How to quickly make money on cryptocurrency. 4 ways

How to quickly make money on cryptocurrency. 4 ways


Within a few months, DeFi tokens have brought investors multiple profits, and DeFi platforms promise users thousands of percent per annum for opening a deposit. We tell you how to choose a project with good potential and reduce the risk of losing all money

The cryptocurrency market provides opportunities to earn every day. Some of them are conservative, for example, trading on fluctuations in the rate of bitcoin, the value of which can be about 10% per day. Other options offer both many times more income, and significant risks.

Trading with large leverage and options

One of the surest ways to earn hundreds of percent for a single trade or lose everything on it is to trade with leverage. Many exchanges and derivatives platforms, such as Bitmex, Binance Futures, OKEx and others, allow clients to borrow funds under the collateral of their assets. The size of the loan and the risks are determined by a factor that starts at 1 and reaches 100, in rare cases exceeding this value.

Here's how it works. The trader temporarily gives the exchange, for example, 1 ruble as collateral and, choosing the leverage with a factor of 100, receives in return 100 rubles. They automatically buy cryptocurrency. If its price rises by 1%, the user gets 100% profit. If the asset becomes cheaper by 1%, the site closes the transaction and takes both the issued funds and the deposit.

Private trader Alexander Boyarintsev told about another way of earning money. He offered the option of buying call-options for cryptocurrency. These are contracts that entitle you to buy an asset under predetermined conditions. The price of such contracts may fall if the volatility of the asset rate decreases, it will make the conclusion of the transaction more profitable.

"Example: the price of bitcoin was $9500. Volatility dropped, and options with a strike of $11,000 and a two-week expiration period cost $60. I bought three options. Then the price of BTC went above $11,000. Accordingly, everything that was higher than this price turned into a profit. The risk was $180 - $60 for each option. The total profit is $3000," Boyarintsev explained.

Investing in DeFi tokens

Another sure way to increase capital or zero it is to invest in cryptocurrencies from the sphere of decentralized finance (DeFi). In 2020, the sector is booming. Many DeFi tokens, which did not exist in June-July, in August showed an increase of thousands of percent. The most striking example is the Yearn Finance (YFI) token. It was released on July 18 and then cost $32. In September, the price of YFI rose by more than 130,000%, to $44,000, now dropped to $22,000.

There are many such examples. Unitrade (TRADE), which appeared on August 5, went from $0.11 to $2.6, but then fell to $1. The UMA coin, issued at the end of April, showed an increase from $0.3 to $25, now worth $12.5. The price of the cryptocurrency Ocean Protocol (OCEAN) for the same period rose from $0.03 to $0.62, now decreased to $0.32.

A high has been formed around the DeFi sphere, so even one successful purchase of DeFi tokens can increase investments many times. But the probability of losing on this is much higher chances of luck. First, now decentralized projects have become extremely many, especially when compared with the beginning of summer. Therefore, the capital of users, which used to be distributed to a limited number of assets, now accounts for thousands of projects.

Secondly, along with the hype in this sphere came scammers. And the deFi tokens they allegedly released are much more than real projects. After the incredible increase in the price of YFI, many users decided that DeFi coins should try to buy as early as possible, before the masses have learned about it. In this regard, there is a demand for services that allow you to be the first to know about the release of the new DeFi-token.

Most of these coins appear on the Uniswap exchange for the first time. Services such as Astrotools.io or Dextools.io allow you to monitor in real time how new projects are added to the site. On the one hand, it allows traders to buy coins immediately after it has appeared, in the hope of multiple growth.

On the other hand, Uniswap does not have a strict listing procedure. Anyone can issue a token and add it to this exchange. In this regard, fraudsters use the hunt of traders for new projects and try to "slip" their coins, which have absolutely nothing. Probably for this reason, according to the Astrotools.io and Dextools.io, new cryptocurrencies appear on Uniswap literally every 5 minutes. Often, it's not even people who do it. Scammers create special programs that automatically release tokens and add them to Uniswap and other decentralized exchanges.

The value of risk and possible income from hunting for new DeFi projects is demonstrated by the example with HotDog token. It was released on September 2 and rose from $5 to $6200 per day, and then in a few minutes fell to almost zero. Another example is the SAVE coin. On September 14, its rate soared by more than 500%, to $5000, after the project was announced in his Twitter account by the creator of YFI. The very next day SAVE cost about $300.

