Money Trading Cryptocurrency
A Bitcoin With Euro Bills | Image credit: EwaStudio/Twenty20

5 Strategies for making money trading cryptocurrency

Bitcoin

Just a few years ago, several big players in the tech world opined that cryptocurrencies would quickly disappear. They were wrong. While Bitcoin and other cryptocurrencies have seen some swings in value, especially since the World Health Organization declared COVID-19 a pandemic on March 13, most people who invested in cryptocurrencies a few years ago have reaped a lot of financial rewards as of today.

Read on to learn about five strategies you can use for making money trading cryptocurrency.

1. Think of Bitcoin as a long-term investment

Investments are those assets that you hold onto for a long time. You buy them and hold them. Cryptocurrencies are well-suited to this trading strategy. Their short-term volatility could frustrate you. Buy them and forget about them.

Most of the gains in Bitcoin and other cryptocurrencies happen on just 10 days of the year. If you miss one of them, you’ll lose out on the growth. If you had missed out on those 10 winning days each year between 2013 and 2018, you would have lost money on your investment. Buy cryptocurrency, and stick with it for the long haul.

2. Know what derivatives are

If you prefer the short position for trading, then you’ll need to know about cryptocurrency derivatives. This is the best way to make money on trades if you don’t plan to keep your funds tied up for a long period of time. You’ll need to have a solid foundation in cryptocurrency derivatives before submitting your payment.

3. Learn how to read the charts and reports

Before you put money into cryptocurrency, learn how to read the charts. Cryptocurrencies aren’t the best investment for a newbie. They require some skill and experience with trading platforms. You’ll need the ability to understand the technical indicators, which are shown in graphs and charts as well as spreadsheets.

These data points give you the indicators as to when you should buy Bitcoin in emerging markets. For example, the Bitcoin price in India rose when their government de-regulated the currency. By watching for these market opportunities you can buy Bitcoin before the rise in price giving you a profit on the investment. You’ll also benefit from in-depth knowledge about blockchain and different cryptocurrency companies.

Think about the historical context and use it to predict the future short-term prices of the cryptocurrency in which you want to invest.

4. Consider staking and lending

These processes are similar. They allow investors to make money with alternate coins. Staking means locking coins in a wallet and getting rewards that validate transactions. Those transactions occur on a proof of stake network. They are an alternate to mining.

The network’s algorithm chooses which validations to run on each transaction. You don’t need fancy hardware to do this. It’s more energy-efficient than mining. You could also lend coins to other investors. Generate interest on your loan. You can do this on different exchanges and decentralized finance networks.

5. Start mining

If you have hardware that’s not dedicated to anything else, and you’ve also got plenty of bandwidth and more time than money, you could start mining for cryptocurrency.

Mining is part of the proof of work mechanism in the cryptocurrency industry. It’s one of the oldest ways to generate income from digital coins. You verify transactions and secure the proof of work network. Your reward is a new coin. It’s delivered through a block reward. These days, you need specialized mining hardware. If you don’t already have it, you’ll need cash to buy it.