11 Ways to Make Money in Crypto – Least to Most Risky Methods
The brands listed on this site are carefully researched, and we may earn fees from some. However, our recommendations are driven by our independent opinions. The information provided on this site is for educational purposes only and we strongly encourage you to do your own research before making any decisions.
Cryptocurrency has emerged as a dynamic and rapidly evolving space, offering a variety of ways to potentially make money in crypto. Whether you’re a seasoned investor or just starting to explore the world of digital assets, there are multiple opportunities to generate income.
From traditional methods like trading and mining to newer options such as staking and running masternodes. The options are diverse and can cater to different levels of experience and risk tolerance.
In this article, we’ll explore 11 ways to make money in crypto, highlighting their benefits, challenges, and the types of investors they are best suited for. Additionally, each method will include a risk rating, ranging from 1 to 10, where 1 represents the least risky option and 10 indicates the most speculative and high-risk investment.
Here’s a rundown of the main ways to make money in crypto, along with a risk rating for each.
1. Buying and Holding (HODLing)
Buying and HODLing (or simply “holding”) is one of the most straightforward strategies for making money in crypto. The term “HODL” originated as a misspelling of “hold” in a 2013 online forum post, and it has since evolved to mean “Hold On for Dear Life.” It reflects the strategy of buying a cryptocurrency and holding onto it for a long period, regardless of market fluctuations, with the expectation that its value will increase over time.
How It Works
Investors usually select established cryptocurrencies like Bitcoin (BTC) or Ethereum (ETH) to hodl because they have a track record of long-term growth.
Michael Saylor, the co-founder and executive chairman of MicroStrategy, a company known for its substantial Bitcoin holdings, once stated that you should never hold Bitcoin for less than four years. Since other established cryptocurrencies often fluctuate along with Bitcoin, this long-term approach virtually guarantees you won’t lose money.
According to Saylor, when investing in a highly appreciating asset like Bitcoin, the key factor is the holding period, rather than the exact timing of your purchase or sale. However, you can amplify your gains if you’re savvy enough to enter the crypto market when it’s down, (check out the Bitcoin 4 year cycle) allowing you to enjoy greater profits later.
Instead of Bitcoin or Ethereum, some investors opt for other promising projects they believe will appreciate in value.
After purchasing, investors store their crypto in a secure wallet (often a hardware wallet for long-term holding) to reduce the risk of theft or hacking. HODLers intentionally ignore short-term price fluctuations. Even during bear markets or “crypto winters,” and maintain their positions, trusting that prices will recover or increase over time.
The goal is to sell the asset at a significantly higher price in the future, ideally after years of appreciation. Some HODLers also use the strategy to avoid the complexity and emotional stress of active trading.
Pros and Cons of Buying and Hodling
Pros:
- Simple and low-maintenance, requiring little knowledge of technical analysis or market timing.
- Potentially high returns if the asset appreciates significantly over time.
- Long-term capital gains tax advantages in some countries.
Cons:
- High risk due to crypto volatility; prices can experience massive drops, which can test the resolve of HODLers.
- Opportunity cost, as funds tied up in crypto aren’t available for other investments.
- No income generation, unlike staking or yield farming, unless you sell for profit.
Best For
HODLing is ideal for investors who believe in the long-term potential of a cryptocurrency and can handle the emotional ups and downs of the market. It’s a simple approach that requires patience but can be effective for those willing to wait through cycles of volatility.
2. Trading
Trading in crypto is a more active strategy than HODLing. It involves buying and selling cryptocurrencies to profit from price fluctuations in the short or medium term.
According to a Taiwanese academic study, more than 75% day traders do not make a profit and quit within the first 2 years. This is primarily because many approach trading more like gambling than actual investing. To succeed in beating the market, you’ll need a solid understanding of market dynamics, technical analysis, and, in some cases, complex trading tools.
There are several types of trading strategies within crypto, each with its own level of risk, time commitment, and skill requirements.
