We’ve all heard stories of cryptocurrency investors who made massive profits. We’ve also heard of other unlucky investors who lost massively to the crypto market. This brings up the big question: is cryptocurrency profitable? If it is, how profitable is it? We’ve answered these questions and others you might have about the profitability of cryptocurrency. Read on to find out more.
How to Profit from Cryptocurrency
You can make money from crypto in many ways. Let’s discuss the major ones briefly. Mining is a major avenue to huge crypto profits. It involves performing tasks of varying difficulties to get cryptocurrency rewards.
Staking involves holding cryptocurrency without spending. These are used to verify transactions, and you get rewards similar to the interest you get on your credit balance.
Trading requires you to buy and sell cryptocurrency for a profit based on market movement. However, investing means you buy at a low price and sell at a higher price later.
Crypto backtesting and paper trading are valuable tools for both traders and investors to test their strategies and hone their skills in a risk-free environment before committing real capital.
Other ways of making money in crypto include creating content for crypto social media and getting free tokens from airdrops and forks.
It is evident from the above that you can make good money from cryptocurrencies, but does that make them a good investment? Let’s find out.
How Profitable is Crypto?
Many cryptocurrencies are available, and others are being created continuously. But is it profitable to get involved with any of them? The answer is yes—for some cryptocurrencies.
Cryptocurrencies can be incredibly rewarding, whether you trade them, invest in them, or mine them. If you are thinking about investing in cryptocurrency, there are several things you should think about. Some of these considerations include risk, volatility, security, and liquidity. What do these terms represent, and how do they impact the profitability of a cryptocurrency?
Volatility
It is well known that cryptocurrencies are unstable. They consequently go through significant price fluctuations. The implications is that you might quickly realize big returns or lose the majority of your investment. On December 17, 2017, Bitcoin was worth $20,000, but a few weeks later, the price plummeted to just above $7,000. This thrill of profit or loss is not for all people, so it’s up to you to decide if you’re up for it.
● Risk
The extreme volatility of cryptocurrencies also means crypto investments are very risky. However, the volatility is expected to decrease over time, especially for major cryptocurrencies like Bitcoin and Ethereum. The decision to choose cryptocurrency will depend on your risk tolerance and how you see the future of cryptocurrency.
● Security
Cryptocurrencies employ a wide range of technologies to serve their purpose. The underlying technologies have various degrees of efficiency and security. Some blockchains are extremely secure and have never been compromised, while others have experienced attacks. Choose a cryptocurrency with a robust security system to minimize your risk of losing money.
● Liquidity
This is a very important determinant of a cryptocurrency’s profitability; a cryptocurrency that can’t be sold for money is useless, right? That‘s what liquidity entails. Liquidity is how much demand and supply there is for an asset. A liquid asset is one that is easily exchangeable or tradable for other assets. Although some other digital assets aren’t as liquid as Bitcoin, it is. Therefore, before making an investment, it’s critical to ascertain a cryptocurrency’s liquidity.
● Adoption
Cryptocurrencies, especially Bitcoin, have gained widespread acceptance. Bitcoin has been listed on some major financial exchanges. Some major companies, like MicroStrategy and Tesla, hold large amounts of Bitcoin. All of these point to more people using cryptocurrencies, which is a good sign that they are good investments.
The Verdict
So, should you invest in cryptocurrencies? Absolutely! But you have to look within yourself before taking a step. Are you capable of watching crypto price swings? Do you believe that cryptocurrency is part of the future? Are you prepared for the risks that come with crypto? You might want to consider crypto investments if you answered positively to these questions.
After looking within yourself, you have to look without. What are your cryptocurrency preferences? Are they extremely volatile? Are they secure? Do they have real future plans? Are they liquid? Ensure that you choose a cryptocurrency with a good chance of growth. And also, do not invest with money you cannot afford to lose; it’s very important.
