New Ways of Making Money in the Crypto Market: The Definitive Guide [2020]
While there are a number of different reasons that people use cryptocurrencies every day around the world such as making payments, acting as their own private bank, and generally avoiding the high fees of the mainstream financial industry, the predominant reason that people use cryptocurrencies in 2020 is still as a way of generating income.
Millions of people around the world every day are generating profits and revenue within the cryptocurrency market, with people using cryptocurrencies in order to generate some extra money each week, all the way up to people that have used cryptocurrency as their sole source of income for a number of years.
As a cryptocurrency market has grown and developed however, there have been a diverse range of new methods of generating income that have been integrated into the cryptocurrency market, and this guide explores the options available for people that would like to be able to make some money with cryptocurrency.
What is Cryptocurrency and How is it Used?
What is Cryptocurrency?
Cryptocurrency is the most recent addition to the asset classes of the financial world, and unlike all other financial assets which have their homes in stock exchanges and financial institutions around the world such as Wall Street, cryptocurrencies are decentralized in nature and have only relatively recently been assimilated into the world of mainstream trading.
Cryptocurrencies are virtual currencies that predominantly operate using a technology known as “blockchain” which allows each cryptocurrency to operate without the need for a central authority to manage the monetary policy and supply of the cryptocurrencies units.
Cryptocurrencies are kind of like a combination of digital money coupled with digital stocks, being that as well as being able to be traded on exchanges and brokerages around the world, cryptocurrencies are also able to be used to purchase and sell goods in a wide range of different situations.
Cryptocurrencies have evenly split opinions of pundits and financial analysts over the past 10 years, with an equally-large amount of people believing that they are the future of the financial system and money as a whole, as there have been people who believe the cryptocurrencies are simply an elaborate ponzi scheme that has been successful for many years.
However, it is categorically true the cryptocurrencies are in fact not a scam or ponzi scheme, but instead they provide tangible value in a wide range of different forms for a wide range of different people around the world, and far from being a ponzi scheme that will evaporate, they are only going to grow larger in value and application over the coming years and decades.
What is the History of the Crypto Industry?
The first mention of the word “cryptocurrency” in the public domain was in 2008 when an anonymous group or individual known only as “Satoshi Nakamoto” released the Bitcoin whitepaper which outlined the first cryptocurrency, Bitcoin, as well as the concept of what a cryptocurrency is, and also a description of the new technology that would facilitate the use of cryptocurrencies, blockchain.
The earliest years of cryptocurrency are very murky as there was a substantially smaller community involved in buying, selling, and documenting the happenings of the cryptocurrency space at that point in time, however what is for sure is that the infrastructure surrounding the cryptocurrency market was virtually nonexistent.
At an early enough point in time, and a point in time close enough to 2008 and 2009, there were no cryptocurrency trading platforms available for holders of Bitcoin to be able to sell, and for potential investors to be able to purchase, with there instead of being a loosely connected cluster of websites, communities, forums, and blogs is that comprised the cryptocurrency community at that point in time.
However, as the number of people that became interested in Bitcoin increased, so did the value of a single Bitcoin, with there being exponential growth in the early days of the cryptocurrency industry that outpaced even the largest return on investments in Bitcoin that have been seen in recent times.
Over the years, the profits that were available by becoming involved with cryptocurrencies drew in a huge number of people that saw the number of total cryptocurrency users expand from a few thousand up to tens of millions in the space of half a decade.
Why Do People Use Cryptocurrencies Instead of Normal Money?
There are a wide range of different reasons that cryptocurrencies have become popular over the last 10 years, and within those reasons a lot of them pertain to the ability to use cryptocurrencies as an alternative to normal fiat currencies, such as USD and EUR.
One of the most significant incentives to using cryptocurrencies instead of using normal money is the privacy aspect of cryptocurrencies which is built into the core of how they function, with Bitcoin itself being a pseudo-anonymous cryptocurrency where no direct personal information has to be connected to the transactions that you make.
As well as this, there are a wide range of cryptocurrencies where the transaction time can be as low as 15 seconds and this is another reason that a lot of people choose to make international transfers using cryptocurrency instead of using fiat currencies in the banking system, where a transaction from another country’s banks can take anywhere upwards of 3 days.
Another major draw card for using cryptocurrencies instead of using fiat currencies is relatively low cost of making transactions and pain of using cryptocurrencies, and where using a payment processor such as PayPal can cost a significant amount of the total value of a transaction, as recently as a few months ago an exchange made a transfer of hundreds of millions of dollars worth of Bitcoin which cost them a grand total of less than $1 to do so.