How It Works
- Choose a Trading Strategy: There are various strategies traders use, including:
- Day Trading: Buying and selling within the same day to capitalise on small price movements.
- Swing Trading: Holding a position for several days or weeks to take advantage of larger price swings.
- Scalping: Making many small trades throughout the day to profit from small price fluctuations.
- Position Trading: Holding positions for weeks or months, based on long-term trends.
- Analyse the Market: Successful trading often requires analysing price charts, trends, and indicators (known as technical analysis). Some traders also incorporate news events and market sentiment (fundamental analysis) to predict price movements.
- Execute Trades on Exchanges: Trades are typically executed on crypto exchanges like Kraken, Binance or Coinbase. Many exchanges offer advanced tools like limit orders, stop-losses, and margin trading, which can help traders manage risk.
- Manage Risk: Since crypto markets are highly volatile, effective risk management is crucial. Traders often set stop-loss orders to limit potential losses, and they may only risk a small percentage of their portfolio on any single trade.
- Stay Updated and Monitor Positions: Active traders need to stay updated on market news and be prepared to monitor and adjust their positions frequently, especially with crypto markets being open 24/7.
Pros and Cons
Pros:
- Potential for high returns in a short amount of time, especially in a volatile market.
- Many opportunities to profit regardless of whether the market is trending up or down.
- Can be very engaging and rewarding for those who enjoy the challenge.
Cons:
- High risk, especially for inexperienced traders; significant losses are possible.
- Time-consuming and often stressful due to the fast-paced nature of the market.
- Requires knowledge, skill, and discipline; emotions can easily interfere with decision-making.
Best For
Trading is best for those who have the time, knowledge, and risk tolerance to actively manage their positions and make quick decisions. It’s a method that can yield high rewards but requires considerable expertise and commitment, especially given crypto’s extreme volatility. Beginners are usually advised to start small, practice with demo accounts if available, or seek proper education before diving in.
Additionally, successful traders often work as part of a team, as trading alone can be overwhelming and risky. A team approach allows for a broader range of skills and perspectives, enabling better decision-making and risk management. Traders who collaborate are able to leverage each other’s expertise in technical analysis, market trends, and strategy development, improving their chances of success.
If you’re unable to be part of a team, consider following experienced traders or subscribing to services that provide market analysis and strategies from a professional trading team.
I find the analysts at The Crypto Vigilante quite good. The Crypto Vigilante is quite an expensive paid service that provides expert insights and real-time market analysis from a team of seasoned traders, offering valuable perspectives on trends and potential opportunities. By subscribing to their service, you gain access to in-depth research, risk management strategies, and actionable trading advice, which can help you navigate the volatile crypto market with more confidence and precision.
3. Staking
Staking involves participating in a cryptocurrency’s network by locking up a certain amount of your coins to help maintain the blockchain’s security and operations. In return for staking your tokens, you earn rewards, usually in the form of additional tokens.
This process is commonly associated with Proof of Stake (PoS) and other similar consensus mechanisms. Instead of miners using computational power (as in Proof of Work), participants “stake” their crypto assets to support the network’s validation process.
How it Works
When you stake your tokens, they are used to validate transactions on the blockchain. In PoS systems, validators are chosen based on the amount of cryptocurrency they have staked and other factors. Validators confirm transactions and, in return, are rewarded with new tokens.
Staking rewards are typically paid out periodically, either daily, weekly, or monthly, depending on the network. The reward rate can vary based on the network’s staking policy, your staking amount, and the overall demand for staking on that network.
For those who don’t have the technical know-how or the large amounts of crypto required to stake on their own, staking pools offer an alternative. A staking pool is a group of crypto holders who combine their resources to increase their chances of being chosen as validators. The rewards earned are then distributed among the pool members based on their contribution.
Staking can be low-risk for stable, reputable blockchains (e.g., Ethereum, Solana). However, there’s still some risk if the value of the token drops or if network protocols change.
