How People Are Making Money in Crypto

“Crypto millionaire” and “Bitcoin billionaire” are terms that come up often when talking about cryptocurrencies. It’s probably no surprise that crypto has created more millionaires than any other industry in the past decade. Current estimates put the number of crypto millionaires at around 88,200. And with an increasingly favorable market that just recently beat previous highs, the conditions are ripe for this number to grow. 

Fortunately, in a bull market, there is no shortage of opportunities for investors. Here is a look at the various ways that people are making money with digital assets. 

Method	Description
Airdrop Farming	An airdrop is a promotional event where a project distributes free tokens to users. The best airdrop farmers seek out and engage with multiple airdrops to maximize earnings.
Holding (HODL)	Buying and holding within the community is the oldest way to invest in cryptocurrencies. It is a simple, passive approach.
Trading	When people realize they can make money speculating on the value of an asset, they begin to trade it. It’s no different with crypto.
Mining & Validation	Miners and validaters are users who help secure transactions on a blockchain network.
Stacking & Liquidity Providing	Involves locking a certain amount of crypto in a protocol/blockchain for a certain period to support its operations. Participants receive rewards in exchange.

Airdrop Farming

If you’re active in crypto communities, you’ll notice that few events generate as much hype as airdrops. And that’s because they mean one thing: free money.

And who doesn’t love that?  

An airdrop is a promotional event where a project distributes free tokens to users. The goal is typically to create awareness, encourage adoption, or reward loyal community members. To participate in one, users must complete simple tasks, like signing up for newsletters, joining social media channels, or holding a certain amount of a specific coin in their wallets.

But while collecting free money looks easy enough, having a strategy helps. The best airdrop farmers systematically seek out and engage with multiple airdrops to maximize their token earnings. 

This method can be highly lucrative, especially if the airdropped tokens appreciate in value over time. However, it requires continuous effort to stay updated with ongoing and upcoming airdrop opportunities. You should also watch out for risks such as spam or phishing attempts from less reputable projects​  

Holding [HODL]

If chasing airdrops feels like too much work, you can always relax and HODL. This is what many early adopters of popular cryptocurrencies are doing. 

Buying and holding, popularly known as “HODLing” within the community, is the oldest way to invest in cryptocurrencies. It is a simple, passive approach. You buy assets and hold on to them for an extended period. If their value increases, you’ve made a profit.  

This strategy accounts for many crypto millionaires, especially among early adopters of popular cryptocurrencies, like Bitcoin (BTC), Ethereum (ETH), Solana (SOL), Binance Coin (BNB), and many more. 

Thus, while it’s generally a viable way to make money in crypto, HODLing has the highest returns if you’re an early adopter. The earlier in its lifecycle you buy into an asset, the higher your profits will be if it actually increases in value. 

Here is a wallet that held onto 50 bitcoins for 14 years. It’s now worth $ 3.67 million. 

Trading

Usually, when people realize they can make money speculating on the value of an asset, they begin to trade it. It’s no different with crypto assets. 

People have been making money trading crypto since the early days of Bitcoin. Trading, in this case, involves regularly buying and selling assets to take advantage of price fluctuations. This approach is so popular that it is responsible for the development of crypto exchanges, which are some of the biggest financial platforms in the world. 

Crypto traders trade on exchanges. These can be centralized exchanges (CEXs), like Binance and Coinbase, or decentralized exchanges (DEXs), like Uniswap and Pancakeswap. CEXs are typically owned and administered by private companies, while DEXs have no particular owners and are administered by their respective communities of users. 

Here is an example of a swing trader:

But whether on a DEX or CEX, most traders make money by day trading, swing trading, or arbitrage.   

• Day Trading: Day traders aim to profit from short-term price movements. So, they buy and sell digital assets within the same day, relying heavily on trading techniques, tools, and real-time data to identify opportunities. 
• Swing Trading: Swing traders hold onto assets for several days or weeks to capitalize on upward or downward market trends. This requires patience, a good understanding of market cycles, and some proficiency in using analysis techniques. 
• Arbitrage: This is trading done to capitalize on price differences for the same asset across different exchanges. 

Mining and Validation

If you randomly pick a person from the crypto community, they’re more likely to be a trader or  HODLer than a miner or validator. But this doesn’t mean they’re not profitable. Rather, they are more demanding tasks with a higher entry barrier. 

Miners and validators are users who help secure transactions on a blockchain network. This is what allows crypto to be considered a currency, even though it isn’t issued by a government.

Miners secure transactions by providing computational power to solve complex cryptographic puzzles on proof-of-work (PoW) blockchains like Bitcoin (BTC). 

Validators, on the other hand, can be found on proof-of-stake (PoS) chains like Ethereum, Cardano, and Polkadot. They confirm and verify new blocks of transactions before they are added to the blockchain. 

For their service to the network, miners and validators are rewarded. Miners receive newly minted coins for every new block added to the blockchain, while validators get a portion of transaction fees paid by other users. 

Also, PoS blockchains typically require participants to stake a certain minimum value of assets to become validators. For example, Ethereum requires a minimum of 32 ETH to activate a validator. This ensures that the validator has a vested interest in the well-being of the blockchain.

Staking and Liquidity-Providing

When you believe in an asset, the temptation to HODL is understandable. However, some crypto users believe just keeping your assets locked in a wallet is an inefficient use of value. If only there was a way to utilize your tokens without having to sell them. 

Well, there is! 

Staking is a method used by many in DeFi to earn passive income on their assets. It involves locking a certain amount of cryptocurrencies in a protocol/blockchain for a certain period to support its operations. Participants then receive rewards in exchange for the assets they stake. 

Popular DeFi staking platforms include Lido Finance, Aave, and Curve Finance.  

Liquidity providing is another way people make money from their holdings. Here, investors provide liquidity to DEXs, which typically rely on their users to provide liquidity for trading. 

Those who take up this task are known as liquidity providers. They play their part by locking assets in liquidity pools for other users to trade. In exchange, they receive a portion of the pool’s trading fees as rewards. 

Because they’re quite passive, staking and liquidity providing don’t generate the highest returns. For those needing more, this is where the next technique comes into play.  

Yield farming 

In DeFi, yield farming is generally any effort to maximize returns earned from staking and liquidity providing. It relies on complex strategies that may involve moving assets between different chains, pools, and protocols based on their interest rates and reward structures.

Do Your Own Research

There are many ways you can make money in crypto. Nonetheless, you should know that the volatility of the market makes investing in digital assets very risky. If you’re not careful, you could lose money just as easily as you could make it. This is why you should always conduct your own research into an asset, protocol, company, and/or team before investing.