A few years ago, cryptocurrency would not have been among the first few options for accumulating wealth. Despite the fact that the introduction of Bitcoin was met with skepticism. However, times have changed, and recent discussions about wealth creation almost always include some mention of cryptocurrency.
Nonetheless, it is important for you to understand that it is not all that simple. While many people have become millionaires through digital assets, not everyone has used the same strategy.
It’s day trading for some. Others focus on compounding or looking for coins with 1000x potential. Whatever it is, keep in mind that there is no one way to build wealth in cryptocurrency.
As a result, this article will concentrate on various ways in which an investor or trader can profit from the cryptocurrency market. You must know something before we begin.
To begin with, the cryptocurrency market is extremely volatile. As a result, there is no guarantee that you will make money or amass vast wealth. At the same time, this is purely informative.
We should point out that the strategies highlighted here are those used by successful investors and traders.
The fact that they earned using these strategies does not guarantee that you will. So, read with an open mind and conduct your own research to develop a strategy that works for you. So, without further ado, let’s get started.
1. Buying and HODLing
This is one of the most popular ways people build wealth in crypt and we will explain how it works. However, note that this is not a short-term strategy. It takes a lot of dedication, patience, and grit.
So, what exactly is buying and HODLing? Buying and HODLing is simply the process of buying cryptocurrencies and holding them for a long time which could run into years. Well, you might say why spell ‘hold’ as HODL? You do not have to bother as we will let you know. HOLD simply means you Hold On to Dear Life.
In Crypto terms, it simply means, you are holding an asset regardless of its price trend. So, let’s give an example. Imagine you buy some Bitcoin on the Immediate Edge App in 2018 when the price was about $6,000.
Then, you buy again when it increases to $10,000. Then, the same coin dropped to $3,000 around 2020 and you still did not sell, then what you have done is that you have HODLed Bitcoin.
So, let’s also imagine that you kept buying more Bitcoin regardless of the price increase or decrease up till the $69,000 price it hit in 2021.
Then, you decide to sell off a large part of your asset, then you have bought and held, and most likely made a lot of money from holding the asset. There are other examples of coins that have helped people build wealth with the buy and HODL strategy.
Cryptocurrencies like Fantom, Binance Coin (BNB) and Solana have done the same in a much shorter period. However, know that not all cryptocurrencies can help you make tons of return by buying and holding. That is why it is important that you do a fundamental research on coins you intend to buy.
Trading is a different approach compared to investing. This is because, in investing, you do not need to worry about making daily or weekly profits. However, with trading, you will be obliged to monitor the market closely or learn some aspect of technical analysis.
In building wealth with trading, it is important that you keep your emotions in check and also employ a comfortable risk management strategy. This is to ensure that you minimize losses and make more profits. In addition, there are several ways of trading that can help you build wealth in crypto.
You can engage in spot trading or futures trading. In other parts, you can also try out Contract for Differences (CfD) trading.
There is however, something you must keep in mind. While spot trading might be a little bit on the safe side, the same cannot be said of futures trading and CfD trading. Of course, you might be a “no risk, no reward” person, still, it may be profitable to apply a strategic approach so you don’t go from trying to build wealth to losing all your capital.
3. Staking and Lending
If you are familiar with traditional finance, you would know that lending money out makes good money for banks. However, it is a bit different in crypto as you do not need collateral worth millions of dollars to stake or lend. To stake, you only need to own coins and not spend them.
It is described as one of the best ways to earn passive income in crypto. All you need to do in staking your assets is to confirm or validate transactions and you get rewarded for these.
However, not all crypto assets have the capability to stake. But for tokens on the Proof-of-Stake Network, most can. For lending, you only have to agree to lend out your assets for a specific period with a specific return. If you have an incredible worth of assets, you can make a good amount of money while doing a little less.
Arbitrage is simply buying an asset on a crypto platform for a particular value and selling it on another for a higher value. This is one way to build wealth since many exchanges and platforms sometimes have different values for the same asset. Let’s make an example.
Assuming you bought one BNB for $300 on Coinbase. Then, you head on to Binance and notice that the same BNB was being sold for $318 within the same period.
All you need to do is buy BNB on Coinbase, transfer it to Binance and sell on the Binance to make profit. To build wealth with this strategy, it has to be something that you do repeatedly.
This last part is one of the hardest ways to earn money in crypto. This is because you are not in control of how much you earn or if you earn at all. However, crypto rewards active participation.
So, in trying to build wealth with airdrops, you need to keep an eye and ear out for information. This is because you only get rewards for involving yourself with a project or taking part in activities. Some airdrops have made people $2,000 while others have made much more than that.