Pros and Cons
Pros
- Earn rewards without actively trading and generate a steady stream of passive income, especially in a stable market.
- Helps secure and decentralise the blockchain network.
- Potentially earn attractive returns on your staked assets. Annual yield rates vary from a few percent to over 20%, depending on the cryptocurrency.
- Unlike Proof of Work (PoW) mining, Proof of Stake (PoS) blockchains are more environmentally friendly.
- Some networks offer flexible staking options with easy withdrawal after short lock-up periods.
- Rewards can be reinvested to increase returns over time, compounding earnings.
Cons
- If the market value of the staked asset drops, it can reduce the overall value of your investment, even if you are earning staking rewards.
- Some coins are locked for a specific time, meaning you cannot access or sell your tokens during that time.
- You may lose part of your stake through ‘slashing’ if you’re found to be acting maliciously or if the network suffers from technical issues like downtime.
- Setting up staking for some networks can be technically challenging, especially for beginners. Any mistakes in setup could lead to lost rewards or funds.
- If the value of the staked cryptocurrency falls, you may feel less inclined to keep your funds. However, due to the locked nature of many staking systems you will have unstake them and wait until you are able to sell your coins.
- Large pools may lead to network centralisation, which goes against the decentralised nature of cryptocurrency.
- If you’re using a third-party staking service or exchange, there’s always the risk of hacking or platform failure.
4. Yield Farming / Liquidity Mining
Yield farming is also known as liquidity mining. It is a strategy where investors lend or stake their cryptocurrency in liquidity pools on decentralised exchanges (DEXs) to earn rewards. The rewards usually come in the form of additional cryptocurrency or tokens. They’re generated by fees collected from users who trade against the liquidity pool or by incentive programs provided by the platform.
Returns can be attractive, but they come with risks. For example, temporarily losing value during market downturns and the potential vulnerability of the platform to hacks or scams.
How It Works
- Provide Liquidity to a Pool: To participate, investors deposit pairs of tokens (e.g., ETH and USDT) into a liquidity pool on a DEX like Uniswap or PancakeSwap. This pool facilitates trades between these tokens, and in return, liquidity providers receive a share of the transaction fees.
- Earn Rewards: In addition to fees, many platforms offer rewards in the form of governance tokens like UNI on Uniswap or CAKE on PancakeSwap. This incentivises crypto holders to provide liquidity to the platform. These rewards can be claimed periodically and sometimes reinvested to maximise returns.
- Temporary Value Devaluation: One risk unique to yield farming is when coins temporary go down in market value. This leads to a lower overall value of your initial deposit compared to simply holding the tokens. This is a key factor to consider when choosing coins for liquidity pools, especially with volatile assets.
- Compounding Returns: Many yield farmers reinvest their rewards back into the liquidity pool to compound their returns over time, although this strategy increases risk.
Pros and Cons
Pros
- Potential for high returns, especially on newer or smaller platforms incentivising liquidity.
- Provides passive income while holding assets, as opposed to just waiting for price appreciation.
- Opportunity to earn governance tokens that might increase in value or provide voting power in the project’s development.
Cons
- Temporary value devaluation can reduce profits if the token prices decrease significantly.
- High risk of platform vulnerability; many DeFi protocols have been hacked, leading to significant losses.
- Yield farming can be complex, and fees on some networks (like Ethereum) can reduce profitability, especially for smaller deposits.
Best For
Yield farming is best suited for experienced crypto users who understand DeFi protocols and the risks involved. It can be highly profitable, but due diligence is essential, especially when choosing newer platforms with potentially untested security. Those with a higher risk tolerance and knowledge of risk management may benefit most from yield farming, particularly if they can monitor their positions and adapt to market changes.
5. Lending
Crypto lending is a way to earn passive income by lending out your cryptocurrency to borrowers through centralised or decentralised lending platforms. In return, lenders earn interest, often paid in the same cryptocurrency they lent out. This can be a relatively straightforward way to make money, especially for those who prefer a less active approach than trading or yield farming.