Finally, another major reason that people use cryptocurrencies is because of the permissionlessness of doing so, and where the banking sector has all sorts of regulations and requirements in order to be able to set up an account and to be able to use their network and systems, access to the Bitcoin network and the networks of other cryptocurrencies are provided without the need for permission in order to do so, with anybody being able to use cryptocurrencies freely.
How do Cryptocurrencies Work?
How did Cryptocurrencies Come About?
Nakamoto created Bitcoin in 2008, and what many people have noticed is the coincidence between the creation of Bitcoin and the major financial event that was happening at that same period, the Global Financial Crisis.
Also when looking at the goals of the creation of a cryptocurrency like Bitcoin, it’s easy to imagine that Nakamoto was motivated by seeing the corruption of the mainstream financial system and the systemic problems which had led up to the GFC.
With the problems in the mainstream financial sector caused by the centralized control that some parties had over the system, the main purpose of creating Bitcoin was to create a decentralized power structure, while all participants in the Bitcoin network share control, and no one party is open to be able to corrupt the network.
Since the creation of Bitcoin until now, millions of users across the world have been drawn into the idea that they could manage their own financial holdings without the need for a bank or other financial institution in order to do so.
What is Blockchain?
The thing that differentiates digital currencies like Bitcoin from fiat currencies like the USD is the decentralization of the way that they function, and the reason that cryptocurrencies are able to function in a decentralized manner is because of the underlying technology that was created by Nakamoto, known as “blockchain”.
Blockchain technology is revolutionary, and has been not only used in the vast majority of cryptocurrencies in existence today, but also in many non-financial applications as well, such as supply chain management and management of medical inventories of hospitals and other health institutions.
Within the context of cryptocurrencies, blockchain is a type of ledger system that records all of the transactions that have been made between accounts within the Bitcoin network, with it being easy to follow all of the transactions in order to know who owns how much Bitcoin.
Blockchain gets its name from data structure itself, where timestamped blocks of transaction data are chained together using cryptography in a process that makes all of the information stored within a blockchain immutable, making it impossible for malicious actors to edit the blockchain and give themselves free Bitcoin.
Blockchain technology is so fundamental to the way that cryptocurrencies operate that without the creation of Blockchain in 2008, there never could’ve been the creation of Bitcoin or any other cryptocurrencies, as it would not have been possible to decentralize a currency in this way.
Why do People use Digital Currencies?
Although when Bitcoin was first created there were only a relatively limited number of use cases, over time the ways that people use digital currencies has become significantly more diverse and varied.
Three main ways that people use cryptocurrencies today can be divided into two main categories, with those being the generation of revenue and for the transfer or storage of value.
Many people buy and sell cryptocurrencies in trading platforms around the world each day with the goal of generating profit, and this has been the most common use case of cryptocurrencies since the initial creation.
Similarly to how stocks and other traditional financial assets are traded, cryptocurrencies can be traded as well, however while the volatility of traditional assets is relatively small compared to cryptocurrencies, the volatility within the cryptocurrency market is the highest of any asset class.
What this means is that with high volatility comes a higher potential for generating larger profits, and this has been one of the main factors in the growth of the popularity of cryptocurrency trading over the past 10 years.
As well as generating profit, the second most popular use of cryptocurrencies is in the transfer and storage of value, with there being a wide range of benefits of using cryptocurrencies for these reasons compared to using other methods.
Unlike Paypal and other payment processors, it is very cheap, fast, and easy to make payments and transfers using cryptocurrencies, with a transfer from any two people in the world taking as little as 15 seconds, and the cost of selling hundreds of millions of dollars worth of cryptocurrency being less than $1.
Many people are drawn to cryptocurrency as a way to store value over the long-term, with the anonymity of cryptocurrency usage providing a way for people to keep their financial transactions and situation private.
What are the “Normal” Ways of Making Money in the Crypto Market?
Mining
Cryptocurrency mining is technically the oldest way of making money with cryptocurrencies that had ever been created, and it is the core process by which new cryptocurrencies are created if they are “proof of work” cryptocurrencies, and represents a significant amount of the value that is built into various cryptocurrencies, including Bitcoin.
The two main ways of managing the creation of new units for any cryptocurrency are called “proof of work” and “proof of stake”, with “proof of stake” meaning that the more of a cryptocurrency you hold the more of any newly created cryptocurrency you are given, and “proof of work” meaning that the faster that your computer can solve complex cryptographic puzzles, the more Bitcoin that you will be given as a reward for doing so.
