Since the launch of bitcoin in 2009 and the subsequent rise of other blockchain cryptocurrencies and projects, thousands of new crypto millionaires are becoming minted yearly. As a result, there has been a frenzy among other crypto enthusiasts eager to follow their lead. However, becoming the next crypto millionaire is not as easy as it appears. It takes determination, hard work, tenacity, and deep expertise.
Nonetheless, as arduous as it initially seems, you can join this elite group of new crypto millionaires if you are willing to go the extra mile. In this article, we have curated a comprehensive guide on how to begin the journey to your crypto fortune. Also, you will learn how to earn interest on crypto holdings, how to make money on crypto, how to calculate how much money you make on crypto, how to pay taxes on crypto gains, and how to earn passive income on crypto.
Is it Easy to Make Money on Crypto?
There are many ways to make money with cryptocurrency. Whether you make money by getting into profitable projects early or you are involved with constant buying and selling on the active marketplace, the ease of doing business in the crypto environment is relative to your expertise and understanding. Regardless, the more you understand blockchain technology, the potential of short and long-term trades, as well as the economics (often called tokenomics in Defi) behind various crypto projects, the more it becomes easier to make money.
What are the Ways to Make Money on Crypto?
There are several ways of earning money with cryptocurrencies. This includes trading and investing, staking cryptocurrencies for interest earnings, earning rewards in play2earn crypto games, and participating directly in the blockchain system. For example, through mining and node operations. Below is a more expanded description of how to make money on crypto.
Cryptocurrencies are digital assets. Hence, they are very similar to other physical assets like currencies, stocks, real estate, commodities, and mortgage-backed securities that can be bought and sold in exchange markets.
Furthermore, trading is an endeavor that exploits short-term opportunities present in the crypto market because of its high volatility. To make money on crypto using this method, you must have extensive analytical and technical skills to correctly predict price movements before they become apparent to other market participants.
This method is the long-term version of active trading. It involves the buy-and-hold strategy, which is essentially buying and keeping crypto assets for a long time, say five to ten years, over which you expect its price and valuation to increase significantly.
This strategy requires a keen eye for identifying valuable crypto assets that will appreciate over time because of their underlying fundamentals. These fundamentals include coin tokenomics, market capitalization projections, unique use-cases, media portrayal, and community acceptability.
Staking and Lending
With the emergence of DeFi and the application of some traditional financial instruments made available to crypto holders through several intermediaries, investors can now earn interest with their holdings. Staking involves locking your crypto assets in a liquidity pool or yield farm that rewards you with interest using a Proof of Stake(PoS) smart contract. This method is comparable to earning interest generated from bank activities on deposits in your savings account.
Similarly, lending is another popular method of earning interest with your crypto assets. You can loan your crypto to other investors and generate interest on the loan through mediators such as exchange platforms.
Mining is a crucial component of the Proof of Work mechanism through which many cryptocurrencies are secured. Although mining is capital intensive nowadays, you can still be handsomely paid with newly generated reward coins. It is possible if you run the business effectively with specialized technical expertise and special mining hardware.
Airdrops and Forks
Airdrops are often free tokens distributed to a group of people to generate awareness and spur the interest of the general public. By sourcing for information or joining crypto discord groups, you can become aware of airdrops to receive free coins to trade or invest.
Forks occur in blockchain projects because of changes or upgrades in a protocol that create new coins. If you hold coins from the original project, you will get free coins on the new network.
If You Make Money on Crypto Do You Pay Taxes?
The increase in the value and popularity of the cryptocurrency industry has attracted the unwanted lure of the IRS. Therefore, it is necessary that you understand how much taxes you need to pay on your crypto gains. The two taxable events in cryptocurrency are capital gains and income tax events – often charged at different tax rates. Although there are complications with the cryptocurrency tax rates, they mostly operate like other income-generating capital assets such as stocks or bonds.
Luckily, like stocks, you only owe capital taxes on crypto if you sell your holding position and realize a profit. However, if you incur a loss on your position after selling, you do not owe any taxes on this transaction. Yet you must report it while filing your taxes. According to STILT, a financial advisory site, the cryptocurrency tax rate ranged from 10-37% for short-term capital gains and between 0-20% for long-term gains in 2021.
How To Calculate How Much Money You Make On Crypto?
Crypto profit is the amount that remains after you subtract expenditures and initial costs from your selling price. If you get a positive figure, that is a profit. But if the result is a negative figure, then it is a loss.
How To Exchange Crypto With Crypto And Save Money?
Investing in cryptocurrencies by saving is one of the best ways of passively making money for beginners. You can begin your journey to financial freedom by choosing to buy crypto on Swapzone, one of the best beginner-friendly exchanges to buy crypto in the market. We offer real-time swap offers and discounts.