How It Works
- Choose a Lending Platform: Crypto lending can be done on centralised platforms (like Nexo) or decentralised platforms (like Aave or Compound). Centralised platforms handle the lending and borrowing process, while decentralised platforms rely on smart contracts to facilitate these transactions.
- Deposit Cryptocurrency: Once you choose a platform, you deposit your cryptocurrency into a lending pool. These funds are then available for other users to borrow. Some platforms may offer variable interest rates, while others offer fixed rates.
- Earn Interest: The platform pays interest on your deposited assets, usually on a daily, weekly, or monthly basis. Interest rates vary based on the demand for borrowing and the type of asset lent, with stablecoins often offering higher rates than major assets like Bitcoin or Ethereum.
- Withdraw When Ready: Most platforms allow you to withdraw your principal and any accrued interest after a specific period or at any time. This would depend on the terms of each platform. However, some platforms may lock funds for a set period.
Types of Lending
- Collateralised Lending: In most cases, borrowers must provide collateral (e.g., other crypto assets) that exceeds the value of the loan, reducing the risk for lenders.
- Flash Loans: On some DeFi platforms, borrowers can take out uncollateralised “flash loans,” but these loans must be repaid within the same transaction block. These are more complex and generally used for arbitrage or other advanced trading strategies.
Pros and Cons
Pros
- Generates passive income with minimal active management required.
- Often safer than more speculative crypto investments, especially on established platforms with strong security.
- Flexible, as many platforms allow for withdrawals at any time or after a set period.
Cons
- Counterparty risk, especially on centralised platforms, as they can become insolvent or suffer security breaches.
- Smart contract risk on DeFi platforms; vulnerabilities in the code could be exploited, leading to loss of funds.
- Market risk; if the cryptocurrency’s value drops, the purchasing power of your earnings can be impacted.
Best For
Crypto lending is suitable for investors looking for a steady, passive income with lower risk compared to trading or yield farming. It’s especially appealing to those who hold stablecoins, which can offer high interest without exposure to the volatility of major crypto assets. However, lenders should still be cautious and choose reputable platforms, particularly if they’re new to the space.
6. Mining
Crypto mining is the process of validating transactions on a blockchain network in exchange for newly minted cryptocurrency tokens and transaction fees. Mining requires specialised hardware and a considerable amount of computational power, especially for popular cryptocurrencies like Bitcoin. Originally, it was possible to mine many cryptocurrencies on a personal computer, but as networks have grown, mining has become more complex and resource-intensive.
Mining’s risks come from high initial costs, fluctuating profits due to energy costs, and the risk of mining becoming unprofitable if crypto prices fall.
How It Works
- Choose a Blockchain to Mine On: Mining is typically done on proof-of-work (PoW) blockchains, such as Bitcoin, Litecoin, and Monero. Each blockchain has different requirements and potential rewards.
- Set Up Mining Equipment: Crypto mining requires hardware, such as Graphics Processing Units (GPUs) for some coins or Application-Specific Integrated Circuits (ASICs) for Bitcoin and other high-difficulty coins. ASICs are specially designed for mining and offer high efficiency, but they can be expensive.
- Join a Mining Pool or Mine Solo: Miners can either join a mining pool (a group of miners who combine their computational power to increase the chances of solving a block) or mine solo. In a pool, rewards are distributed among members based on the amount of work contributed.
- Solve Complex Mathematical Problems: Mining involves solving cryptographic puzzles to add a new block to the blockchain. When a miner or mining pool solves the puzzle first, they get the block reward and transaction fees associated with that block.
- Earn Rewards: Successful miners receive rewards in the form of newly minted coins (block rewards) and sometimes transaction fees. For example, Bitcoin miners receive a block reward of 6.25 BTC, though this amount halves approximately every four years.
