Over the past few years, the cryptocurrency market has emerged as a lucrative space that individuals can capitalise on to make a profit. There are currently several different ways to engage in cryptocurrency, both passively and actively. We often hear stories of traders making huge profits in a short period from their crypto holdings, but is this just an exaggeration?
Today, we’ll explore whether or not it’s actually possible to make money from crypto trading. We’ll touch on the common mistakes traders make that result in losses, as well as highlight the key methods you can try out today to potentially make a profit from crypto coins. Finally, we’ll address the key pros and cons that arise from trading so you know exactly what to expect. Soon enough, you’ll know for sure whether trading cryptocurrencies is a viable way to make money or not.
Is It Possible to Profit From Crypto Trading?
Yes, it is possible to profit from trading crypto. In fact, many traders worldwide have made a substantial amount of money when they choose to trade Bitcoin, Ethereum, Ripple, Solana, and other crypto assets. However, due to the crypto market’s volatility, trading involves significant risks that you should be aware of.
It’s vital to have a good understanding of the market, technical and fundamental analysis, and risk management techniques before risking your own money through trading. Although many traders have been able to make a profit from trading, it’s definitely not guaranteed. Furthermore, you’re more susceptible to losing money when trading an unpredictable asset such as crypto.
Common reasons for traders to lose money rather than gain it when they trade cryptocurrencies include:
- Lack of Risk Management – Traders who don’t have a clear understanding of their risk tolerance or have not put a plan in place for managing risk will likely experience a string of unwanted losses.
- Emotional Trading – The fear of missing out (FOMO) and other emotions can often derail traders and result in them making uninformed and irrational trading decisions.
- Choosing the Wrong Strategy – Fortunately, for traders, there’s a range of different trading strategies to choose from. However, if you pick a strategy that doesn’t align with your goals and experience level, you may struggle as a trader.
Top Ways To Make Money When Trading Crypto
Although many traders do end up making these mistakes and lose money when trading, it’s still possible to profit from crypto. Even as a beginner, you can take advantage of the lucrative nature of cryptocurrencies. The best part is that there are several different ways to make money through crypto. Let’s take a look at some of them:
Investing
The standard way to make money from cryptocurrency is by investing in various coins. Investing involves purchasing cryptocurrencies with the expectation that they will rise in value. After their price increases over time, an individual will sell their assets and, in turn, make a profit. Typically, investing is a long-term way to make a steady profit from crypto and gain full exposure to the underlying market.
You can choose to invest in crypto either through a crypto exchange or with the help of a broker. Crypto exchanges are digital marketplaces that allow anyone to buy and sell tons of different cryptocurrencies. They are typically user-friendly and packed with additional features. One top cryptocurrency exchange we recommend is Gemini, a highly secure and reputable platform.
However, if you’re a first-time investor, you may struggle to face the markets alone. After all, as we’ve said, there are plenty of mistakes you may make when dealing with cryptocurrency.
If that’s the case, you’ll be better off seeking the help of a crypto broker instead.
Crypto brokers are there to provide assistance rather than leaving investors to fend for themselves. They usually have various tools, many of which are tailored towards beginners. Some popular tools include demo crypto trading accounts, portfolio trackers, and charting tools. This will make it much easier to trade cryptocurrency and can help you build confidence.
Plus, although brokers cannot guarantee that you’ll make money from your investments, they can still point you in the right direction. To find a suitable and well-rounded crypto broker, we suggest that you use a brokerage-matching platform. However, there are a number of scam platforms that have flooded the crypto scene so it is of paramount importance to choose a reliable platform such as Immediate Bitmasters. This way you will not only benefit from all of the latest trading tools but you will also be fully protected when it comes to fraudulent activities.
Staking
A slightly different way to make money from trading cryptocurrency is staking. Staking is a process that involves participating in the operations of a proof-of-stake (PoS) blockchain network by locking away a predetermined amount of crypto. By doing this, you are supporting the network’s operations, and in return, you can earn staking rewards. These rewards are usually in the form of the same cryptocurrency you are staking.
For instance, if you choose to stake Polygon (MATIC), you will receive more in return. Other popular coins that are worth staking include Avalanche (AVAX), Cardano (ADA), Cosmos (ATOM), and Polkadot (DOT).
Staking is a very hands-off way to make money from crypto. This option tends to reduce your market exposure, so you don’t have to engage in it like you would when investing. Furthermore, it has a low entry barrier so that you can receive steady returns even without any prior experience or knowledge.
Mining
Lastly, if you want to go straight to the source, then you can also consider mining cryptocurrency yourself to make money. However, as you may already know, mining is a highly complex activity that requires specific software and hardware. We still wanted to include it on our list since mining can be highly profitable. But we’re sure that many would rather choose one of the other options we’ve listed.
If you are someone who is interested in mining crypto, then you’ll need to start doing plenty of research. As we’ve said, mining requires certain hardware, so you must first set up a suitable mining rig. After that, you can join a mining pool and connect it to your mining software. Then, you’ll be ready to begin mining. To find out more, you can check out this comprehensive guide on mining cryptocurrency.
The Pros and Cons of Making Money Through Crypto Trading
Before you dive in and begin engaging in one of these methods to start profiting from crypto, take a look at these key pros and cons:
Pros
If you’re ready to trade crypto, then you can expect to benefit from these advantages:
- Possibility of Passive Income – Certain methods, including investing and staking, give you a chance to make money passively. This can potentially provide you with financial stability and, in some cases, even outpace traditional forms of income.
- Potential for High Profit – Certain cryptocurrencies and other digital assets have been known to drastically shoot up in price. When this happens, traders can make huge profits in a short time period.
- 24/7 Market – The cryptocurrency markets are open 24/7, giving you and other traders plenty of opportunities to engage in it and capitalise on coin price movements. So, regardless of your schedule, you’ll always have a chance to manage your trading portfolio.
Cons
Although there are some clear benefits you can experience when you trade crypto, this activity is not suitable for everyone. Let’s take a look at some cons of this activity:
- High Volatility – Crypto coins are some of the most volatile assets to trade. Their prices are known to rise and fall without warning, which can leave traders unexpectedly with losses. Although expert traders use previous market trends to predict price movements, this is not a fail-safe strategy.
- Time-Consuming – Regardless of which method you choose to make money from crypto, you can expect to dedicate plenty of your own time. Even a hands-off approach, such as staking, requires you to do lots of research and planning.
- Regulatory Uncertainty – Although governments worldwide are taking action to regulate cryptocurrencies, there is still much uncertainty within the sector. Additionally, the current lack of regulation can make the crypto markets high-risk for traders since there is limited consumer protection.
Final Thoughts
All in all, you have plenty of different ways to make money via crypto trading. From investing and holding onto different coins to setting up a rig and mining them yourself, there’s definitely a suitable method for everyone.
However, before you set off on your crypto journey with the hopes of making a profit, you must be aware of the risks. Cryptocurrency is extremely volatile and unpredictable, so regardless of which method you choose, you are at risk of experiencing losses rather than profits. To reduce your chances of this, you need to do plenty of research, keep your emotions in check, and take time to consider your risk tolerance.