How to make money on a cryptocurrency exchange? This question last year excited all social networks, each person at least once heard the word "bitcoin". But what is this sensational way of earning? Is it possible to earn big money on cryptocurrency? You will learn about this from our article.
Cryptocurrency earning methods
The most important thing in this type of earnings is to correctly determine the most suitable strategy for you. Making money on the cryptocurrency exchange today is possible not only through investments and trading, there are many more varied and interesting options that you can learn about in detail. But if you have chosen the most common options for how to make money on the cryptocurrency exchange, then you need to approach the process no less thoroughly.
Trading
The main principle of how to make money on the cryptocurrency exchange using trading is speculation. That is, you have to sell more than you bought. But beginners often forget about it and in a hurry do the opposite.
Your actions, if you have chosen trading for yourself:
- You should carefully choose the exchange. Often these are large exchanges with a large number of trades and good reviews on third-party resources.
- Correctly choose the object of trading, that is, currency pairs. This is a pair of currencies, on the difference in the sale and purchase of which you can earn. This may be the difference between traditional and cryptocurrencies, or it may be the difference between two cryptocurrencies. If you are thinking about how to make money on a cryptocurrency exchange on the Bitcoin exchange rate against the dollar, then it is better to give preference to the first option. Moreover, the dollar is now in price. And if you want to earn on the cryptocurrency exchange exclusively with the help of the new currency, then give preference to the second option. If you are a beginner, then try yourself on cryptocurrency and fiat currency trading. Here, in any case, you will be in the black, as fiat currencies are more stable.
- If you plan to make money on the cryptocurrency exchange, then you need to carefully analyze the situation in the foreign exchange market. If you are recently in this area, then wait until the value of the currency falls below the average level and buy it when its value is close to the previous minimum values. If you missed this point, you can buy the currency as soon as the rate grows slightly and has not yet risen to the average value. The selling algorithm is slightly different from the buying algorithm. if the currency does not have a stable growth trend, then sell it as soon as it reaches its maximum point. But if a currency has a stable upward trend, then wait for its value to rise as high as possible.
- If you want to make money on a cryptocurrency exchange, then study all the trading tools, and then your efficiency and success on the exchange will increase markedly. It is better to withdraw part of the earned funds to external wallets.
Currency Selection Criteria
There are several criteria for a good pair selection. There should be a lot of offers for buying and selling for your pair. This means that there is a demand for your currency, therefore, you will not have to sell it for a long time. If there is active trading, then a trader with a lot of money is unlikely to significantly affect the rate. If the trading volume in foreign currencies is small, then a large rate will deploy the course in the way that a large and experienced trader wants.
Course Changes - Pros and Cons
You should also pay attention to changes in the cryptocurrency rate. Strong fluctuations are twofold - they can provide good income for experienced traders, and nerves and losses spent for beginners, since it is quite difficult to guess them without enough experience. If you are a beginner and want to capitalize on large fluctuations in currencies, it is best to invest a small amount to understand the further process. If you want to make money, it is better to choose more stable currencies.
What is cryptocurrency investment?
Is it possible to make money on the cryptocurrency exchange through investing? Of course. There are two types of investments in the foreign exchange market - long-term and short-term.
If you want to become a long-term investor, you need to invest money for a period of a year or more. Proponents of long-term investments are people who are confident in the growth of a certain currency.
Short-term investments are made for a period of one week to several months.
The short-term investor does not know and does not assume what future awaits the currency in which he invested. He relies on the rapid and rapid growth of the currency in the near future, despite the possible confidence that this currency is short-lived.
Algorithm of actions for a long-term investor
Is it possible to earn on the cryptocurrency exchange with the help of long-term investment, and if so, what is the procedure for the long-term investor?
- First you need to study the forecasts for the future of top currencies and choose the most attractive to you as a long-term investor.
- Wait for the maximum decline in the price of your chosen currency and buy it at the lowest price.
- Withdraw earned money to the most secure wallet and forget about investing for the required period.
The profitability of this company depends on the growth of currencies. It starts from 100%, and can reach up to 1000%.
Reliability depends on the stability of the selected currencies. Of course, the stability of fiat currencies is much higher than, for example, Bitcoin.
This is the perfect way to make money for beginners. Long-term forecasts are the prerogative of experts with many years of experience. You just have to choose the most expert opinion for yourself, and then you can earn as much as experienced traders earn on the cryptocurrency exchange.
Short term investment
How much can a short-term investor earn on a cryptocurrency exchange? It all depends on you.
- Find the currencies you are sure of. Long-term investments require a minimum of currencies, sometimes even one, while short-term investments involve several currencies that make up the portfolio. Learn the general picture of the currency market at the moment. Your goal is to search for currencies that are growing steadily and have good prospects, or do not slow down the growth rate for a long time and have good reviews in the press. Short-term currency growth may be due to various positive developments in the foreign exchange market. For example, before bitcoin futures appeared, the active growth of bitcoin began. For a successful short-term investment, the required minimum is three currencies.
- Distribute the share in the portfolio between currencies. Most of the portfolio should go to the currency most promising in the near future.