Pros and Cons
Pros
- Potential for significant returns, especially for miners with efficient equipment and low electricity costs.
- Helps secure the blockchain network, contributing to its integrity and stability.
- Rewards are earned in cryptocurrency, which may appreciate in value over time.
Cons
- High upfront costs for mining equipment and ongoing expenses for electricity.
- Increasing difficulty over time makes it harder for small miners to compete, especially on established networks like Bitcoin.
- Environmental concerns due to high energy consumption, particularly for large mining operations.
Types of Mining
- Solo Mining: Mining independently, where rewards are larger but harder to obtain.
- Pool Mining: Joining a group of miners to increase the chances of earning consistent rewards. Mining rewards are shared within the pool.
- Cloud Mining: Renting mining power from a cloud mining service, which eliminates the need for hardware but has its own risks, including potential scams.
Best For
Crypto mining is best suited for those who have access to low-cost electricity, the technical knowledge to set up and maintain mining equipment, and the capital to invest in hardware. It can be lucrative, but as competition and network difficulty increase, small-scale miners may find it challenging to profit, especially without efficient equipment or a low-cost setup. Here is a comprehensive breakdown on how to make crypto mining profitable, should you consider it.
7. Airdrops and Forks
Airdrops and forks are methods of receiving new tokens without directly purchasing them. They often serve as promotional strategies for new projects or arise from changes in blockchain protocols. These methods are particularly popular in the crypto community as they allow users to earn or receive tokens simply by holding or interacting with certain cryptocurrencies.
Airdrops
An airdrop is when a blockchain project distributes free tokens to holders of an existing cryptocurrency, often to raise awareness or reward early adopters. There are several types of airdrops, including:
- Holder Airdrops: Tokens are distributed to holders of a specific cryptocurrency. For example, if you hold a certain amount of Ethereum, a new project built on Ethereum may airdrop its tokens to ETH holders.
- Bounty Airdrops: Users receive tokens for completing tasks like joining the project’s social media channels, sharing content, or signing up for newsletters. These airdrops encourage engagement and increase visibility.
- Exclusive Airdrops: Tokens are distributed to users who were early adopters of a project or participated in specific activities, such as providing liquidity, using a platform, or holding particular NFTs.
- Hard Fork Airdrops: When a blockchain undergoes a hard fork, the original chain splits, and holders may receive an equivalent amount of the new cryptocurrency on the forked chain. This is also sometimes referred to as a “fork.”
Forks
A fork occurs when a blockchain splits into two separate chains, typically due to a disagreement in the community about its future direction or technical changes. Holders of the original cryptocurrency may receive an equal amount of the new cryptocurrency on the new chain after the fork.
- Hard Forks: These create a permanent split in the blockchain, leading to two separate coins. For instance, Bitcoin Cash (BCH) was created from a Bitcoin (BTC) hard fork, and Ethereum Classic (ETC) came from an Ethereum (ETH) hard fork. Users who held BTC or ETH at the time of these forks received an equal amount of BCH or ETC on the new chain.
- Soft Forks: These are upgrades to a blockchain that remain compatible with the original chain, so they do not result in the creation of a new cryptocurrency. Soft forks generally do not lead to free tokens for holders.
How to Benefit from Airdrops and Forks
- Hold Eligible Cryptocurrencies: Simply holding certain cryptocurrencies in a private wallet (not on an exchange) can make you eligible for upcoming airdrops or forks.
- Follow Crypto News: Stay informed about potential airdrops and forks by following crypto news, social media, and official project channels.
- Use DeFi Platforms: Some DeFi platforms reward active users with airdrops, so participating in decentralised exchanges or lending platforms might increase your chances.
- Security Precautions: Scams are common in airdrops, so always verify the legitimacy of any airdrop. Avoid sharing private keys or sensitive information, and be cautious about connecting wallets to unknown platforms.
Pros and Cons
Pros
- Free tokens without needing to make additional purchases.
