How to make money trading cryptocurrency

After learning more about Bitcoin, Ethereum, and other altcoins, many people want to know how to make money trading cryptocurrency. But for every case of successful traders getting rich overnight, there’s an equally sad story to match it.

For example, host of the popular What Bitcoin Did podcast Peter McCormack shared his story of how he won – and lost – his crypto fortune with the community last December.

Beyond exchange and wallet hacks that traders have to watch out for, there are plenty of Ponzi schemes and exit scams as well. There are also exchanges with 100x leverage that allow traders to get ‘REKT’ and lose all their money.

How to make money trading cryptocurrency

Writing about how to make money trading cryptocurrency in 2019 looks a lot different from the years before. ICOs have all but died out, raising just $43mn in funds in March this year – down from their highs of $1.74bn.

Making money in cryptocurrency was relatively easy when the markets were all going up. You just invested in the right ICO or got in early on an altcoin and watched the massive gains.

Some of the earliest adopters of Bitcoin managed to earn a staggering 4,057,900% return on their investment when BTC sold for just $31 per unit. Imagine that return at the current price or the price it reached during its peak in December 2017!

Bitcoin and altcoin millionaires were being made overnight. But, these days, the landscape has changed. Making money on cryptocurrency has generally turned into a long game.

So if you can’t make a huge profit quickly anymore, the question of how to make money trading cryptocurrency remains. Here are a few tips.

Get in early

Many traders made huge profits by purchasing assets at their initial ICO value and selling them just days or even hours afterwards. These opportunities are few and far between today.

However, buying low and selling high is the rule among all asset traders and applies to trading cryptocurrencies as well.

Remember that no one knows for sure if Bitcoin’s price has bottomed out and whether the bull run will continue – or if buying now means you’ll get in just before another drop.

Cryptocurrency is still so new and there are few indicators of how much longer the bear market conditions will remain. So, as with any other investment, never trade more than you’re prepared to lose.

Stay up to date

Even missing one day of the action in the cryptocurrency arena can mean losing out on price spikes.

To make money trading cryptocurrency, you have to stay in the game every day. If that’s around the clock, so much the better. Cryptocurrencies never sleep.

Clearly you’re only human and sleep will be vital to your state of mind. However, you can use trading bots to help which you can set to follow automated rules. This means that you won’t have to miss out on a buy order you would have executed if you were awake, or end up with a big losing position.

Bots or not, make sure you stay up to date and follow forums, industry media, and social media like Telegram and Reddit, and know the updates and announcements that will likely make a coin or token pop in price.

Often, an upcoming launch, a new development, a hard fork, or an exchange listing are all events that can make the price increase.

Try day trading

Day trading can be split into several categories, the two main ones being spot and margin trading.

Spot trading is the most common type and involves trying to make money on your asset by trading it for another, hoping the asset makes gains.

For example, you could sell ETH, buy BNB, wait for the BNB asset to appreciate, and then withdraw the funds you put in.

You can do this on all major exchanges like Binance, KuCoin, Kraken, and even Coinbase, although the fees on the latter are much higher. You can also make money by using arbitrage, which is the difference in price listing between one exchange and another.

So, for example, if LTC is listed cheaper on one exchange and higher on another, using arbitrage will allow you to take advantage of the minor deviation in price.

Margin trading is increasingly available on exchanges as well, with the most notable being BitMEX. Margin trading basically lets you borrow money (called leverage) for a fee. Some exchanges offer up to 100x leverage.

This means that you can trade cryptocurrency with 100 times more than you have put behind it. If you’re successful, you can rake in a huge profit. If you’re not, it can put you in a catastrophic losing (or ‘liquidated’) position.

Learn to trade futures

Several cryptocurrency futures exchanges will let you try your hand at trading futures contracts. This works in the form of a contract between buyer and seller that specifies the exchange of the underlying cryptocurrency asset at a predetermined price on a future date.

You can either go “long” or go “short” on futures. Going long means that you agree to buy the asset in the future, and going short means that you agree to sell it.

Futures trading can provide a way to make money trading cryptocurrency even in a bear market when the price of BTC falls.

By “shorting” Bitcoin, traders essentially believe that the price will fall and enter the agreement to sell at the previously secured higher BTC price.

If they’re right, they can make a profit when the price drops based on their prediction. If they’re wrong and the price rises, they must sell the underlying asset for a devalued price.

The takeaway

So, how do you make money trading cryptocurrency? It isn’t an exact science and there are certainly no guarantees. As the (slightly bizarre) saying goes, there’s more than one way to skin a cat.

How you choose to trade in cryptos (and which ones) is ultimately up to you. Just be sure to carry out as much research as you can and understand that a winning streak can easily be followed by a fall.