How to Earn and Avoid Losing Capital on Cryptocurrency Trading? Safe Strategies for Beginners
What strategies are suitable for those who are just starting their way in the cryptocurrency market? Is it possible to earn on cryptocurrency without risking capital? What points should you pay attention to first of all? Everything about the first steps in crypto earnings in our article.
The cryptocurrency market remains most promising in the face of a possible recession, which is expected to hit stocks after two years of economic crisis and quantitative easing. There are real growth triggers here, as everything related to technology is on the rise right now. Bitcoin and other large coins are increasingly being considered as a hedging tool, including by institutional investors. The DeFi industry has undergone tremendous development, offering an alternative to almost negative, adjusted for inflation, bank deposit rates.
At the same time, there are more and more people wishing to study exchange trading, and this is not surprising, given that for many the usual sources of income have become inaccessible. Based on the prerequisites for the growth in the number of new traders and the prospects of the cryptocurrency market, it can be assumed that in the near future the industry is waiting for a new wave of users who, on the one hand, will feed the market with money and, on the other, will start to fill their own bumps. In this article, we will tell you where a novice trader should start on the crypto market in order to achieve success along the way and avoid big disappointments.
Cryptocurrency Security and Informational Issues
Please remember that the cryptocurrency market is one of the most risky, and without experience and expertise here you can easily lose your starting capital in one hour. Therefore, you need to start, of course, with the study of the rules by which this market lives. In particular, it so happened that the crypto market is traditionally heavily influenced by the news and opinion leaders` statements.
Learn To See the Essence of News about Cryptocurrencies
Before entering the cryptocurrency market, you should learn to interpret its local news, find out which characters set the tone for the ball and subscribe to them on social networks. Over time, you will learn to recognize the manipulation attempts that, for example, helped Elon Musk to pump up the Dogecoin funny crypto, and learn how to capitalize on this knowledge.
Learn about How to Store Cryptocurrency Correctly
Naturally, since we are talking about earning money through the network, cybersecurity issues come out on top. First of all, you need to deal with the issue of storing cryptocurrencies. It can be cold and hot, that is, you can store your crypto offline or online. Today, mixed storage has become the security standard on large exchanges: most of the user funds are kept in cold wallets, while the funds involved in trading are used in hot ones. Most of the major exchanges offer this type of storage, in which most of the funds are safe in the trader's cold wallet.
Easy and Safe Strategies of Earning Cryptocurrencies for Beginners
In this part, we will talk about strategies for making money on cryptocurrencies available to beginners. They are good, first of all, because by using them, you do not risk your capital. These strategies are less profitable than high-risk strategies, and yet much more profitable than traditional bank deposits and even buying low-risk stocks on the stock exchange. So, let's go.
The Easiest Way to Earn by Crypto: Buy and Hold Strategy
The first and easiest way to become a part of the crypto market is to buy yourself a piece of Bitcoin. Strictly speaking, any coin from the top list of Coinmarketcap fits the role of an asset for long strategies. Their liquidity won't cause you any problems if you decide to sell these coins. Each and every exchange supports pairs with large cryptocurrencies in its listing.
Of course, neither Bitcoin nor Ethereum give out such growth charts as some pumped up coins, which can grow by thousands of percent in a matter of months. Yes, there are plenty of such stories on the crypto market, but there are thousands of times more stories of falls and exit scams, so a novice crypto enthusiast should start with the classics that will not let them down.
Don't Buy All Crypto You Want To Buy at Once
It is better to stretch the process of buying an asset over time, without buying everything at once. The fact is that the cost of a crypto is constantly changing (it's called volatility), and in order to reduce the risk of buying at a disadvantageous price, it is better to decide in advance on the amount that you are ready to invest in a particular coin and divide this amount into several parts. Then it remains only to systematically buy the asset for several weeks, following the price movement. This way you can catch the price in a drawdown and thus earn. However, it is worth remembering that “hodling” is not a quick income, and it is worth being patient for it.
If you look at the price of bitcoin over the years of its existence, you can see that in the historical perspective, BTC is always growing. Even if you bought bitcoin at the peak of its price just before the fall, believing in the asset and not selling it, you ultimately won, because bitcoin always came out of any falls in growth. Many market experts say that bitcoin has not exhausted its capabilities, and against the background of the madness with the uncontrolled release of fiat money, this is very easy to believe. Therefore, the “buy and hold” strategy remains relevant today.
