Let’s face the music right away.
Trading Is Not For Everyone
And it’s not just that crypto trading is not for everyone.
Even if you have enough skill or edge to trade, very often there is just not a good opportunity to open a trade.
The market is choppy, there are stop hunts, the volume is too thin.
So then, can you profit from your crypto holdings even if you don’t want to trade?
The answer is you can with a basic crypto strategy, but be warned. For the most part it requires you to be ultra-longterm bullish on crypto.
Let’s take a look at the options you have.
1/ Build a “hodl” strategy
This is the simplest method ever.
The “buy and hold” strategy is the staple of retail legacy finance as well. In crypto, the idea is the same, except you apply it on a cryptoasset instead of on a stock.
Oh, and we call it “hodl” in crypto, not “hold”.
Beginner HODL Crypto Strategy
- Find a crypto with good fundamentals: network effect, resistance to bad news, a use case showing that it’s more than a vaporware.
- Once you find cryptocurrencies you want to keep, decide on how long you are willing to hold them. Ballpark is good enough: A decade? A year?
- Split that period and make a mental note on how often you will re-evaluate your investment. You can go with seasonal cycles, as long as they are relevant. Crypto traders all week all year, but there are seasonal things like the halving cycle of Bitcoin.
- Every time your point of re-evaluation comes, you can decide to rebalance and take out some amount from your profits, or to cut your losses, or to just keep holding everything.
If you are wondering about how much to invest and how to pick the best time to buy - that’s already speculation. If you are a beginner, you will do best with DCA, which is dollar cost averaging.
To execute a beginner HODL strategy, you will probably need some of these:
- Skim through our Guide on Buying Altcoins - with KYC, with no KYC.
- Recommended crypto exchange to buy From is Independent Reserve, if you go the KYC route.
- Recommended non-KYC place to buy from is LocalCryptos, the P2P marketplace for crypto.
- Get the basics of Dollar Cost Averaging. For a true beginner strategy you will want to avoid price speculation. Too many people fall into the trap of “I will buy when it drops” and never get started.
- Two places where you can easily automate your regular purchases are Independent Reserve (real crypto) and the Revolut App (investing vehicle only, impossible to withdraw).
- Get a good crypto wallet, that’s where you will hodl your coin. The commercial ones get on sale a few times a year.
2/ Crypto Lending
If you have more than a tiny amount of Bitcoins (or Ether, or any other cryptocurrency that is traded on custodial exchanges), you can lend it to traders on most exchanges that run margin trading.
You will earn interest in cryptocurrency directly into your exchange wallet.
The best trading platform to do that is Bitfinex, thanks to their new Lending PRO interface.
Beginner Crypto Lending Strategy
- Sign up at an exchange that does margin lending. This is a link to Bitfinex, there you go.
- Decide on the size of your lending stack. All your wallet’s contents? Part of it? It’s up to you.
- Lending itself has next to no risk, but the platform through which you lend may get hacked.
- Decide what is the lowest acceptable rate for you. A good one is a daily rate of 0.03 which gives you 10% return per year.
- Monitor the daily rates. If the rates increase, lend all your stack! If the rates get below your threshold, lend less and take the rest out into your crypto wallet.
- Margin Lending: Full template and formulas for your interest rates calculation can be found in ATNET Strategy on Lending
- Other options: Lending platforms like Ethlend, where you can lend a range of some 250 ERC-20 tokens.
- Automation: If you don’t want to manually manage the lending rates, a crypto lending bot can take care of it either for free or for a fee. The platform 3commas offers easily configurable crypto trading bots.
3/ Run a Masternode
With masternode management we are getting into the territory of strategies that are simple to pull of, but they require upfront investment.
Masternode is a cryptocurrency full node with a wallet that keeps the full copy of the blockchain. By that it supports the coin’s network.
A masternode must be always up and running and is required to perform certain tasks for the cryptocurrency network. You as the masternode owner get a payout in your node’s currency as a compensation for this.
As already mentioned, running a masternode also requires an upfront investment.
You will need to buy the node’s currency and hold it in the node wallet as a minimum to start running your node as a masternode.
Obviously you don’t want to be stuck with a shitcoin. Make sure you do your proper due diligence and judge the coin’s value carefully.
Staking might be the easiest way to get extra income on a cryptocurrencies you hold. Clearly, as with masternode management, you need to hold the crypto in question.
Our note about value judgement is just as relevant here.
Once you decided a currency has value for the long run, staking requires no strategy or evaluation - you are primarily collecting more of the coin.
You can stake even OG cryptos
In order to stake a cryptocurrency, it has to follow the proof-of-stake consensus mechanism.
But in 2020, there are variations of “wrapped” cryptocurrencies. That means you can also stake bitcoin in its wrapped form, or even a fiat currency.
Staking is not too profitable
In the past you could earn up to 10% extra coins in a year by just holding and staking them. As the barrier to start staking gradually became lower, the earnings also decreased.
As of 2020, for the more mainstream cryptocurrencies you will earn better by lending them via margin funding.
If you still want to do it…
- The crypto trading platform Kraken is one of the most legit places that lets you do that.
- If you prefer non-KYC platforms, Bitfinex lets you stake automatically after depositing a stakeable cryptocurrency.
5/ Mining and other early opportunities: Bounties, Rebates, Cashback…
In 2020, mining of the most popular proof-of-work coins (like Bitcoin) is a lost case unless you are in special circumstances.
These days, mining is only really profitable if you are a big player, if you have cheap electricity and special equipment.
If you have mining rigs and cooling stuff left over from when small scale Bitcoin mining still paid off, you can still make some money with that on the altcoin markets.
There are new proof-of-work cryptocurrencies getting launched all the time. With new coins you can get into mining early when it’s easy and pays well.
Here on ATNET we alert you on these opportunities through our Crypto Airdrops page.