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6 Ways to Make Money with Crypto Currencies

Crypto Currencies

Bitcoin and crypto currency: 6 ways to make money with virtual currencies


6 Ways to Make Money with Crypto Currencies


Buying, trading, mining, staking crypto-currencies... What are the various ways to make money with crypto-currencies? The increasing spread of crypto-currencies today offers a wide range of possibilities to try to make money with virtual currencies. This can range from managing a crypto currency account, trading crypto-based derivatives, mining, staking, earning rewards, etc. Overview of the different ways to make money with crypto currencies.

Buy crypto currencies

In our last article on the outlook for Bitcoin, we revisited the various macroeconomic factors that can affect the price of crypto currencies. This approach can be complemented by other analyses such as technical and chart analysis. The virtual currency market remains very volatile and the risks high. Therefore, depending on your profile and objectives, it may be more advantageous to favour a long-term investment. It is still necessary to detect the best entry or exit opportunities.

To buy and sell crypto currencies, there are platforms specialised in crypto currencies such as Binance, Coinbase, BitPanda, Coinhouse, Kraken, etc. This is generally the best way to invest in the medium to long term. Be careful though, the risk is very high and these assets are very volatile. You should therefore only invest a small part of your capital, taking into account your risk profile. These applications allow you to buy or sell a wide range of crypto currencies (Bitcoin, Ethereum, BNB, Ripple, Aave, etc.). Transaction fees vary but are generally around 1%. Note that small exit fees are sometimes applied. It is therefore important to compare the different crypto currency platforms before opening an account.

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Trading virtual currencies

There are various possibilities to trade crypto currencies via derivatives. The most common derivatives on crypto currencies are CFD's which replicate the variation of the corresponding crypto currency. Many stock brokers offer the possibility to trade virtual currencies via CFDs. This is the case with brokers such as eToro, IG, XTB, etc. CFDs are (very) short-term products with a high risk of capital loss and require a thorough knowledge of the financial markets. Note that CFDs do not confer ownership of the underlying assets.

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In addition, some websites that offer crypto-currency derivatives should be avoided at all costs. To do this, you can consult the AMF's blacklist. There is also a wide range of crypto currency derivatives, such as futures for example. Nevertheless, the risks remain high. In England, this has led the FCA (Financial Conduct Authority) to ban crypto currency derivatives in 2021. Derivatives should therefore be handled with great caution and used for active traders who frequently trade virtual currencies on a short-term basis.

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Mining crypto currencies


How to mine crypto currencies?

Mining crypto currencies remains a difficult process. The purpose of the miner is to make his computer equipment available to secure the transactions of crypto-currency users. To validate their participation in the network, a miner must provide a proof of work by solving a mathematical problem. Solving the problem results in a "hash" (a code made up of numbers and letters), which validates the transaction. The accumulation of transactions over time makes mining increasingly difficult.

To facilitate mining, some individuals are joining together in a "mining pool" to centralise processing capacity. Nevertheless, as an individual, it is still possible to mine crypto-currencies. To do so, you need an ASIC (especially for hashing), such as AntminerS9, AntminerT17 or AntminerZ11, etc. Alternatively, a mining rig can also be used. This is a graphics card. There is a wide range of these cards, such as Vega56 (mainly for ETH), AMD 5700, GTX 1070, etc.

So cryptocurrency mining is still a complex and costly business.

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Cryptocurrency mining therefore remains a complex and costly activity.

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Is mining virtual currencies profitable?

For individuals, mining is generally not a highly profitable activity. Remuneration obviously depends on the costs generated. These costs are mainly related to computer hardware and electricity. If Bitcoin were a country, it would consume more electricity than the whole of Austria according to Digiconomist. This gives a good idea of the high electricity requirements.

In fact, there are two parameters to take into account:

The difficulty of mining the cryptocurrency in question, which changes over time ;

the price of the mined cryptocurrency.

Graph showing the difficulty of mining Bitcoin since 2015

bitcoin mining difficulty


Overall, the difficulty of mining tends to increase due to the cumulative process of validated blocks. Mining Bitcoin in 2017 was less difficult than in 2021.

Finally, we note for Bitcoin the presence of a Halving every 4 years. This is the halving of the miners' remuneration, which is supposed to increase the price in the long run, due to the decrease in supply. The last Halving took place in 2020.

Staking of crypto currencies

Staking is a growing practice. Staking is the practice of locking up a portion of one's crypto currency wallet to receive rewards (most often interest). It is called "proof of staking", i.e. proof of possession (or participation). The central objective of Staking is to allow a better security of the exchange network and to decrease the Blockchain energy consumption. Indeed, locked cryptocurrencies are used to validate transactions, which facilitates the Blockchain network.

The interest offered can sometimes seem high, and it is often best to inquire about the seriousness of the project to avoid a pronounced drop in the price of locked cryptocurrencies. Crypto-currencies allowing staking are crypto-currencies such as DCR (Decred), ATOM (Cosmos), XTZ (Tezos), ALGO (Algorand), etc.

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Stable Coin for yield

Some tokens aim to offer a stable price with low volatility. These are called stablecoins. To ensure price stability, these crypto currencies are often correlated to an underlying asset, much like an ETF. Simply put, some stablecoins replicate the movements of assets such as the dollar, gold, etc.

For example, the currency Tether is backed by the dollar while DGX or PAX Gold are crypto-currencies backed by the price of gold. For stablecoins, the presence of an underlying is still the most common practice. However, other techniques exist such as changing the number of tokens in circulation according to supply and demand, a guarantee system (example of Dai guaranteed by ETH), etc. The Dai has for example introduced a 2% remuneration on its stablecoin according to the release published by Coinbase in July 2020.

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Special tokens

There are several thousand crypto currencies and many opportunities to make money. Some crypto-currencies or tokens (crypto-currencies associated with a company) are based on a process of destroying part of the supply in circulation ("burned tokens"). This is the case for large crypto-currencies like BNB, or other medium-sized crypto-currencies like CHSB, REQ, etc. This theoretically helps to increase the upward pressure on futures prices.

Ethereum, for example, is not in limited supply and does not have a destruction system. Bitcoin, on the other hand, is in limited supply. A very large proportion of the Bitcoins initially created are lost, which can be associated with involuntary destruction. In addition, a small number of tokens offer returns, just like a share. Beware that the success of many crypto currencies is based on a decentralised pyramid scheme. The increase in the number of users increases the capitalisation of the tokens, which attracts even more users, etc.

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All our information is, by nature, generic. It does not take into account your personal situation and does not constitute in any way personalized recommendations for the realization of transactions and cannot be assimilated to a financial investment advice service, nor to any incitement to buy or sell financial instruments. The reader is solely responsible for the use of the information provided, without any recourse against the publishing company of being possible. The publisher of cannot be held responsible for any error, omission or inappropriate investment.


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