If you want to know how to make money with cryptocurrencies, you are certainly part of the group of people who in 2021, got excited about the yield of almost 120% of Bitcoin.
Over the past few years, not only Bitcoins but numerous cryptocurrencies have been receiving increasing attention from the market. In fact, several analysts, who recently questioned the viability of digital currencies as a way to make money, today already recognize some of them as serious projects with great growth potential.
The reason for so much interest is not difficult to understand: even with high volatility, cryptocurrencies surpass the yields of stock exchanges around the world.
Technological development on an increasingly fast scale has produced paradigm shifts in almost all areas. In the financial segment, in particular, disruption has happened on all fronts. Cryptocurrencies result from this process.
What are cryptocurrencies?
Cryptocurrencies are digital currencies that only exist virtually. It’s a new kind of money.
The classic definition is by Satoshi Nakamoto, responsible for the creation of Bitcoin in 2009: “a point-to-point electronic money system.” This is the concept defined in the white paper that created Bitcoin and, obviously, can be extended to all other cryptocurrencies that came after it.
Currently, if you want to pay someone online, you need to use a bank or a payment application to make the transaction.
The proposal of cryptocurrencies is to enable you to make this payment online directly to the recipient without using conventional financial intermediations. This is what makes Bitcoin and other cryptocurrencies so disruptive: digital currencies allow you to do online exactly what you do with physical money.
Cryptocurrency: As simple as money
To easily understand what cryptocurrency is, think of a common situation, for example, when you take a banknote out of your wallet and pay for the purchase of coconut water at a street vendor on the beach.
You and the coconut water seller did not identify yourself in advance to make the transaction, and no bank or government knows that you used R$ 5.00 that you had in your wallet to buy the coconut water. Right? In addition, after delivering the R$ 5.00 to the street vendor, he gives you his coconut and leaves. You have no way to cancel the transaction and get your banknote back.
This is exactly the principle of cryptocurrency: payments in kind, between people, anonymously and irreversibly. But instead of physical money banknotes, you use digital currencies.
How to make money with cryptocurrencies?
There are several ways to make money with cryptocurrencies. However, it is important for you to understand that it is a volatile and high-risk asset, so first of all, you need to study deeply and understand the principles, risks, and opportunities.
There are great digital currency projects on the market; however, it would be naive to believe that in the midst of more than 15,000 cryptocurrencies in the world, there are no bad projects and even opportunistic trying scams.
It takes attention and a lot of research. Only after that will you be able to assess whether any of the ways to make money with cryptocurrencies are adherent to your financial planning.
Mining is the digital production process of cryptocurrencies. It is a complex process that involves knowledge of algorithms in addition to the need for supercomputers and specific software.
Those who act as a miner receive as a reward a fraction of cryptocurrency, so to really be a compensating activity, high computational power is required to solve thousands of equations per second. A single piece of mining equipment can cost around USD 15,000. Therefore, it is advisable to evaluate very well whether the cost pays off when compared to the time it will take to have a return on investment.
In addition to consuming a lot of time, both for studies and for the activity itself, to be worth it, it is necessary to have several computers turned on 24 hours a day, which, in the case of Brazil, in addition to the dollar price of the equipment, also means a high cost with the consumption of electricity.
It is also possible to work as a miner in companies specializing in this activity. In this case, the gain is in current money, in the form of salary. The labor market for programming professionals, cryptography specialists, and other related activities has grown a lot.
Trading with cryptocurrencies is a very common activity. Many people have taken advantage of the volatility of digital currencies to gain in the difference between buying and selling in short time intervals. Many times, even on the same day.
This type of activity requires monitoring the market in a more disciplined and constant way, in addition to minimal knowledge of graphic analysis. Entering the trade without these prerequisites exposes you to very high risk.
In addition, it is important to be aware of the rates of the operation; otherwise, the profit can be fully consumed by them.
The high volatility of cryptocurrencies can cause a trader to lose a lot of money, especially if he is a beginner without any technical basis. Therefore, be careful and, above all, study the topic in depth.
The simplest way to make money with the appreciation of cryptocurrencies is to buy and save for the long term. The valuation history of the most consolidated currencies is impressive. Taking Bitcoin as an example, since its creation 12 years ago, the currency has already been valued more than 65,000 times.
Despite this, it is necessary to emphasize the volatility of cryptocurrencies and also the unpredictability of some as a project. At the same time that the number of digital currencies grows exponentially, thousands of them cease to exist every day.
Currently, about 20,000 cryptocurrencies are on the market. However, another 7,000 have already stood in the way and ceased to exist.
Therefore, it is very important to know the projects behind each cryptocurrency that you intend to buy and understand if the rationality of the project makes sense to you and if it really has relevant potential for continuity in the medium and long term.