- Great way for early adopters to benefit from supporting new projects.
- Provides extra income, especially if airdropped tokens gain value.
Cons
- Scams and phishing attempts are common with fake airdrops.
- Airdropped tokens may have low liquidity or value, and some may never gain significant market traction.
- Receiving tokens from a hard fork can have tax implications in some regions.
Best For
Airdrops and forks are ideal for those looking to accumulate tokens passively without investing additional funds. They’re particularly popular with long-term holders who want to maximise the potential benefits of holding their existing cryptocurrency assets. However, it’s important to stay vigilant and prioritise security, as these opportunities can sometimes attract fraudulent schemes.
8. Initial Coin Offerings (ICOs) and Token Sales
Initial Coin Offerings (ICOs) and Token Sales are fundraising methods used by blockchain projects to raise capital by selling their tokens directly to investors. Similar to an Initial Public Offering (IPO) in the stock market, ICOs and token sales give investors the chance to buy tokens at an early stage, often at a lower price, with the hope that the token’s value will rise as the project grows.
ICOs and token sales are highly speculative and have seen significant fraud and failure rates, but successful projects can yield high returns.
How It Works
- Project Development and Whitepaper Release: The project team creates a detailed whitepaper explaining the purpose, technology, tokenomics, and roadmap of the project. This whitepaper is key to attracting investors, as it outlines the project’s goals and how the token will be used within the ecosystem.
- Announcement of the ICO or Token Sale: The project announces the ICO or token sale, providing information on how to participate, the price of the tokens, and the funding target. Some projects use their own platforms, while others use third-party launchpads like Binance Launchpad or Polkastarter.
- Purchase Tokens: Investors buy tokens by sending funds, typically in the form of established cryptocurrencies like Ethereum or Bitcoin, to the project’s wallet. In return, they receive the project’s tokens, either immediately or after an earning period, depending on the terms.
- Listing on Exchanges: After the ICO or token sale, projects often work to get their token listed on major crypto exchanges. Once listed, the token can be traded on the open market, allowing early investors to potentially realise gains if the token’s price rises.
Types of Token Sales
- ICOs (Initial Coin Offerings): These are open to the public, allowing anyone to participate. ICOs were especially popular during the 2017 crypto boom, though regulatory scrutiny has increased since then.
- IEOs (Initial Exchange Offerings): These are similar to ICOs but are conducted on a cryptocurrency exchange. The exchange acts as a mediator, vetting the project and conducting the sale on its platform. This added layer of scrutiny can make IEOs somewhat safer than traditional ICOs.
- IDOs (Initial DEX Offerings): These are token sales that take place on decentralised exchanges (DEXs). They allow projects to raise funds without relying on centralised platforms, but they may involve less oversight.
- STOs (Security Token Offerings): These are token sales for tokens that are classified as securities and thus are subject to stricter regulations. STOs are typically geared toward institutional investors or those in regulated markets.
Pros and Cons
Pros
- Potential for significant returns if the project succeeds, as tokens are often sold at a discounted price during the ICO or token sale.
- Opportunity to support innovative projects and become an early participant in their ecosystem.
- Some ICOs and token sales provide access to utility tokens, which can be used within the platform for exclusive benefits.
Cons
- High risk of scams, as ICOs and token sales have been notorious for attracting fraudulent projects. Some projects disappear with investor funds, known as “exit scams”.
- Regulatory risk, as many countries have tightened regulations around ICOs and unregulated token sales.
- Project failure risk, as early-stage blockchain projects may fail to deliver on their promises, leading to losses for investors.
Best For
ICOs and token sales can be profitable for investors who are willing to take on high risk in exchange for potentially high rewards. These opportunities are best suited for those who understand the risks, are familiar with evaluating crypto projects, and are willing to conduct thorough research into a project’s team, whitepaper, and roadmap. However, caution is essential, as the ICO and token sale space has a history of scams and failed projects.