The process of solving the puzzles used in proof of work is known colloquially as “mining”, which can be broken down into purchasing computer hardware that is suitable for the task, installing the required Bitcoin software onto the computer, connecting to the Bitcoin network, and then running the computer 24/7 trying to solve as many puzzles as possible in exchange for free Bitcoin.
While mining as an individual sat in your house is still technically possible for some cryptocurrencies, for Bitcoin it is all but impossible to be able to profitably do this today, and instead Bitcoin miners either join pools of a large number of thousands of different individual miners working together and sharing the rewards, or have to invest millions of dollars into setting up warehouse-sized operations full of computers known as “Bitcoin farms”.
Although Bitcoin is the most widely known cryptocurrency that can be mined, there are many others which have grown in popularity over the past few years and can be significantly more profitable to mine than Bitcoin such as Monero, and it is worth doing extensive research into the options available before deciding which cryptocurrency to dedicate your hash power to.
Investing
Cryptocurrency investing has been the most profitable financial activity to have been involved in over the past decade across all financial asset classes and every country in the world, with the profit of investing in Bitcoin from the time of its launch until today being a return of 27,000,000%.
The basic principle of cryptocurrency investing is purchasing one of the many thousands of different cryptocurrencies, and holding that for a significant period of time until the value of the asset increases, hopefully substantially.
Cryptocurrency investors inherently pay a lot more attention to the fundamentals of the cryptocurrency market than cryptocurrency traders do, being that they care more about the background of a cryptocurrency such as the composition of its team, any partnerships that the project might have, and other external factors that have nothing to do with the charts.
Investors will often build a portfolio in the cryptocurrency market of a wide range of different cryptocurrency in order to diversify against any single asset suffering losses as a result of bad news or other factors, and the myriad of different cryptocurrencies available to invest into today lends self towards investors being able to maximally diversified a portfolio.
Trading
Cryptocurrency trading is very similar to the processes involved with cryptocurrency investing, however there are some distinct differences which separate cryptocurrency trading and investing as two separate types of activities.
The cryptocurrency investors might purchase and hold an amount of Bitcoin for a period of years in order to generate profit while cryptocurrency traders hold the assets which they purchase for significantly shorter periods of time, often making multiple trades per day, with the intention of making small amounts of profit but in a higher volume.
Where cryptocurrency investing is focus more on the fundamentals of different cryptoassets, cryptocurrency traders focus more on technical analysis in order to understand the patterns which form in the charts relating to any given asset, with the price and volume changes over time being the determining factors of whether or not traders will make purchases or sales in the market.
Cryptocurrency trading is also a much higher-stress activities than cryptocurrency investing on average, with cryptocurrency investors often making purchases and then setting-and-forgetting, and cryptocurrency traders having to continuously monitor the charts manually, with this taking a significant amount of time and sometimes causing significant amounts of stress.
What are the Best Trading Platforms in the Crypto Market?
PrimeXBT
PrimeXBT is the world's leading multi-asset margin trading platform and has grown over the past 3 years to today manage up to $2 billion worth of global trade across a wide range of markets every day.
PrimeXBT began with a wide range of cryptocurrency listings, but within a short space of a few months expanded to list many of the world's leading traditional assets and instruments as well, and today the platform lists cryptocurrencies including BTC, ETH, XRP, LTC, and EOS, stock indices including S&P500 and FTSE100, commodities including gold and oil, and forex pairs including EUR/USD and AUD/CAD.
PrimeXBT has developed a reputation for providing the lowest fee schedule of any major cryptocurrency trading platform in the market with a low flat rate of just 0.05% applied across all trades, and this being anywhere up to 10x lower than its competitors.
PrimeXBT’s trading platform is easy-to-use for both beginners and experts, with high-quality customer service providing fast responses to any inquiries that traders have, and the user interface itself being intuitive and providing access to powerful tools for generating profit in the cryptocurrency market.
PrimeXBT is a leader in the cryptocurrency margin trading space, and offers industry-leading leverage of up to 100X on all listed cryptocurrencies, and up to 500X on all traditional assets, with a wide range of different order types provided also including stoplosses and OCO orders (one-cancels-the-other).
Coinbase
Coinbase is another leader in the cryptocurrency space and has been around for many years, weathering the many storms which have occurred throughout the history of the cryptocurrency market, and today are a mainstay of the cryptocurrency industry.
Coinbase is a professional trading platform that is tailored for high-end customers and institutional investors to take full advantage of a range of powerful tools and features for generating profit with cryptocurrencies.
