When prices go up and down, some traders lay low until things go back to normal. It’s a natural reaction, but major market turbulence often brings money-making opportunities. Let’s see how to make a profit from crypto when the market is feverish.
Below are 4 smart legal strategies to fish in the troubled crypto waters.
Strategy 1: Buy Low and Hold
To a beginner, a sudden price drop looks like a signal to panic-sell, but more seasoned traders often see it as a chance to buy really cheap. If the asset has real value, its price is likely to rise when the market stabilizes again.
Just have a look at a recent BTC price chart. It’s obvious that the big drops earlier this year could have brought you considerable profits. The V-shaped price curve means that you had a chance to buy BTC for $3,600 in the middle of March to sell it for $10,000 at the end of May. Or to hold it in the hope the price will reach $15,000, as some experts predict.
If you wonder why such sharp price corrections are possible, read our article “Why Cryptocurrencies Are So Volatile?”
Long story short, the crypto market is now full of amateur traders who are very sensitive to news and cannot resist stress like pros. You can keep your head when all about you are losing theirs? Now you know how to make profit from crypto using this advantage.
Strategy 2: Follow the Trend (aka Position Trading)
This strategy is good for those who are naturally risk-averse and have no time to follow short-term price fluctuations. In this is your case, you can align your trading activities according to big market trends.
Ok, let’s consider a real-life example. Your friend Bob believes in some token. Currently, the price is low, but Bob has made research and found out that the team is preparing a major update. Also, he has a reason to think that the token will grow in value due to the new law coming into force soon. Some experts agree that the token looks promising, and its trading volume has been slowly growing so far. Encouraged by this info, Bob places a buy order for 1,000 tokens offering a very nice price.
In a few months, Bob sees he made the right choice. The price of his token starts to grow because the team has released the promised update and the new law has created additional use-cases. Bob keeps holding his tokens until he sees the first signs of a downward price trend. At this point, he sells his holdings and makes good profits.
As you see, Bob bought and sold the asset among the first, when he noticed an incipient trend. This strategy allows you to avoid big risks, but you may need to wait until the right moment comes. It means holding an asset for weeks or even months, depending on how the situation develops.
Strategy 3: Buy, Lock, Stake
Another strategy would be to make friends with staking coins and use them to generate passive income.
In 2020, some popular staking coins include Tron, Tezos, Cosmos, KAVA, DASH, and Lisk. The procedure is rather simple: you buy some amount of staking coins and lock them using a wallet that provides this option. The locked coins participate in transaction validation in PoS (Proof-of-Stake) systems. The more coins you lock, the bigger your potential staking profits.
In a way, staking is similar to mining. You provide your resources to support the operation of a blockchain network and get rewarded for it. The difference is that you don’t have to invest in expensive mining hardware and cooling equipment and pay huge electricity bills. Instead, you contribute your coins. If you decide to quit, you can easily withdraw and sell them at any time.
By the way, Ethereum has plans to shift to the PoS protocol, too. The deadline is still unclear, but ETH supporters believe it will happen in the near future.
Strategy 4: Using a Lending Platform
Finally, the fourth strategy to make a profit out of crypto is to lend it to other people and earn some interest — the same way you would lend a fiat currency. So far, few users have tried this option, but it’s a good way to generate additional income without staring at a trading terminal for hours.
Are you a beginner who is still uncertain of his trading skills and has low risk tolerance? Or maybe you need some cash, but don’t want to sell your bitcoins? Today, you can deposit them in a crypto lending platform for a fixed period of time and get a fixed reward.
Here are some of the popular platforms in 2020, with their approximate interest rates:
Using a landing platform may be a good solution, but consider all pros and cons first. The main pro is that you don’t need any advanced skills to lend your BTC or ETH. On the other hand, you send your money to a wallet controlled by a third party. In most cases, the process is secure, but you never know what can happen.
Finally, before locking your funds with such a service, make sure it’s not a scam. A big red flag would be a promise of abnormally high returns on your holdings. If you doubt, stick to a platform with a good rep, like the ones from our list.
How to Make Profit From Crypto When the Market Is Unstable: Conclusion
These days, the crypto landscape is still very young, changeable, and hard to predict. The pandemic crisis creates additional turbulence. It makes you think twice before doing anything with your money.
Depending on your character and trading expertise, you may opt for one of the 4 strategies we briefly described above. Some of them are not for the weak of heart while others are rather comfortable and safe for a newbie.
The choice is yours.