Most retail investors adopt a HODL mentality, the strategy of holding a coin for long-term growth. Whilst this is a solid approach, there are other ways to make money in crypto which every investor should explore.
Think of it as diversifying your money-making mechanisms. [iMGCAP(1)]
Take the past few months as an example.
The average HODLer made huge gains in December on the back of Bitcoin hype and mass media attention. But as Bitcoin experienced a major correction in early January dragged the whole market down with it. HODLers sat through a 4 month bear market with their smaller alt-coin holdings slowly bleeding every day.
So how do we make money in a bear market? How can we make money in a sideways market?
The key lies in diversify our money making strategies.
How Do You Make Money?
Take a second to analyse your portfolio. How do you look at your holdings?
- Do you group by their market cap? (ie. micro, small, mid, and large-cap)
- Do you group by category? (ie. platform, utility, currency, security, or DEX)
- Do you group by investment term? (ie. short, medium, and long-term)
Say you organise your portfolio by investment term. This might be how you break down your portfolio:
Long-Term: these are your HODL coins, the solid projects that you believe in and continue to hold regardless of price action. You ignore short-term fluctuations in price, but over longer time frames these projects double, quadruple, go 10x in value.
Mid-Term: these are newer and less established projects that you see good potential growth in. They are not as rock solid as your long-term holdings but have decent prospects to perhaps one day become a long-term hold. It is more important to time your entry with these holdings to avoid buying when overpriced. In a bull market, these smaller alts will bring you better returns than your traditional large-cap cryptocurrencies.
Short-Term Trades: this is your fun money which you use to day/swing/momentum trade (whichever suits your fancy!). You dont necessarily do deep fundamentals analysis on these projects as you are trading more on technicals analysis. This should only be a small portion of your portfolio.
But there is another money making strategy that is often overlooked by investors that fits into any organization of a portfolio.
This is where we find the 7 ways to make money every day in crypto.
Never put your eggs all in one basket. If you really have to, at least make sure theyre all different colours.
Passive Income
Passive Income is income received on a regular basis requiring minimal to no effort to maintain
Doesnt that sound fantastic?
Rental payments from an investment property or dividend payouts from holding large blue-chip stocks are traditional forms of passive income. But did you know you can earn passive income from crypto as well?
There are a few different cryptocurrencies that currently offer dividends or payouts that range between 5 to 10% per annum. These payouts are IN the cryptocurrency, so are compounded by any growth in the currency valuation over time.
Think about it, a 10% return sure beats the 2-3% p.a. interest rate offered by your bank. It beats most government bonds at present in the 3-4% p.a. range. You could argue that it even beats the housing market in certain countries (In Australia house prices in Sydney have fallen 2% since January).
Some would say 10% is on par with stock market returns, but youre forgetting that these crypto dividends are compounded by any future growth of the base currency.
Say you invested $400 in ARK today. At the time of writing, ARK is priced at $4, so you would have a total of 100 ARK. Over the course of the year, through staking, you receive 10 additional ARK absolutely free. So you have 110 ARK now. Lets take a guesstimate and say ARK merely reaches its last ATH of $9 in a years time. Your initial investment of $400 is now worth $990, a 147% gain. Thats an additional 22% gain from your crypto dividend.
Here are a few projects providing crypto dividends or passive income.
ARK
ARK is a 3rd generation blockchain platform utilizing a Delegated Proof of Stake (DPoS) consensus mechanism (DPoS). ARK has one of the best Desktop Wallets which is easy to use and fully compatible with the Ledger Nano S, making it an attractive option to set up for staking.
To receive dividends from the ARK system, you simply have to buy some ARK, hold ARK in your wallet and vote for a delegate. The delegate will then provide you with a payout as a reward for voting for them.
Delegates are users that wish to help run the ARK network, much like Bitcoin miners in the Proof-Of-Work mechanism. To become a delegate, a user pays a 25 ARK fee and is registered as a delegate. ARK holders then vote for delegates, and the top 51 delegates are selected to verify transactions on the network and receive rewards for doing so. Most delegates create profit sharing plans to get users to vote for them; this is how ARK holders receive ARK dividends.