9. NFT (Non-Fungible Token) Flipping
NFT flipping is a strategy where investors buy non-fungible tokens (NFTs) with the intention of reselling them at a higher price. Unlike holding NFTs for the long term, flipping focuses on short-term gains, often relying on trends, scarcity, and hype in the market to quickly increase the value of purchased NFTs.
NFTs can be highly speculative, with unpredictable value. Demand can drop suddenly, leading to significant losses.
How It Works
- Research and Find Promising NFTs: NFT flippers typically spend time researching trending projects, artists, or collections that have potential for future demand. Platforms like OpenSea, Rarible, and Foundation are popular for buying and selling NFTs.
- Buy NFTs at a Low Price: Investors look to buy NFTs when they’re newly released, often during a presale or minting event where the prices are lower. Early access to minting can sometimes be obtained by joining a project’s community on Discord or social media, or by owning other NFTs that give you access.
- Hold and Monitor Market Trends: After purchase, flippers watch the market closely to time their sale for maximum profit. They monitor factors like trading volume, social media buzz, and any upcoming announcements by the NFT project’s team.
- Sell at a Higher Price: When demand rises and the price increases, the NFT is listed for sale on a marketplace. Ideally, flippers aim to sell during peak hype, often after the project gains significant attention or announces major partnerships.
Factors Affecting NFT Value
- Rarity and Scarcity: NFTs that are part of limited collections or have unique attributes often sell for higher prices.
- Creator’s Reputation: NFTs from well-known artists, celebrities, or brands are more likely to retain or increase in value.
- Community and Utility: Some NFTs provide membership access to exclusive communities, events, or rewards, which can drive demand.
- Market Hype and Trends: The NFT market is influenced by trends, with some projects experiencing sudden increases in popularity due to influencer endorsements or viral attention.
Pros and Cons
Pros
- Potential for high profits in a short period, especially if the NFT’s value surges shortly after purchase.
- Offers an opportunity to participate in emerging digital art and gaming ecosystems.
- Diverse market, allowing investors to focus on specific niches like digital art, collectibles, or virtual real estate.
Cons
- Highly speculative and volatile, with no guarantee that an NFT will increase in value after purchase.
- Requires deep knowledge of trends and timing, as well as time spent monitoring market movements.
- Risk of illiquidity; some NFTs may take a long time to sell, especially if demand drops.
Best For
NFT flipping is suited for those who have a good understanding of the NFT market, enjoy researching projects, and are comfortable with high-risk investments. It’s best for investors who can recognise valuable projects early and have an eye for trends, while also having enough capital to participate in multiple projects. Given the speculative nature of NFT prices, flippers should be prepared for potential losses and only invest money they can afford to lose.
10. Crypto Savings Accounts
Crypto savings accounts are a relatively low-risk way to earn interest on your cryptocurrency holdings by depositing them into an account provided by a centralised or decentralised financial service. Similar to traditional savings accounts, these accounts offer regular interest payments, though rates are typically much higher than those offered by conventional banks. However, they come with risks unique to the crypto space.
Crypto savings accounts are relatively safe on major, reputable platforms. However, there’s a risk if the platform lacks transparency or faces liquidity issues.
How It Works
- Deposit Cryptocurrency: You start by depositing your cryptocurrency (like Bitcoin, Ethereum, or stablecoins) into a crypto savings account on a platform that offers this service. Popular platforms include Nexo, and Bitget.
- Earn Interest: The platform lends out your deposited cryptocurrency to other users or institutions, generating revenue from the interest paid by the borrowers. A portion of this revenue is then shared with you as interest on your deposit. The interest rate you earn can vary widely depending on the asset and the platform, ranging anywhere from 3% to over 10% annually.
- Withdraw Anytime or at the End of a Fixed Term: Many platforms offer flexible terms, allowing you to withdraw your funds at any time. Others offer higher interest rates if you agree to lock up your funds for a fixed period, which is known as a fixed-term account.