There are several criteria that increase the likelihood of selecting a token with good potential. The first is limited emissions. The lower this indicator for an asset, the higher its price may be. For example, the key factor in the growth rate of YFI was the fact that there are 30,000 tokens in total. But the issue itself does not guarantee the rise in the price of cryptocurrency. On the contrary, many fraudulent projects issue coins with the issue of 30,000 in order to make inexperienced traders believe that this is the new YFI.

The second is the availability of the product. If a project has released an application or platform, as its polarity grows, more and more users will learn about the coin. This makes it likely that it will rise in price in the future.

The availability of the product also increases the chances that the token will be added to the trading floors. This is the third and probably the most important criterion for deFi projects. After the listing on the deFi exchanges, coins show rapid growth. Reasons: more users get the opportunity to invest in cryptocurrency, and the addition of the exchange gives more reason to assume that the project is not a pacifier.

However, buying DeFi tokens after they have been added to large sites is usually too late. Typically, listings on Coinbase, Binance and other industry giants coincide with the peak price of such coins. Therefore, the chance to earn on investing in DeFi tokens is higher if you buy them after appearing on small trading platforms in the expectation that they will be paid attention by market leaders.

Income farming

DeFi offers another way of earning risky money: "income farming." Here's how it works. The user makes a deposit on the platform in cryptocurrency, for example, Ethereum. This deposit pays interest, but in another cryptocurrency - in the native tokens of the project. Thus, the "farmer harvests." The coins you receive can then be sold to lock in the profit.

"Income farming" is now very popular. The reason is sometimes insane rates on deposits. In the early days of DeFi, platforms often offer returns of thousands of percent per annum. For example, the Spaghetti Money project in the first day of operation allowed users to receive up to 35,000% per annum in bitcoin. The Sushiswap project is over 2000%. And these are normal indicators for the sector.

Such bets are suspicious. And indeed there are a number of nuances. First, the amount of profitability depends on the number of users - the more of them, the fewer tokens will be per "farmer."

Secondly, the key role is played by the price of the coin, in which the "harvest" is collected. Typically, the first day after the application is launched, the price is high. But as soon as users start receiving payments, they sell tokens and their value drops. This has a corresponding effect on deposit rates.

Third, most DeFi platforms run without auditing the code. This means that the protocol can work with a critical vulnerability, and there is a risk for users to lose funds. For example, on August 12, the Yam platform started working, in the first day users contributed more than $500 million in cryptocurrency. The next day, the project developer reported that a code error had been detected. Within half an hour afterwards, the price of the Yam token dropped from $167 to $1.

Third, the scammers. They come up with different ways to trick users and steal their funds. One example is that the platform code has an extremely high withdrawal fee. Let's say that to make a cryptocurrency for "harvest" you need to pay $30-50, and to withdraw - more than $1000. Another example is that attackers, luring high-stakes users, may try to sell them their tokens that have no internal value.

Fourth, a misunderstanding of how "income farming" works. On September 11, a user toldhow he lost $5000. He introduced funds to the platform to receive 300% of the income per year with a deposit in Ethereum. However, later decided to change the plan to another, more profitable.

The Kimbap project offered a yield of 1000% if the platform's native token was used for farming. The user bought it for $5000 and deposited it. The next day the price of the coin fell more than 100 times. Such an outcome could be expected, as in this coin other traders "harvested" and sold it for profit.

Fourthly, not only the token of the project can become cheaper, but also Ethereum itself or any other cryptocurrency used as a deposit. You also need to take into account the commissions. The cost of one transaction on the ETH network due to the rapid growth in popularity of the DeFi sphere has increased tenfold since the beginning of the summer - to $6-10. Even more expensive has become smart contracts, the use of which is necessary for farming - $30-50.

The increase in commissions has put "farmers" in a difficult choice. On the one hand, they need to allocate a fairly large sum for this strategy to reduce the share of the commission. On the input/withdrawal alone, you can lose about $100. On the other hand, to get a substantial income, you need to contribute to the platform in the first days of its launch. And it is extremely risky to do this with untested projects that have not been audited.

On September 13, the former product manager of the analytical company Messari, Xiao Wang, called DeFi tokens "the investment opportunity of the decade." He believes that not using this chance is like not buying bitcoin in 2013 or Ethereum in 2015. However, there is a lot of garbage in this industry, so it is extremely important to choose projects that develop a real product and have a fundamental basis for growth.

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