The average return for an ARK holder voting for a delegate is 10% per annum. Some of the most popular delegates include Biz classic, Dutch delegate, Jarunik, Sharkpool, Biolyn and Arkpool.
Not sure which delegate to pick? Head over to the ArkDelegates subreddit for more information.
Need help setting up your voting? Check out this tutorial.
Want to buy some ARK? You can purchase ARK on Binance, Bittrex, and COSS.
LISK (LSK)
LISK is a similar blockchain project utilising the DPoS mechanism and delegate voting. In LISK, the top 100 delegates stake coins and LISK holders can similarly vote for a delegate based off the payout they are offering.
Learn more about setting up LSK here.
Want to buy some LKS? You can purchase LSK on Binance, Huobi, Bittrex, and COSS.
NEO
NEO, formerly known as AntShares, is a blockchain platform utilizing a Delegated Byzantine Fault Tolerance (dBFT) algorithm. Like ARK, NEO has a very user-friendly Desktop Wallet developed by City of Zion that is fully compatible with the Ledger Nano S.
NEO holders receive their dividends in the form of GAS. GAS is the cryptocurrency used as the fuel on the NEO blockchain, and is given to all NEO holders with the generation of each new NEO block is generated. At the time of writing, dividends on holding NEO range between 4-5.5% p.a.
Want to buy some NEO? You can purchase NEO on Binance, Bitfinex, Huobi, Bittrex and Kucoin
VeChain Thor (VET, formerly VEN)
If youve been in the cryptocurrency space recently, youve probably heard of VeChain. It was shilled so much that mentions of VEN were banned from the subreddit r/cryptocurrency for a month.
There are two types of tokens used on the VEN (to be renamed VET) ecosystem:
VET: VeChain Tokens are used as a smart payment currency. This provides a user with the rights and priority to use the VeChain Blockchain
THOR: THOR Power is the fuel of the VeChain blockchain, similar to what GAS is for NEO. THOR is consumed or burnt when smart contracts are executed or when VET is transferred between different addresses.
The VeChain network will have 4 types of nodes determined by the amount of VET held and the maturity date. Without delving into the specifics, Masternodes that hold more VET earlier on will receive a higher percentage payout.
All VET holders will generate THOR passively, but those running a masternode will receive a higher percentage payout.
Want to buy some VET (currently VEN)? You can purchase VET on Binance, Bithumb, Huobi, Kucoi, and Liqui
Icon (ICX)
ICON utilises a Loop Fault Tolerance (LFT) consensus mechanism, with a similar payout system to those using DPoS. ICX holders similarly vote for delegates who help to run the ICON Blockchain, and delegates reward voters by paying them a portion of their earnings.
Want to pick up some ICX? You can purchase ICX on Binance, Bithumb, Huobi, and COSS
PIVX
PIVX is fork from DASH and utilises a Proof-of-Stake consensus mechanism. Like the VeChain system, users running a masternode on PIVX receive higher payouts than those simply staking their PIVX. To run a Masternode you need at least 10,000 PIVX.
Dont have 10,000 PIVX? Fear not! There is no minimum PIVX requirement, meaning you can stake any amount of PIVX in a wallet and receive a payout. The current dividend is about 5% p.a.
Want to pick up some PIVX? You can purchase PIVX on Binance and Bittrex
Stellar (XLM)
Whilst technically not a crypto that pays a dividend, holders of Stellar Lumens can receive inflation payouts by joining the Lumenaut Community Pool. It might not be as much as ARK or LISK in terms of payout, but its still free money! So if youre a XLM holder make sure you set up your Lumenaut! Instructions are pretty easy to follow.
Conclusion
Generating passive income is an important strategy to consider when setting up your cryptocurrency portfolio. Look to diversify your holdings by including projects which pay dividends so that you can still build your stacks in a down market!
