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A Brief History of the Crypto Industry

The cryptocurrency industry has evolved and grown significantly since Satoshi Nakamoto published the first paper describing Bitcoin in 2008. A decade later, many people are familiar with the terms “Bitcoin” and “cryptocurrency.” 

At the peak of interest in cryptocurrencies in 2017, the query “ how to buy BTC ” was the third most popular search query on Google for queries beginning with “how to”. And while the market capitalization of different crypto assets has varied significantly, it has nevertheless grown to $10 billion (£8.1 billion or €9.1 billion) in 2013, and reached $237 billion at the end of 2019. Likewise, the number of unique Bitcoin accounts and transactions has increased by an average of 60% per year over the past five years.

 

Since 2009, early adopters and investors of cryptocurrencies have become significantly rich. Some of them, such as the Winklevoss twins or Changpeng Zhao, used their investment proceeds to create businesses in the crypto ecosystem. Cameron and Tyler Winklevoss founded the crypto exchange Gemini, and Changpeng Zhao founded the crypto exchange Binance, which is now one of the largest cryptocurrency exchanges in the world. 

There are many other examples. Valery Vavilov founded the mining company BitFury in the early stages of blockchain development. Today, his company also produces and sells hardware for mining bitcoins, generating revenue of over $400 million. Anthony Di Iorio financed the development of the Ethereum blockchain , and has also invested in many other crypto projects, including Qtum , Vechain, and Zcash.

Cryptocurrency Review: Is It Possible to Make Money with Cryptocurrency?

And although the first successes and profits in crypto have already been achieved, the industry is still in its early stages of development. The Internet, for example, was created in 1969, and the World Wide Web appeared only in 1990. In comparison, cryptocurrencies have only existed for a little over 10 years.

The latest research from venture capital firm a16z shows that the crypto space is evolving in cycles. Typically, the cycle begins with a rise in the price of crypto assets, which causes a stir on social networks and media. This publicity attracts more people who bring new code, new ideas, and create new projects. This gives rise to the next cycle. 

At the moment, we can identify three cycles of development of the crypto space, which had peaks in 2011, 2013 and 2017. Despite the fall in prices in each cycle, we see a constant increase in activity in developments, social media and the emergence of a number of startups. The peak of the next cycle will most likely coincide with new technological breakthroughs and an increase in the price of cryptocurrencies.

Long-term price growth in cryptocurrencies is likely to support the growth of interest in them among institutional investors. The volume of daily trading in cryptocurrencies is only 1% of the trading volume in the foreign exchange market . Despite the growth in capitalization to more than $ 200 billion, crypto assets still make up only a small share of the global stock market (the volume of which was $ 71 trillion at the end of 2019) and the global debt market (more than $ 100 trillion at the end of 2018), not to mention the global real estate market.

Recently, renowned investor and hedge fund manager Paul Tudor Jones admitted to holding bitcoin as a hedge against inflation, and the holdings of the bitcoin fund Grayscale Investments have skyrocketed – both early but positive signs of institutional adoption of cryptocurrencies.

This environment gives traders and investors the opportunity to make money in the crypto space. 

How to Make Money on Crypto: Six Strategies

There are many ways to earn money on cryptocurrency and get income in the crypto space. At the same time, it is necessary to take into account the high volatility of crypto assets, due to which the risks in this industry are also high, in addition to everything else, this area requires certain knowledge and experience.

Investment

Investing typically means buying and holding assets for an extended period of time. Crypto assets lend themselves quite well to a buy-and-hold strategy. They are extremely volatile in the short term, but have enormous long-term potential. Research from investment firm Fundstrat has shown that the majority of Bitcoin profits come from the top 10 trading days of the year. In fact, skipping those days from 2013 to 2018 would have resulted in a negative 44% annual return. 

 

It is because of this high volatility that long-term investing may be one of the best approaches to making money from cryptocurrencies. As with any other investment, investing in cryptocurrencies should be considered as a portfolio investment and based on investment goals and risk tolerance.

How to Make Money Trading Cryptocurrency

The main difference between trading and investing is the time horizon. While investing involves long-term investments, trading uses short-term opportunities. Trading cryptocurrencies requires certain skills and experience. In particular, it will be useful to be able to read charts and understand technical indicators . At the same time, deep knowledge of blockchain and various projects is no longer so important for trading. Earning on cryptocurrency through trading requires an excellent understanding of how prices behave historically and how to use this to predict prices for the near future.

To make money trading cryptocurrency online, investors can buy or sell both the cryptocurrency itself and derivatives such as contracts for difference (CFDs) . When trading cryptocurrency using CFDs , you speculate on the price direction of the underlying asset without actually owning it.

You can open a long or short position, depending on whether you expect the asset price to rise or fall. Thus, CFDs provide the opportunity to earn on both bullish and bearish movements in security prices. 

Contracts for difference (CFDs) allow you to trade on margin , giving you greater liquidity and easier execution. However, it should be noted that CFDs are a leveraged product , so both profits and losses are magnified. 

Learn how to make money trading cryptocurrencies with CFDs with Capital.com's comprehensive guide and trade them using our AI-powered trading platform.

Staking and lending

Staking and lending are similar and allow investors to make money on altcoins. Staking essentially means locking coins in a cryptocurrency wallet and earning rewards for verifying transactions on the Proof of Stake (PoS) network. Instead of mining, the PoS algorithm selects transaction validators based on the coins to stake. PoS does not require expensive software and is much more energy efficient. Another option is cold staking, which allows investors to earn on tokens while holding them in an offline wallet. Tether, NEO , and Stellar (XLM) are some popular coins for staking.

With staking, investors essentially lend coins to the network to keep it secure and verify transactions. Another way to make money with crypto is to lend coins to other investors and earn interest on the loan. Many platforms facilitate crypto lending, including exchanges, peer-to-peer lending platforms, and decentralized finance (DeFi) apps.

Crypto Social Media

In 2016, Dan Larimer launched Steemit, the world’s first blockchain-based social platform. The platform rewards its users with its own coin, STEEM, for creating and organizing content. Steemit ran into some trouble in 2017, and its user base has been declining ever since. However, many other platforms have been created based on its idea of ​​rewarding users for creating content, such as Narrative, Sapien, and Scorum.

Mining

Mining is a very important component of the Proof of Work (PoW) mechanism and one of the oldest ways to earn money on cryptocurrency. It is the process of verifying transactions and ensuring the security of the PoW network. For performing these functions, miners receive new coins as a reward. At the very dawn of Bitcoin development, mining could be done on a regular PC, but today specialized mining software is required for this.

As for network support, running a masternode can also be profitable. Masternodes are wallets that store a copy of the entire network. 

Both methods of earning cryptocurrency require technical knowledge and significant investment, both initial and ongoing.

Airdrops and forks

Airdrops and forks are about being in the right place at the right time. Airdrops are free tokens that are usually distributed by exchanges to promote themselves and grow the user base for a project. Forks are protocol changes or updates that create new coins. When a blockchain forks, or divides, coins on the original chain usually receive free tokens on the new network.

Stay up to date with the latest crypto market developments with Capital.com to find the best trading opportunities.