Trading Bitcoin: How to Make Money Buying and Selling Cryptocurrency

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Trading Bitcoin: How to Make Money Buying and Selling Cryptocurrency

With the feasibility of creating Bitcoin through mining decreasing with every halving, many are looking to turn a profit by trading Bitcoin and other cryptocurrencies. There are many advantages to trading over mining, not least that you can get started right away. Below are a few ways which can help you make money buying and selling cryptocurrency successfully.

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1. Buy & HODL Strategy

There is a reason this strategy is at the top of the list: because it is the most widely used technique of all. Investors usually buy coins such as BTC, LTC and ETH (amongst other altcoins) and wait until their value appreciates.

To reap the benefits of such a strategy, one needs to differentiate between stable and volatile assets that can fluctuate in value substantially, which in turn, can result in frequent profits. Cryptocurrencies like Bitcoin and Ethereum are normally the safest bet when it comes to regular value appreciation.

Nevertheless, if you consider yourself more of a risk taker, and aspire to buy and sell bitcoin for profit, you can do the legwork and trade an asset you are confident will increase in value. Just be sure to make a good analysis before you commit to HODLing it.

One good tip to keep in mind when HODLing, you do not necessarily need to opt for the most expensive assets for you to make profits. With thousands of smaller valued altcoins, it would be good practice to have a mix, choosing a handful of the ones which seem to have potential in price appreciation. Also keep in mind, these altcoins need not be the most popularly listed in exchanges.

2. Dividend Earnings

Much like stock dividends, you can choose to invest in a dividend cryptocurrency and get a fixed interest on said investment. Needless to say, this would require you to buy and hold cryptocurrencies for the timeframe you would like to earn a profit.

Some great dividend cryptocurrencies worth investing in include BNB, NEXO, COSS and KUCOIN. But do your research, because just like stocks, you will have to make an educated decision when choosing which of these coins suit your portfolio best. Many coins do not require you to stake for you to earn interest.

3. Day Trading

Contrary to popular belief, day trading does not simply entail an investor to hold an asset until it appreciates in value. It requires the intricate analytical and technical skills to successfully become a day trader. One effective, albeit rather time-consuming strategy to adopt (if you aspire to become a successful day trader) is studying market charts. This might require endless hours of analysis, but in the end, such time will prove fruitful and useful for evaluation since they present the listed assets’ performance.

4. Crypto Arbitrage

Notorious for its volatility, the world of cryptocurrency also gets a bad rep for being largely unregulated. Consequently, there are a lot of variations in assets’ values and products’ pricing, amongst other factors.

While the majority of exchanges set their own asset prices, arbitraguers are able to trade between exchanges or perform what is known as ‘triangular arbitrage’ on a single exchange. However, be warned, this is a risky technique and arbitrage trading can lead an investor down a slippery slope. Risks involved include slippage, price movement as well as transfer fees.

That being said, if well researched, one can make a handsome profit buying from cheap sources and selling on what some might describe as ‘overpriced’ exchanges. This is describes the practice of arbitrage in a nutshell.

5. Run Nodes

Perhaps a lesser opted for trading technique due to its complexity, particularly for newbie traders. For this reason, it is no surprise that this is a less sought-after trading strategy. A node constitutes of a computer connected to the Bitcoin network that uses peer-to-peer agreement.

Basically, there is a network of nodes that communicate with each other, spreading information on transactions and blocks. Data is then transferred on these nodes and create the entire blockchain network.

A lot of cryptocurrencies pay node operators to document real-time activity on their native blockchains. Owing to the fact that such a process is so convoluted, necessitating a certain minimum number of coins under what are referred to as ‘master nodes’, cryptocurrency platforms opt to outsource this service to a third party against a fee.

Crypto Trading Bots

Trading bots have been used in traditional markets for a while, and are now available to crypto markets as well. Bots remove the majority of human flaws, such as emotional trading, uncertainty, and tiredness. They operate 24 hours a day and never get bored checking, double checking, and triple checking Bitcoin prices across different exchanges. Such bots could possibly enhance possible returns for the investor who wants to buy and sell bitcoin for profit.

Some crypto trading bots are also able to carry out arbitrage. This is the process by which different cryptocurrencies are bought and sold on different exchanges. For example, a bot might purchase Bitcoin from Binance at a low price, and see an opportunity to sell it for profit on another exchange, such as CEX.

The selection of trading bots is growing, and whilst there are some free versions, these are generally not recommended. Subscription bots have a better track record, but might be expensive, based on the value of your trades.

Human Psychology

There are tens of thousands of people trading crypto every day, and a good number of these are in it just for FOMO. In order for you to buy and sell Bitcoin for profit, you need to understand the very basics of human psychology. Inexperienced traders tend to fear bear markets and panic sell in order to retain some of their investment.

You should not fear such markets. Even when Bitcoin drops 30%, keep your investment and consider investing further. An external factor, such as positive crypto news or a bull market will bring those novice investors back and raise the price once more. Then, once you reach your profit goal you can sell, and wait for the next bear market to reinvest.

You can also analyse several online tools to help you arrive at a conclusion about whether to sell, buy more or hold your investment.

Airdrops

Airdrops are ways to get free coins with little effort. They are usually provided to users in exchange for their time or feedback. Marketing campaigns for a new coin could also lead to free coins, and you can find several of these on Coinbase. Once you have the free coins it is up to you whether to store them in a crypto wallet or whether to sell them for a profit.

Interest

An often overlooked factor when one wants to make money buying and selling cryptocurrency – as simple as it might seem – is through interest. There are several ways to achieve this, both through crypto lending platforms, margin lending, and by owning PoS coins. Interest rates vary considerably but can earn you upwards of 12% per annum at a very low risk. By investing your crypto in this way you will be turning a profit in times when trading might not provide the best return.

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