One of the more obvious reasons cryptocurrencies have become so popular in recent years is the possibility of a good investment. There are a lot of stories about earning money with cryptocurrencies, so it is no wonder that they are attracting more and more new users. The potential for high returns, low transaction fees, and a wide range of utility makes them attractive to investors, looking for an alternative to traditional investments.
As with other investments, the value of cryptocurrencies themselves can fluctuate. Since the fluctuations in cryptocurrencies can be very high, cryptocurrencies are said to be highly volatile. Although they can offer high returns, they can also lose value quickly. Simply put, as much as the price can go up, it can also go down.
When considering the purchase of cryptocurrencies, it is essential that the individual conducts thorough research (the popular abbreviation for this is DYOR – Do Your Own Research) and carefully weighs the possible risks and benefits on his own.
There are several known ways to invest and earn with cryptocurrencies, but the most common are:
Holding: An individual purchases cryptocurrencies and holds them long-term (a minimum of 4 years) in the hope that their value will increase over time. This is also known as “Hodling” and can be a good way to make money if an individual believes that the value of the cryptocurrency they hold will increase.
Crypto trading: An individual buys and sells various cryptocurrencies in an attempt to make a profit based on the fluctuation of their values within different time intervals (1 hour, 4 hours, 1 day, 1 week, etc.). This is a riskier way of making money, but it can also be very profitable if the individual has the knowledge and experience to trade successfully.
Interests: The individual earns through the interest of the cryptocurrencies they hold. Many cryptocurrency platforms offer the possibility of earning through interest, in exchange for the user locking part of their funds in the wallet for a certain period of time. This is known as staking.
Mining: The term mining represents the use of powerful computers to solve complex mathematical equations that verify transactions in the blockchain. When a miner successfully verifies a transaction, they are rewarded with a small amount of cryptocurrency. This can be a profitable form of working with cryptocurrencies, but it requires a significant investment in specialized equipment and a lot of technical knowledge.
Initial offerings: this represents participating in initial coin offerings (ICOs), exchanges (IEOs), or other initial offerings (more on them in future chapters). These are crowdfunding campaigns in which new crypto projects collect money through the sale of their tokens or coins for the further development of the project. If the project is successful and the value of tokens or coins increases, you can make good money by selling them. It is important that an individual is cautious when participating in ICOs and IEOs, as some projects are very risky and may ultimately turn out to be scams.