Types of Crypto Savings Accounts
- Flexible Accounts: These accounts allow you to deposit and withdraw your funds at any time. They offer slightly lower interest rates but provide more liquidity and accessibility.
- Fixed-Term Accounts: These accounts require you to lock up your funds for a specified period (e.g., 1 month, 3 months, or 1 year) in exchange for higher interest rates. The interest rates are generally higher due to the extended commitment of your funds.
- Stablecoin Savings Accounts: Many platforms offer high-interest accounts specifically for stablecoins (e.g., USDT, USDC). Stablecoins are pegged to fiat currency and are less volatile than cryptocurrencies like Bitcoin or Ethereum, making these accounts popular for users who want high interest with lower exposure to price volatility.
Pros and Cons
Pros
- Higher interest rates than traditional savings accounts, making them attractive for earning passive income.
- Suitable for both short-term and long-term savings, with options for flexible or fixed terms.
- Available for a variety of cryptocurrencies, allowing you to earn interest on idle assets.
Cons
- Funds may not be insured like in traditional banks, so you’re at risk if the platform experiences a hack or financial trouble.
- Locking up funds in a fixed-term account can reduce liquidity, which may be an issue during price volatility.
- Regulatory risk, as some governments are scrutinising and even banning certain crypto-lending services.
Best For
Crypto savings accounts are ideal for investors who want to earn passive income on their crypto assets without actively trading or speculating. They’re especially suitable for those who hold stablecoins or who are long-term holders of major cryptocurrencies and want to put their assets to work. However, it’s essential to research the platform’s reputation and security, as your funds may be at risk if the platform encounters financial instability or regulatory issues.
11. Running a Masternode
Running a masternode involves setting up a full node on a blockchain network to support its operations. Masternodes are responsible for performing advanced functions beyond basic transaction validation, such as governance, transaction privacy, and enabling faster transactions. In return for maintaining the network and providing these services, masternode operators earn rewards, typically in the form of the cryptocurrency they are supporting. It requires an initial investment in coins and some technical knowledge to set up and maintain the server.
Running a masternode requires a substantial investment in a particular cryptocurrency. This method of making money in crypto is relatively stable but can be risky if the network doesn’t remain secure.
How It Works
- Staking Coins: To run a masternode, you must stake a certain amount of the cryptocurrency in a wallet. The required amount varies by coin (e.g., Dash requires 1,000 DASH).
- Setting Up a Server: A virtual private server (VPS) or dedicated server is required to host the masternode software. The server needs to be reliable and meet the coin’s technical requirements.
- Installing Masternode Software: After setting up the server, you must install the cryptocurrency’s wallet and masternode software to sync the blockchain and begin running the node.
- Validating Transactions and Providing Services: Masternodes validate transactions, ensure network security, and provide advanced services like private or instant transactions.
- Earning Rewards: Operators earn rewards (usually in the form of the cryptocurrency being supported) for their contribution to the network. Rewards are paid periodically.
Pros and Cons
Pros
- Passive Income: Running a masternode can provide a steady stream of passive income through staking rewards.
- Network Security: By running a masternode, you help secure the blockchain and support its operations.
- Additional Features: Masternodes enable advanced network features such as faster transactions and enhanced privacy.
Cons
- High Initial Investment: Staking the required amount of coins can be costly.
- Technical Knowledge: Setting up and maintaining a masternode requires a certain level of technical expertise.
- Ongoing Costs: You must pay for server hosting, and there’s a risk of losing rewards if your masternode goes offline.
Best For
Running a masternode is best suited for:
- Crypto Enthusiasts: Individuals who are passionate about blockchain technology and willing to invest time in setting up and maintaining the node.
- Long-term Investors: Those who can afford the initial investment and are looking for a long-term passive income opportunity.
- Technically Savvy Users: People with the technical know-how or willingness to learn how to set up, maintain, and monitor a masternode server.