Cryptocurrencies for Those Who Have Traded on the Stock Exchange before
Cryptocurrency is the same exchange asset as traditional ones, with the only difference that, as a rule, there are no corporations behind cryptocurrencies. It is also always worth keeping in mind the increased volatility of cryptocurrency as an asset. Otherwise, everything is as always: observe, learn and apply trading tools. If you are an experienced trader and understand technical analysis, then you will master these two types of cryptocurrency trading quite quickly.
Cryptocurrencies Day Trading
Cryptocurrency day trading is supported by many exchange platforms. The day trading strategy is extremely simple: buy low and sell at the high of the daily price. In practice, this is not so simple: you need to be able to catch the moment. However, having learned to catch daily fluctuations of 20-50%, which are quite real for cryptocurrencies, you can receive a stable and significant income every day.
Cryptocurrencies Medium-Term Trading
Medium-term trading is the most common strategy in crypto today. Its meaning is to buy undervalued assets and sell them over the next few months. By following this buying strategy, you can make a decent regular profit within a foreseeable period of time. The key to success in this direction is to restrain your own greed: set the target sale price within 10-15% of the initial price and sell the asset as soon as this level is reached. You can use two advanced tools for reducing risk we have explained before here.
Although the figure you can earn via medium-term trading is not impressive against the general background of possible income, by repeating the cycle at least 4 times in six months, you can easily manage an annual return of about 100% which is quite good for any trader.
How to Earn by Cryptocurrency Arbitrage?
Having a sufficient amount of free funds on hand, you can use another popular way of earning money that does not require much mental effort, and yet it is quite working. We are, of course, talking about cryptocurrency arbitrage. As we said before, the main property of cryptocurrencies is their volatility, and it is here that a plenty of opportunities opens up for a nimble arbitrator.
All you have to do is find one exchange where the price of the coin you are interested in is relatively low, and then find another that sells the same coin at a significant premium. The spread can be from 5 to 40%, so count. Just remember to deduct the exchange fee.
In general, arbitrage is operations that are characterized by low risk, but their profitability is still lower than in trading. Although arbitrage seems at first glance to be quite simple “buy and sell”, nevertheless, as a rule, experienced exchange players deal with it. The fact is that in arbitration you need to logically link several transactions into one in order to earn on the difference in asset rates on various sites. However, having mastered the intricacies of arbitrage, you end up with practically a profession with a salary - the guaranteed income provided to you absolutely.
Dividends for Storing Cryptocurrencies
As with stocks, some types of cryptocurrencies can provide you with dividends. This method perfectly complements the first “buy and hold” strategy and is essentially a passive income. The fact is that there are several exchanges — AscendEX, Kucoin, FTX, Bibox — which pay you interest on their native tokens that you store in one of the exchange's hot wallets. For example, when you hold your cryptocurrency on AscendEX, you get an annual return of 2-4% up to 100% per annum depending on the asset. This is a risk-free easy way to earn money, which, nevertheless, exceeds the yield on government bonds and even more so the rate on bank deposits. We discussed the topic of cryptocurrency dividends in more detail in this longread.
Diversify Your Crypto Assets
Even if you quite rightly consider bitcoin to be the most reliable asset in the crypto market, the “don’t put all your eggs in one basket” rule still applies here. Each asset has its own reasons for rising and falling, and when one sinks, the other will help the portfolio stay afloat. By diversifying, you can afford to experiment - for example, buy tokens of a promising project that you have read/heard a lot about and are ready to take a risk. If you win, you will have a good profit on your hands, but if you lose, income from other assets will mitigate the losses.
By investing in various assets, partly risky, with a higher return, partly traditional, with a lower percentage of return, but safer, at the end you get a portfolio that is balanced by the level of risk that is acceptable to you personally and the return that you expect to get. How much to invest in each type of asset depends on how quickly you expect to make a profit and, more importantly, how much risk you accept. Simply put, how much are you willing to lose without compromising your mental well-being.
As you can see, for a beginner, there are also ways to start making money on cryptocurrency right away, gradually deepening your knowledge as you study the market and tools for working with it. The deeper your knowledge, the more risky tools you can master by rebalancing profits and investing in worthwhile projects, which over time can quite realistically bring you hundreds of percent APR.
Author name: Albert Galeev
Quickex.io partner writes