Cryptocurrencies have emerged as one of the most profitable financial tools ever developed, and it is estimated to have created over 25,000 millionaires since the creation of the blockchain in 2009. Bitcoin was the first cryptocurrency to make a name for itself, and it remains the highest priced and the most traded cryptocurrency in the world.
In about 11 years, the price of bitcoin has risen from pennies to over $35,000 per coin. A dollar invested when bitcoin was launched would now be worth over $2 million.
I missed out on turning a dollar into two million bucks, but I was fortunate enough to be one of the lucky people who stumbled upon bitcoin while its price was only a few hundred dollars. Since then, I’ve made money holding, trading, and selling bitcoin and other cryptocurrencies.
If you’re wondering if it’s too late for people who are just discovering cryptocurrencies to make money off them, think again. There is no limit to how high the price of any cryptocurrency will get, and even coins that are close to their historic highs like Bitcoin can still go a lot higher.
A single bitcoin could very well cost a million dollars a few decades from now.
Besides, holding cryptocurrencies and cashing in on price increases is not the only way to make a profit off them. I’ve personally had decent success with peer-to-peer trading, day trading, arbitrage trading, short-term trading, and long-term trading.
Figuring out if trading cryptocurrencies is right for you
Trading cryptocurrencies can be a profitable endeavor if you’re willing to learn as much as possible about the coins you will be trading and the trading method you choose.
It comes with some risks like the value of a cryptocurrency you’re holding suddenly dropping, payments made for coins being charged back, or accidentally sending your coins to a wallet address you no longer have access to.
Signs you might be well-suited for trading cryptocurrencies include:
- You’re comfortable with the risks that come with dealing with commodities as volatile as cryptocurrencies
- You’re disciplined enough not to invest more than you can afford to lose in cryptocurrencies
- You’re are willing to learn as much as possible about the blockchain and other technologies that power cryptocurrencies
Ways to get rich off cryptocurrencies that still work
Here are some of my favorite ways to make money off cryptocurrencies that remain effective despite the price increases that have occurred in recent years:
1. Peer-to-peer trading
Here’s how I started my journey making money off cryptocurrencies. I started on a site called LocalBitcoins, trading bitcoin with profit margins somewhere between 4 to 15 percent.
Peer-to-peer trading platforms like Local Bitcoins and Paxful allow you to buy and sell cryptocurrencies using payment methods like your bank account, PayPal, and Chime.
All listings on these sites are made by users, while the platform provides a coin escrow service that prevents buyers from running away with coins until payments are verified.
The biggest obstacle I’ve run into with peer-to-peer trading are scammers looking for a score. These unsavory characters can be creative with their tricks (like sending payments from hacked accounts), and some payment processors automatically grant chargebacks in favor of the sender.
The key to avoiding getting scammed for your coins is to verify the people you trade with. Go over the details of each payment, make sure the person you are trading with owns the account the payment is coming from, and ask for identification documents as needed.
Peer-to-peer trading has low entry requirements, and you can start trading with a few hundred bucks.
Risks are minimal when making money off cryptocurrencies using this method. With peer-to-peer trading, you set your margins (while trying to remain competitive with other traders), so there is virtually no risk of taking a loss.
The only way you lose money with peer-to-peer trading is if the price of the asset you’re trading drops, or a scammer gets over on you.
The key to avoiding these pitfalls is to stick to trading with established users. There are no guarantees with peer-to-peer trading, particularly when you’re receiving funds from reversible payment systems like Paypal, Venmo, or Serve, but a trader who has over 5,000 transactions with no negative feedback is less likely to be problematic than someone who just joined the trading platform a few hours ago.
2. Day trading
Day trading requires more investment capital than peer-to-peer trading, but it typically takes up less of your time. It was the logical next step for me as my holdings of cryptocurrencies grew. However, day trading is a lot riskier than peer-to-peer trading.
You might end up losing or making money at the end of the day. The market decides your fate. You can mitigate losses by getting rid of any bags you have if prices start moving against you.
The concept behind day trading is extremely simple. You want to buy crypto close to its daily low and sell it close to its high. If you have ever looked at a cryptocurrency chart – or any other commodity – it is impossible to miss the cyclical nature of prices.
Knowing how to read charts and other financial signals comes in handy when it comes to day trading.
Day trading will remain a viable way to make money off cryptocurrencies regardless of how high their prices go. I prefer to automate my day trades as much as possible, so I don’t end up making any emotional decisions.
That’s the key to success. You want to purchase cryptocurrencies close to their daily low and sell close to the high price. Emotions like fear of missing out (FOMO) can lead to poor decisions being made especially when a coin you’re watching starts to moon.
With day trading, there’s no need to worry about scammers sending me payments that will be charged back in a few days. I recommend not keeping any more than you can afford to lose on cryptocurrency exchanges since there’s always a chance the platform gets hacked or its owners pulling an exit scam.
Always keep the bulk of your cryptocurrency holdings in personal wallets. A personal wallet gives you complete control over your investments, which may come in handy if you need to access them quickly.
3. Arbitrage trading
Looking back, this probably should have been my next move after peer-to-peer trading for a few years. It’s so easy, anyone can do it, but you will have to spend some time browsing prices on every cryptocurrency exchange you have access to.
The idea behind making money this way is simple. You buy cryptocurrency on exchange A, and you sell it on exchange B where it is being sold at a higher price. Profits can be really nice when you find major price disparities.
The key to making profits with arbitrage trading is to make sure prices where you plan to sell the coin are high enough to cover transaction fees plus transfer fees, and still leave a decent profit.
Having a nice chunk of capital to invest makes it easier to make money this way and absorb any fees that come up. Exchanges typically have limits on how much you can withdraw from their platforms daily, but you can significantly increase these limits by verifying your account.
4. Short-term trading
Short term trading is similar to day trading, but instead of aiming to buy and sell over a 24-hour period, you hold on to your investment for a longer period for increased profits. It can be a week, two weeks, or even months.
Having a decent amount of capital helps a lot when it comes to short-term trading.
I always have a clearly defined goal when it comes to short term trading. I go over charts and make my prediction on what future prices are likely to be before even purchasing the cryptocurrency I plan to invest in.
There’s always a risk of prices going the other way, but I try to manage that by setting stop-loss orders.
The key to making consistent profits with short-term trades is sticking to your plan. It’s easy for a short-term trade to become a long-term one when you are undisciplined.
Set clear goals and sell off your holdings once you’ve reached your target price or it has become clear that you made a bad prediction.
5. Long-term trading
Here’s one of my favorite ways to invest in cryptocurrencies and it still works. To make money using this method, you’d need careful research before investing and lots of discipline. The amount of cryptocurrency invested should be an amount you can afford to leave untouched for years.
You also need to be financially disciplined in your personal life so there’s never a need to tap into your long-term investments for emergency cash.
The key to successful long-term trading is selecting cryptocurrencies that are likely to remain significant in the future like Bitcoin. BTC has been an amazing long-term investment for all those who got in early and there’s still lots of money to be made. There’s only a fixed amount of bitcoin in circulation so there is no limit on how high the price might get someday.
A $20,000 investment in BTC could easily be worth more than a million in a decade. It’s certainly likely to be worth more than $20,000. That’s the idea behind long-term trading. I only invest in coins I believe in.
You haven’t seen anything yet
Cryptocurrencies are just getting started and they are likely to become a bigger part of our lives as the world moves towards cashless systems. Their value will continue to grow as an increasing number of societies adopt them as part of every-day life.
Contributor’s opinions are their own. Always do your own due diligence before investing.