There are many ways to make money with cryptocurrencies. The four most popular ones are:
1. You can mine them
This is where you use your computer(s) to mine for Bitcoin i.e. use the computational power of your computer(s) to help verify certain transactions on the blockchain and be rewarded with Bitcoin or other coins.
In my opinion there is not much money in it for the average person.
2. You can lend them
This is where traders who need margin and leverage borrow your coins to trade with. They have to give them back to you with a % commission.
3. You can buy already established cryptocurrencies
This is the topic of the following chapters.
4. You can buy new ICOs
Recently there have been a flurry of new Initial Coin Offerings where, if you get it right, you can invest £1,000 and turn it into £10,000 or even £100,000 in a relatively short period of time. Therefore, we will also be discussing this topic.
When choosing cryptocurrencies, do your research. Don’t get caught up in the hype. When you are researching, remember to ask:
1. “What problem is it solving?” If it doesn’t solve a problem then why would anyone use it or buy it? And 2. “Does it have the right team to solve that problem?”
Bitcoin and Ethereum are the most widespread by far. Imagine them like the Reserve Currency of the crypto world – if you wanted to invest in other cryptos, then you have to buy Bitcoin or Ethereum with your local currency first. Then you buy the other cryptocurrencies with your Bitcoin or Ethereum.
If you don’t want to buy the cryptocurrencies themselves, you can always buy a Bitcoin fund or Bitcoin tracker. I did this for my daughter in her Junior ISA and it went up 98%, making her just under £2,000 in just three months.
This might not seem like a lot of money but £2,000 in three months isn’t bad for an eight year old!
What are the signs of a ‘bad’ cryptocurrency
Avoid these signs of a bad cryptocurrency
1) Me-too coins – these are coins that do exactly the same as already existing coins and don’t really add any more benefits or USPs. They are just copying what has already been done. Avoid these. If, however, they are sufficiently different and do the same but do it in a much better or faster or cheaper way etc. then it might be worth considering
2) Coins for specific industries – what I mean by this is coins that are designed for just one market. A perfect example is Potcoin. I actually bought some but I regret it now because all they are saying is “here is a market and we are going to create a coin for this market so everyone can use this coin to buy marijuana.” But in reality there is no real NEED for this coin. It doesn’t solve any PROBLEMS. You can use Bitcoin or Monero or Ethereum instead. Worse still, there are other coins like Dopecoin, Cannabiscoin, Hempcoin doing the same thing. Paragon, on the other hand, is creating a platform for the Marijuana industry – I own tokens in Paragon too.
3) Teams that are either too small or unqualified – in reality it is not easy to make a start up successful, and the competition is only going to intensify. It is best to check out the backgrounds of the team and see if they really do have the experience to pull off what they are suggesting in their whitepaper. Also, the team needs to be large enough to handle this or at least they have to have plans to hire more relevant team members. A one-man band or three people can’t dominate an industry.
4) Low trading volume – it means that that not enough people are buying and selling. This is not a good sign. You want to see ever-increasing volume as the market is waking up to the opportunity.
If you take care of the above then you should avoid the majority of coins that are scams.