The platform has been professionally developed as well, and its infrastructure is strong and reliable, ensuring a positive trading environment for traders and investors.
Coinbase does however charge substantially higher fees than almost any other trading platform on the market, with the fees being up to 5 times more expensive than that of PrimeXBT, and this is something which has been largely prohibitive for the majority of retail traders in the cryptocurrency market, who who today are spoiled for choice with cheaper platforms that are offering competitive fees in order to secure new clients.
What are the Best Cryptocurrency Trading Strategies?
Social Trading Digital Currencies
Social trading is the process of multiple traders pooling their resources together and sharing information and capital in order to be able to collectively improve the profits of the group as a whole.
While this has been an important part of the traditional trading market for a number of years, it has only been relatively recently that cryptocurrency social trading has taken off and become popular.
However, the growth of the prevalence in crypto social trading has been rapid, with a number of platforms now providing variations of social trading tools.
One such example of this is PrimeXBT’s Covesting Module, which allows traders to create peer-to-peer investment funds, with experienced traders being able to increase the profits of the trades that they would have created anyway, while inexperienced traders can access crypto markets with reduced risk and a higher likelihood of profit generation.
Outside of this, there are many other variations of crypto social trading, and with the demand for these kinds of services increasing within the digital currency market, it is likely that this sector will continue to grow over the coming years.
Margin Trading Digital Currencies
Margin trading is another subset within the cryptocurrency space that has grown significantly over the past few years, and where there was the perception initially that margin trading was a risky way to access cryptocurrency market, today it is not just professional institutional traders that use cryptocurrency margin trading.
As retail traders within the cryptocurrency space have become more sophisticated over the past few years, advanced strategies that use the power of margin trading to dramatically enhance their profitability have become more prevalent.
Cryptocurrency margin trading can be divided into two main areas which are cryptocurrency leveraging and shorting, with both of these tools being essential for the efficient use of capital with the cryptocurrency market.
Cryptocurrency leveraging is a way of borrowing funds from a broker in order to create trades that are magnitudes larger than would typically be available with the capital on hand.
Cryptocurrency shorting is a way of borrowing funds from a broker in order to create trades that are profitable as the price of an asset drops, instead of being profitable as the price of assets increase, as is typically available with the strategy of buying low and selling high.
What are Newer Ways of Making Money in the Crypto Market?
Cryptocurrency Referral Programs
While cryptocurrency referral programs aren’t exactly a new way of making money in the cryptocurrency industry, they are significantly newer than mining, trading, or investing, although their popularity has grown sharply over the past few years as a much wider range of trading platforms and other websites have entered the cryptocurrency market.
The basic idea behind cryptocurrency referral programs is that trading platforms such as exchanges and brokerages, cryptocurrency payment processors, and other such platforms, will create a program where users are able to partner up with them, get a unique referral code, and then share the referral code throughout crypto social media and other places in order to generate traffic and exposure for the platform.
In return for helping the platform to build a user base and generate revenue, affiliates are then rewarded in one of two ways: by receiving a percentage of all of the revenue generated by the referrals on the platform, or by receiving a single payment for every time that somebody signs up for the platform.
Airdrops and Bounty Programs
Airdrops and bounty programs came into existence in the ICO boom of 2016 where a huge number of new cryptocurrencies were being formed every month, and in order to compete amongst each other, projects developed programs where they would give away amounts of the newly formed token in return for exposure and task completion by cryptocurrency uses.
Bounties are programs where a cryptocurrency will announce a list of tasks which users can complete in order to receive a free amount of the token, with some of the more common tasks that are found in bounties being social media following and sharing, the creation of graphics and other imagery on behalf of the project, and other marketing-based tasks.
Airdrops are similar to bounties in that users are provided with a free amount of tokens from projects, with the difference being that instead of having to complete tasks in order to receive free amounts of the project’s cryptocurrency, they are giving them for free.
In Summary: New Ways of Making Money in the Crypto Market
The cryptocurrency market has come a long way since its origins a decade ago, and today there are a wide number of different ways to generate money with cryptocurrencies in the market.
While the most common ways of making money with cryptocurrencies are the original big 3, mining, trading, and investing, other ways of generating revenue such as referral programs, bounties, and airdrops are more popular than ever and represent a large portion of the revenue generated with cryptocurrencies.
The platforms we have mentioned are at the top tier of cryptocurrency trading, and both provide a wide range of different ways to generate revenue within the cryptocurrency industry, for more information about them check out PrimeXBT and Coinbase.