- Get currencies when their price approaches the level of decline in the previous period.
- Keep abreast of the news of the currency exchange, and then choose a new investment portfolio. It may be the same.
The income from such investments is quite high: some investments pay off in a couple of months by 40-60%. But at one point, the investor, often because of his mistakes, goes into the red. Most often this happens to beginners.
Reliability is quite high, since cryptocurrencies now, despite a large decline, have a rather stable position in the stock markets.
The difficulty for beginners is quite high. You need to know all the tools for analyzing the course, closely monitor the news, know the technical side of cryptocurrencies and accurately determine their effectiveness.
Arbitration
Such a strategy to make money on a cryptocurrency exchange as an arbitrage is not much different from trading. The only difference is that the work is carried out on several exchanges at the same time. You can make good money by buying cryptocurrency on a high-value exchange, and then selling it on the exchange, where its value is higher.
How to make money on the difference of cryptocurrency exchanges? Follow the following algorithm:
- Choose several exchanges that are best for you where you can safely invest your money. The most important selection criterion will be their responsiveness to course changes.
- Opt for the most promising currencies. The greater the difference in fall and growth, the more promising is the currency.
- At the first signs of the appearance of a difference in currencies, you should simultaneously put up a proposal to buy currency where the cost is lower, and to sell where the cost is greater. Changes in the course are quite rapid, so do not hesitate.
It will be much more prudent on the part of the person involved in arbitration in the currency market to use bots for cryptocurrency trading for this purpose, since the work is mostly mechanical.
The higher your speed on exchanges, the greater the earnings. Bots that work on several exchanges generate revenue of $ 200 - $ 400 per month. People most often can earn $ 50 - $ 150 per month.
Reliability directly depends on the stability of the exchanges you have chosen: if there are no problems in your work, and money is withdrawn quickly, then you should have no problems. Unfortunately, courses vary widely on small exchanges, where such problems are quite common.
This method of earning does not require complicated actions, so it will suit beginners as well.
Margin trading
Is it realistic to make money on the cryptocurrency exchange using margin trading? Naturally, because you can manage more serious amounts than those that you have. The trader uses not only his funds, but also the currency taken on credit from another person.
Here is the recommended algorithm for using margin trading:
- Find a large exchange with high turnover, for example, Bitfinex. It provides an opportunity for margin trading.
- Enter your funds and take a loan. Look at the difference in interest, because there is a percentage more and there is less. High interest is usually given for unpopular currencies, and a low lending percentage is typical for popular currencies.
The actions of a margin trader on a currency exchange are similar to those of a trader. As soon as the loan term expires, the player can leave the proceeds to himself, and the loan with interest must return to the lender. If a series of transactions is unsuccessful, then you will be left with nothing.
Profitability can be very high for an experienced trader - 2 to 3 times higher than with conventional trading (depending on the size of the loan). Beginners, on the contrary, risk much more than with conventional trading.
Reliability depends on the chosen currencies, exchange and behavior.
For beginners, this process may seem complicated, because it requires certain behavior on the exchange, but the process of obtaining a loan is quite transparent and has no pitfalls.
Lending
How much can a creditor make on a cryptocurrency exchange? It all depends on the interest and your chosen currency. Let's take a closer look at the reverse side of margin trading.
Most often, loans are provided for 1 to 3 days, but there are such terms as a month or several months.
You can make good money by giving a loan for an unpopular currency, but it will be more difficult to find a trader here.
The algorithm for lending is as follows:
- You need to purchase funds for lending. You can combine it with long-term or short-term investments.
- On exchanges where there is the possibility of margin trading, you need to set interest on the loan and wait for the person who suits your conditions.
- As soon as the deadline expires, you get back your money along with interest. You can get interest on a daily basis, or you can get everything right after the deadline. The longer the loan term, the greater the reliability.
Profitability can be up to 40% per annum, the average value - from 25% per annum.
Reliability depends on the size of the loan and on the reliability of the exchange you have chosen. If the loan matches the amount on the account of the trader, and the exchange is trusted by the traders, then the risk of your losses is reduced to zero.
Some exchanges offer the possibility of lending a much larger amount that is available on the account of the trader. When choosing a loan amount of 1: 3 on a dubious exchange, there is a high probability of not waiting for your funds and it is unlikely to affect the trader or the exchange in this matter. But it is worth noting that such cases are uncommon: usually lenders are not tied to the trader’s failures and get the money back.
This method of earning is suitable for both experienced traders and beginners, as the lending process is brought to automaticity.
Summary
It was a brief digression into how and how much you can earn on the cryptocurrency exchange. Some conclusions can be drawn.
In order to have good income on cryptocurrency exchanges, you need to study the theory well and regularly read a lot of books on economics and finance. Without a theoretical basis, you noticeably reduce your level of earnings on the cryptocurrency exchange.
You can make good money on long-term investments, but only as long as cryptocurrencies grow. As practice shows, this trend will soon come to naught, and sooner or later you will have to figure out the intricacies of working on financial exchanges.