After two years of depressing price action, it appears that the cryptocurrency market may finally be transitioning into a new bull run. This is likely happening for two reasons.
- Bitcoin taking its place as digital gold — As central banks print trillions and governments around the world increase their debt, BTC is promising to protect against indiscriminate monetary mayhem.
- Ethereum transitions to staking — Ethereum is already the second most popular cryptocurrency by market cap. Once Ethereum transitions to a Proof of Stake consensus mechanism, ETH will be even more valuable than it already is.
In this article, we’ll discuss three strategies for profiting from this impending digital asset bull market including investing, mining, and staking. None of the following is financial advice and before getting involved in the crypto industry you should always do your own research.
1. Invest in Crypto
Investing in crypto — the “buy and HODL” strategy, is the simplest way to profit from crypto in 2020. Currently, crypto is in the beginning stages of a bull market which is a great time to buy. Prices are still low enough that there are large profits to be had, yet the likelihood of another prolonged depression is low. This is suggested by cryptocurrency investors like PlanB and others, as well as Bitcoin’s history of a strong bull market always following a bear market.
There are several reasons why investing is the most foolproof way to make money in the crypto market.
- The price of Bitcoin and most other cryptocurrencies follows a regular cycle of bull and bear markets, typically based on the halving. Although there will always be people saying that this time it’s different, the truth is that these boom and bust cycles have a history of performing as expected and there’s not a good reason to believe we won’t see another big bullish move soon.
- Investing doesn’t require complicated decision making. Buy the asset, store it on a hardware wallet like Ledger or Trezor, and don’t sell it.
- Investing typically incurs the smallest tax burden, at least for assets held for more than a year.
While there’s a lot of buzz around cryptocurrency trading and day trading, in reality these activities are extremely difficult to profit from. Many professional traders have estimated that just 1 to 2% of people who ever attempt trading will end up making a profit.
To learn more about cryptocurrency investing we can recommend following Bob Loukas, who is a great source of information for long term trends in the cryptocurrency and Bitcoin market. The Crypto Sniper is also excellent. Although the content deals with Bitcoin trading and technical analysis, there are also quite a few videos about macro trends in crypto.
The easiest way to invest in crypto is ChangeNOW. It won’t take you more than 10–15 minutes to complete your purchase. Every step is explained, so you will be guided through the intuitive interface to make your investment.
2. Mine Crypto
Cryptocurrency mining is a good way to profit from crypto in 2020. Besides Bitcoin, there are many coins to mine today such as Monero, DigiByte, Dash, and others. Before we describe how to get into mining, there are two points to consider.
- Mining profitably requires an edge. That edge can be cheap electricity, cheap equipment, or high price of a cryptocurrency. You can use a digital currency mining calculator to determine what your profits might be.
- ASIC miners are loud and generate a lot of heat. Because of this you’ll need an isolated location to set up your mining rig, especially since miners operate 24/7.
These caveats aside, here’s a simple guide to how you can start mining crypto.
- Decide which cryptocurrency you’d like to mine. Different crypto coins have different hardware requirements, but for this example, we’ll focus on Bitcoin mining.
- Buy some used Bitcoin mining hardware from Amazon. It’s recommended to start mining with older hardware while learning how to mine.
- Set up the mining rig in a well-ventilated area where the ASIC won’t overheat.
- Subscribe to a Bitcoin mining service like Hive OS. The service will make setting up your ASIC dead simple and also provide all sorts of customization options right from a user-friendly dashboard.
- Join Hive OS’s mining pool or select your own mining pool to join. A selection of some of the most popular Bitcoin mining pools is available here.
Once you’ve joined a mining pool, your ASIC will start earning Bitcoin in real-time. As you accumulate BTC, you can always send it to a cryptocurrency exchange to trade it for US Dollars, or exchange for any other crypto on ChangeNOW.
3. Stake Crypto
Proof of Stake cryptocurrencies offer a true passive income. You don’t have to set up a mining rig or buy any specialized equipment. Staking can be explained in 3 steps:
- An investor buys a cryptocurrency — let’s say Tezos, since Tezos staking is now quite popular.
- The investor “stakes” this crypto by sending it to a special smart contract on the Tezos blockchain (or an investor stakes with an exchange).
- By validating legal transactions on Tezos (i.e. no double spends) the staker is rewarded with crypto the same way a miner gets the block reward on a proof of work blockchain.
Currently, one of the easiest ways to start staking is doing this with a crypto exchange. Here are the options to consider:
Binance offers a wide number of staking options. At the moment, they support staking for about 20 assets, and more are about to come.
Staking rewards are constantly changing on Binance so the best place to figure out how much you can earn is directly on Binance’s staking page.
All you need to do to start staking is to create a Binance account and then to deposit the cryptocurrency you want to stake. Currently, the most lucrative coin to stake on Binance is LOOM, which offers a 10 to 12% return.
For American investors who cannot access Binance, Coinbase is another easy way to stake. The only asset that can currently be staked on the Coinbase service is Tezos XTZ, however, other assets will be added in the future.
Staking should go live on the Ethereum network by the end of 2020. This actually presents a great way to profit from crypto, as an investor can buy Ethereum, take advantage of profits as the price rises, and then stake the asset once Ethereum 2.0 is released.
Once Ethereum staking goes live, it’s a sure thing that all of the major blockchain exchanges, like Coinbase, Binance, Kraken, etc. will support staking via their exchange.
Profiting From Crypto
Good investment strategies can be hard to come by, especially in the crypto ecosystem where there are dozens of “traders” on Twitter and YouTube offering questionable advice. This is why it’s important to follow reputable accounts that have a long history of providing value to their followers. Always do your own research.
Although crypto can be high reward, it’s also high risk and a very volatile market. It’s important to only invest an amount that you feel comfortable losing, as the volatility can make it difficult to hold an investment that’s too large.