For years, cryptocurrencies have shown time and again that they are the most profitable asset class. Investors making over 500% gains in a year is commonplace in the crypto industry, especially if you find yourself some solid altcoins that are tied to impressive projects.
Over time, the advice that many have given to crypto newbies is that they can simply get sizable returns if they buy and keep cryptocurrencies - a strategy known in the industry as 'hodling'. Hodling is a misspelling of 'holding' that refers to a buy-and-hold strategy in the crypto world.
The premise is simple - you can keep your cryptocurrencies over a lengthy period, and you eventually benefit as the price continues to increase. Just like it is with stocks and commodities, crypto price gains would eventually favor the long-term hodlers.
But, the market has matured significantly since then. More concepts have emerged for crypto users, enabling them to earn money with their coins. These concepts can increase profitability for investors, and it is worth keeping them in mind.
Trading
Trading is undoubtedly the most popular way to make use of your cryptocurrencies. Here, you simply make speculative bets on the price of a cryptocurrency against another - or, more popularly, against a fiat asset.
The popularity of crypto trading is tied to that of cryptocurrencies themselves. Data from CoinMarketCap shows that the entire market is worth $2.7 trillion, making it one of the most profitable industries in the world. With coins showing the potential to grow exponentially in a short period, traders have an opportunity to also make massive profits without having to wait so long.
More people have entered the crypto industry intending to make their profits, and this oversaturation of people means that the crypto market is now even more vibrant. It’s the perfect time for anyone to be a trader.
The only slight issue is that when it comes to crypto trading, care is of the utmost importance. Like stocks of traditional currencies, it takes a great deal of research and analysis to know whether a cryptocurrency will deliver the type of gains you’re looking for. So, you need to ensure that you’ve covered all angles.
The inherent volatility in crypto prices means that profitability will require massive research. You have to be technically sound, but you also need to keep an eye out for fundamental news and details that could affect the price of the currency you’re trading.
Lending
There is also crypto lending - a new concept that improves the functionality of cryptocurrencies significantly.
Crypto lending allows crypto holders to keep their assets, while also getting their hands on money that they would need for spending immediately. Investors lend their coins to others who need cash, and the borrowers commit to paying back the loans with interest after an agreed-upon period.
Interest rates on crypto lending vary based on the services. If you’re a lender, you can take advantage of services like YouHodler, which offers as high as 12.3% annual interest rates on loans.
Lending is popular for several reasons. It is also safe, with borrowers being mandated to use their cryptocurrencies as collateral. So, if a borrower can’t pay their loans up for some reason, investors could simply sell the collateral to cover the losses.
To protect against fraud, most crypto lending platforms require that borrowers stake up to 50% of the loan amount in crypto. This way, platforms have a much easier time covering the losses and getting lenders their money back.
Crypto lending is also popular for several other reasons, including:
- Approval Speed: A borrower can log on to any crypto landing service and get a loan in a matter of hours. Crypto lending platforms don’t need to go through any due diligence. As long as your information has been confirmed by the platform and you have your collateral ready, you will be able to get a loan.
- Flexible Payment: Crypto lending platforms are also much more flexible in how they structure your deals. You can take a loan and pay it back in a couple of days, or you could even stretch your loan tenure to cover months.
- Reasonable Interest Rates: Crypto lending also offers some attractive interest rates. You can find lending platforms that charge around 7% interest annually, which is competitive with the rates charged by traditional loan companies.
Staking
Staking is a new concept that is also making the rounds. It is a concept that is native to coins running on the proof of stake (PoS) consensus algorithm.
When you think of Bitcoin, you think of mining - a capital and labor-intensive process that many get involved in so they can mine units of it. Several other coins use this mining process, leading to massive criticism from crypto detractors.
Even some crypto supporters have decried Bitcoin mining for its impacts on the environment. For instance, Tesla (NASDAQ:TSLA) CEO Elon Musk announced earlier this year that the company would stop accepting Bitcoin as a payment means because the mining process uses way too many resources.
Staking has emerged as a safer, more eco-friendly alternative to mining. Here, network participants deposit their coins into the network’s protocol. At random, the network selects a wallet to validate and confirm transactions. Once the process is done, the wallet is credited with new units of the cryptocurrency as a reward.
With staking, operations are conducted at a random and dispassionate pace. But, the higher the coins you stake, the higher your reward.
If you’re looking to get your coins to work for you, staking is a great way. All you have to do is stake the coins in the network’s protocol, and it does the heavy lifting for you. If you get chosen to mine, you get your reward. So, all in all, your capital is safe, and you still get rewards at the end of the day.
Some staking services even allow users to get rewards in other coins. Quidax, one of the top cryptocurrency exchanges in Africa, launched the QDX Vault earlier this year. The service allows people to stake its native coin, QDX - and they can get rewards in other currencies.
Just last month, it airdropped 1 billion Shiba Inu (SHIB) to users of its vault service. Staking is simple and easy, and it is virtually risk-free. That’s what makes it so profitable.