Can You Make Real Money With Cryptocurrency

The easiest way to earn money with crypto is through BlockFi. Deposit crypto and start earning passive income today!

Everyone knows the simplest way to make money with cryptocurrency: buy it low, sell it high. However, this is much easier said than done. Cryptocurrency is a high-risk asset with volatile price movements. With the development of decentralized finance programs and lending platforms, there are plenty of ways to make money with cryptocurrency without taking on too much risk.

The innovative nature of crypto means you can generate and grow wealth in innovative ways. Let's take a look at some of the ways that you can earn more cryptocurrency from your initial investment.

Option 1: Cryptocurrency Lending Platforms

Thanks to blockchain technology being able to replace the middleman, investors can earn much higher interest rates with cryptocurrency. Lending crypto isn't like letting your buddy borrow $20 and never getting it back. When you use crypto to lend funds, your money is protected by a smart contract. Once entered, these contracts must be executed. Your deadbeat cousin can't just turn off the phone and hope you forget about it.

How can a loan be guaranteed like this? Well, those who take out loans must offer collateral to take out the loan. If the user defaults on a payment, then the smart contract will use the investors' collateral to make the loan payments.

BlockFi

One of the most attractive, low risk investments in cryptocurrency are stablecoin interest accounts. Stablecoins are pegged to other assets, most commonly the U.S dollar. This way, you can earn interest off of a stable asset instead of being exposed to cryptocurrency.

Why not just buy bonds then? Here's the difference: 10-year treasury yields are currently hovering around 1%. Stablecoin interest accounts yield 6% to 12%, depending on the platform you use.

With BlockFi you can ditch your low-yield savings account and start earning great returns without taking on much risk at all. If you're a more risk tolerant investor, then BlockFi's loans and interest-bearing cryptocurrency accounts may be for you.

Option 2: Mine Cryptocurrency

Mining cryptocurrency means using computing power to help verify crypto transactions. Think of your computer as your neighborhood bank teller. You get paid to make sure that deposits and withdrawals get to the right place.

Anyone can become a crypto miner — provided you have the right equipment. Not just any computer can be effectively used to mine. It needs to be extremely powerful to compete with all of the other "bank tellers" who are looking to verify transactions and make money. These huge computer rigs also use up extraordinary amounts of electricity, causing some municipalities to ban the practice.

As time goes on, mining will become less profitable. The more attention it receives, the more miners enter the space. More miners means profits are spread more thinly throughout the community. But for those who can acquire the hardware and navigate the competition, there is still plenty of financial value to earn. Many miners focus efforts on up-and-coming coins expected to rise in value over time.

There's an entire industry of companies and individuals that sell rigs focused on mining certain coins. Focused rigs only allow you to mine a single coin but usually mine more efficiently. There is risk of losing the investment in your rig if your chosen coin changes its mining criteria.

Option 3: Trade Cryptocurrency

As a whole, the crypto market is stable enough to set the values of coins directly against each other. You don't have to trade your Bitcoin for USD or Japanese Yen — you can trade Bitcoin for Tezos, Ethereum or Zcoin on a trading platform. Many people do this because they believe 1 coin will rise in value more quickly than another.

Crypto traders value anonymity as well. Governments have focused on requiring exchanges to identify traders who want to move from cryptocurrency into traditional fiat. More secretive coins like Monero have been able to avoid this regulation. As a result, many traders are using Bitcoin and Ethereum as a gateway into quieter coins.

There are 4 major types of exchanges that facilitate trade in the crypto space:

Fiat-crypto exchanges: These are exchanges that offer transfers between traditional currencies like the USD and cryptocurrencies. Governments keep them highly-regulated with know your customer (KYC) standards. These standards require you to provide selfies, IDs and sometimes tax records. They only deal in the bigger cryptocurrencies like Bitcoin or Ethereum.

Crypto-crypto exchanges: These exchanges don't offer trades into fiat currencies. They are usually less regulated and may not require any ID at all to use.

Peer-to-peer (P2P) exchanges: Instead of taking the other side of your trade, P2P exchanges match buyers and sellers.

Brokers: If you trade on a brokerage, you actually don't ever own the cryptocurrency you are trading in. You are actually trading a contract for difference (CFD), a financial device that tracks the price of the underlying asset. Brokers must get a license from a regulatory body and follow the rules that the regulator sets forth. If you want to trade under the watchful eye of a traditional regulator, use a broker instead of an exchange.

Option 4: Get Paid in Crypto

As long as you have a digital wallet, you can accept payment for your goods and services in cryptocurrency. Many major businesses accept crypto including Starbucks, Whole Foods, Nordstrom, Subway, Microsoft, Amazon and others. Zogby Analytics found that 33% of small businesses accept crypto.

This is a great option for people who want to build a crypto portfolio without the need to learn about the technicalities of mining or trading.

Use Crypto to Make Money

You might laugh at the returns that traditional checking and savings accounts offer right now. Some researchers even say these rates could move into negative territory to ensure a COVID recovery. Imagine paying a bank to hold your money, and you'll see why the market for crypto is expanding.

All value-generating and trading activities in the crypto space carry risk. FDIC and SIPC insurance doesn't exist in the space yet either. But it's also true that you risk losing your buying power in traditional banks with interest rates that don't outpace inflation. With all the new opportunity, exploring how to make money with cryptocurrency is worth your time.

Benzinga crafted a specific methodology to rank cryptocurrency exchanges and tools. We prioritized platforms based on offerings, pricing and promotions, customer service, mobile app, user experience and benefits, and security. To see a comprehensive breakdown of our methodology, please visit see our Cryptocurrency Methodology page.