Crypto For Dummies: How To Start Earning On Crypto

Last Updated on February 1, 2022 by Editor Futurescope

Ever heard of Glauber Contessoto? If you’re interested in growing your wealth using crypto, you should. He invested all of his savings ($250,000) in dogecoin (the one based on the doge meme) in February 2021. Two months later, he became a millionaire.

This is one inspiring story, of course. But it’s a one-in-a-billion chance that you become a millionaire overnight if you invest in crypto. That’s because it’s still the wild west out there, and value fluctuations are mostly random.

That’s not to say it’s impossible to earn on crypto at all – or that it’s way too risky to get involved. All you need to know is how to get started and manage your risks. And this is your guide on doing just that.

Who Can Make Money on Crypto?

The beauty of it all is that anyone can make money this way. That said, you’ll need to do a lot of research before you make your first investment.

Here’s a quick overview of the four key things you need to know first:

• How blockchain and cryptocurrencies work;
• What determines a coin’s value;
• What regulations on crypto your country has;
• Typical scams and MLMs you should look out for.

Many start still in college or right after graduation. Sure, you’ll have a lot of free time when the classes stop. But what can you do if mining needs your attention 24/7? Being a student, you probably know that you can always google ‘write my essay at Essaypro’ to offload your assignments. Or you can skip out on going out with your friends. Or on watching another episode of that TV show. You get the idea.

Bringing yourself up to speed takes time, of course. So, make sure you have it and prioritize the tasks. Luckily, there’s always something you can give up to make time for this. Just don’t give up your studies altogether. The key point is to not give up or sell out early. Or all your hard work will be in vain.

How Can You Earn Money on Crypto?

Now, let’s move on to the main course. You can read all the literature on the topic, but the main sources of income stay the same. Here are four ways you can make money, and all of them are suitable for beginners in this field.

1.   Buy & Hold

This one is a no-brainer. Therefore, it’s suitable for any beginner. It means you buy certain coin(s) and hold on to them (or HODL, as enthusiasts say) until it goes up in value. When you choose to sell is up to you, of course.

As for the mechanics of buying a coin, you’ll need to create an account and have a wallet on a specialized platform. The three most commonly used are:

• Coinbase;
• Binance;
• Kraken.

When you assess each of the platforms, remember to take into account:

1. Commission fees;
2. Payout procedure;
3. Availability in your country;
4. Supported fiat currencies;
5. Minimum payment thresholds.

As for which coins you should invest in, the answer is, it depends.

Do you want to purchase a relatively safe asset? Then the long-timers like Bitcoin, Ethereum, and Litecoin are worth looking into.

Are you chasing the assets with potentially thousands of percent in ROI? In this case, you’ll have to focus on relatively new, cheap coins that might skyrocket in value.

Pro-tip. Some coins, like BNB and XTZ, will pay you dividends if you hold on to them – just like a bank would pay you the interest rate if you have a savings account.

2.   Stake

Think of staking as opening a savings account, but in a cryptocurrency. But does “staking” mean, exactly? Let’s get a bit technical.

All transactions are stored in a ledger. That ledger is kept in a decentralized manner: a certain number of users have its copy. To verify a new transaction, a currency can use Proof of Stake. That means that the ledger is used in the consensus mechanism, so it’s put to work.

If you decide to stake your coins, they take part in approving new transactions. And that’s what you get rewarded for (you still own them, of course).

Not all currencies support staking, though. Here are the three most popular ones that do:

• Tezos;
• Cosmos;
• Ethereum.

3.   Get Paid in Crypto

The possibilities are endless here. First, you have microtask platforms like Bituro and Coinbucks that serve as a sort of Fiverr but in the world of crypto. Here’s how it works:

1. Someone needs a certain task done (a new app tested, for example);
2. You complete this task;
3. You get paid in a particular cryptocurrency.

If you have certain skills that you can offer as a service, you can add crypto as a payment method.

Then, there are Bitcoin faucets. They work almost the same as microtask platforms, but you get paid in satoshi (it’s a hundredth of a millionth BTC). Typical faucet tasks include solving a captcha, clicking on banner ads, watching videos, and so on.

4.   Use Arbitrage Opportunities

Arbitrage means buying a currency on one exchange platform and selling it on another one. How does it help you make money? You’ll be taking advantage of the difference in prices. You find where it’s cheaper, buy it there, and sell it on a platform where it’s more expensive.

You can use bots designed to help you take advantage of arbitrage opportunities. Cryptohopper is a popular choice.

How much can you score with arbitrage? The difference in prices typically varies between 5% and 40%.

Should You Mine Crypto?

Mining was, most probably, the first or the second thought on your mind when you decided to make money on crypto. However, this option isn’t that suitable for the majority of enthusiasts. Here’s why:

1. You need to buy special equipment to start mining. It typically costs upward of a thousand dollars. Alternatively, you can build it yourself, but it’s not a cheap option either;
2. Your electricity consumption will skyrocket. If electricity isn’t cheap in your area, huge bills will negate any profit you make from mining;
3. The more you mine a specific currency, the more difficult it is to get new coins.

Typically, mining is profitable only if you have access to cheap electricity and a lot of equipment running 24/7. Plus, mining currencies like Bitcoin or Ethereum isn’t for beginners: it requires huge amounts of processing power.

Should You Invest in ICOs?

Think of initial coin offerings as the equivalent of IPO (initial public offering). With an IPO, a company offers to purchase a share to get people to invest in its product. With an ICO, the product is backed by a new currency they offer you to buy.

Unless you have years of experience investing in startups, relying on ICOs to make money is a terrible idea. There are just way too many scams out there. If you don’t have the said experience (as well as the tech expertise), you won’t be able to tell the difference between a scam and an actual startup.

In Conclusion

Remember: crypto is both high-risk and high-reward as an investment. So, while you chase the reward, don’t forget about minimizing your risks, too. This means you might want to:

• Diversify your portfolio: invest in multiple coins and other, more traditional assets;
• Never rely on it to pay your bills;
• Never burn through your financial safety net just to buy coins;
• Invest only as much as you’d be willing to lose;
• Do your research on every platform and coin before investing.

For most people, crypto isn’t the path from rags to riches overnight. Yes, there are inspiring cases, but they’re just a drop in the ocean. However, that doesn’t mean you can’t grow your wealth this way. You just have to be smart about it.

Please keep in mind that this piece isn’t intended to give any financial advice. All of the information presented above is based on investors’ opinions and experiences. If you seek financial advice, turn to a certified financial planner or another qualified specialist.