holders loved BCH, and it has increased in value since then.
Stellar, another crypto, airdropped millions of dollars of Lumens, its native token. Stellar ranks 27 by market cap, and traders actively pump it in value. Instances like this let you earn crypto without depositing any cash.
Airdrops also happen during blockchain forks due to protocol upgrades. You will get a free coin of the upgraded chain if you still hold the coins in the parent chain. In other words, you get a free token since you were in the right place and time.
Airdropped tokens will function as normal tokens. You can use these to buy, sell, invest or trade tokens. Exchanges can also host an airdrop to make a larger user base for a crypto project.
However, be careful in receiving airdropped coins and tokens. Pump-and-dump scammers usually use worthless tokens and airdrop them into people’s wallets. Be vigilant when someone airdrops a token in your crypto wallet.
Top 3 Crypto Tokens in the Crypto Market?
Bitcoin (BTC) remains the top crypto token by market cap, valued at $28,815.04. Bitcoin is the first successful cryptocurrency and made blockchain a reality. People dubbed it the “digital gold,” upon which all crypto will peg their value.
Ethereum (ETH) remains the second biggest crypto token, valued at $1,750.18. Vitalik Buterin created ETH as an attempt to do business out of Bitcoin’s blockchain. This platform allows users to make smart contracts, decentralized apps and finance systems. Creators built most of the dApps, DEX, and Defi on ETH’s language.
The stablecoin USDT comes in third place, valued at $0.99. Tether, a Hong Kong-based firm, made a token that will mirror the US dollar value 1:1. Tether lets users have a smooth exchange rate from fiat to crypto and a store of value during downturns.
Summary
You can make money with cryptocurrency in the ways mentioned above. But, it’s helpful to have guidelines if you want to try earning passive income in this industry.
First, choose projects that have raised funds effectively. You can also review the outlook of the token on the exchange. Then, make sure that the token has real use. Or, count the holders of that token and join them.
Moreover, always follow and stick to your strategy. Pay close notice to the token’s platform and try to use it yourself. Lastly, let the token attract more people to the platform.
Finally, earning money with cryptocurrency is a very risky endeavor. Do your research and be vigilant against scammers and rug pulls. Keep trying until you find that one token that will bring you that steady passive income you desire.Â
