Investing Cryptocurrency How to Make Money from Bitcoin & Crypto 2021 (Easy Guide)
How to Make Money from Bitcoin & Crypto (Easy Guide)

How to Make Money from Bitcoin & Crypto 2021 (Easy Guide)

Investing into cryptocurrency might seem complicated to most people but it’s actually simple once you understand how everything works. 

This is an ongoing guide that will teach you everything you need to know about investing in cryptocurrency. 

I will constantly update this guide with new information, resources and strategies when needed, so bookmark or save this page to stay updated.

This free guide will cover all the fundamentals of Bitcoin and cryptocurrency investing, including:

  • How investing in Bitcoin and cryptocurrency works
  • How and where to buy cryptocurrency
  • How to profit from investing in cryptocurrency
  • How to store cryptocurrency
  • Cryptocurrency investment strategies

Before we get started, here’s a quick summary to get you up to date on Bitcoin, other cryptocurrencies and how they work. 

If you already know what cryptocurrency is and how it works you can skip the summary.

What is Bitcoin? What is a cryptocurrency?

Bitcoin is the first cryptocurrency, created in 2009 as an uncontrolled, peer-to-peer currency. Bitcoin is basically digital cash, you can send and receive it without the need for a central authority like a bank.

Since there is a limited amount of Bitcoins, it’s value increases based on demand. This is why Bitcoin has grown to over $30,000 in value over the years.

Bitcoin isn’t the only cryptocurrency however, other cryptocurrencies known as “altcoins”, started to show up from 2010. Popular altcoins include Ethereum, Ripple, Litecoin, Monero and Dogecoin.

These cryptocurrencies serve different purposes and have features that Bitcoin doesn’t have, for example: 

  • Ethereum lets developers create blockchain based applications and smart contracts
  • Ripple/XRP has ultra fast and ultra cheap transactions
  • Monero is a privacy focused cryptocurrency
  • Dogecoin is a meme cryptocurrency with a heavy community focus

I won’t go too much into the specifics of cryptocurrency since this guide is about investing and making money. 

However we regularly write posts outlining different cryptocurrencies and their benefits. Here are some previous posts we have written on the topic:

Now let’s get straight into the guide.

How does investing in cryptocurrency work?

Investing into cryptocurrency works by buying Bitcoin or any other cryptocurrency and storing it into a wallet.

To do this you need to sign up to an exchange (we’ll look at that below). 

When you purchase any cryptocurrency it is stored in one of the exchange’s built in wallets (i.e. a Bitcoin wallet for Bitcoin, a Litecoin wallet for Litecoin, a Ripple wallet for Ripple, USD wallet for USD etc.)

Once you own some crypto coins, you do the following:

  • Hold on to your investment and take profits when the price increases
  • Buy more cryptocurrency every week by dollar cost averaging

That’s it. You buy and you hold, or you can buy a certain amount every week ($200 for example) to increase your crypto holdings.

Now let’s look at cryptocurrency exchanges.

Where to buy cryptocurrency

Buying cryptocurrency is actually simple, you just need to sign up to a cryptocurrency exchange, verify your identity, then choose a cryptocurrency to buy.

Cryptocurrency exchanges are platforms where you can buy and store multiple cryptocurrencies using your card or bank transfers. 

There’s two types of exchanges we’ll look at in this guide. 

The first type are cash based exchanges where you mainly buy and sell cryptocurrencies for cash. You’ll use these exchanges for buying cryptocurrencies directly and selling them for cash that you can withdraw to your bank account.

The second type is a crypto based exchange where you mainly use Bitcoin (BTC), Ethereum (ETH) and coins like Tether (USDT) to buy other altcoins.

I recommend signing up to the three exchanges below, so you have the most exposure to different cryptocurrencies.

CEX

Cex is a cryptocurrency exchange where you can invest into over 20 different cryptocurrencies. 

This is a cash based exchange, so you’ll use this to buy and sell cryptocurrency for cash.

This exchange is available in all countries, so it’s a good exchange to use for most readers.

To get started, go to CEX and create an account (link opens in a new tab). 

Bitpanda

Bitpanda is Europe based cryptocurrency exchange that lets you invest into over 55 different cryptocurrencies. You can also invest into stocks, precious metals, ETF’s and crypto indices.

This is another cash based exchange, so you’ll use this to buy and sell cryptocurrency for cash. 

I recommend this exchange if you’re based in Europe since it is currently only available to users in Europe, Canada, Mexico and parts of Asia, South America & Africa for now.

To get started, go to Bitpanda and create your account.

Binance

Binance is the most popular cryptocurrency exchange, listing over 820 different cryptocurrencies. 

This is a crypto based exchange, so you’ll use Bitcoin (BTC) or Ethereum (ETH) to buy other cryptocurrencies. You can send Bitcoin from your CEX or Bitpanda wallet to Binance to do this.

I recommend using this exchange with either CEX or Bitpanda, with Binance you can invest into more altcoins but you’ll need CEX or Bitpanda to cash out into fiat currency.

Binance is not available to users in the US, but users from other parts of the world can use it. For those of you in the USA, you can use Binance US instead.

How are cryptocurrencies stored?

Cryptocurrencies are stored using “wallets”, these wallets don’t actually store your crypto, instead it saves your private keys, which proves that you are the owner of the crypto coins.

Crypto wallets come in many different forms, the exchanges mentioned above all have built-in wallets to store your crypto after purchasing. 

Different types of crypto wallets include:

Exchange wallets

Private keys are stored on the exchange where you buy your crypto, allowing you to easily trade, buy and sell your crypto coins. 

If you are trading, buying or selling multiple different cryptocurrencies, leaving them on a trusted exchange is okay. 

This is especially true if you hold exchange coins which can earn you rewards for trading and keeping your crypto on their platforms

Hardware wallets 

Private keys are stored on physical devices that look like USB sticks. Ledger is the best choice for a hardware wallet. 

They encrypt and store your private keys offline for maximum security. If you are holding your crypto for the long term this is the best choice.

Software wallets

Keys are stored inside software or apps, allowing you to easily send and receive crypto. 

Exodus is the best choice for software wallets, they have wallets for desktop, iOs and Android devices.

Paper wallets  

These are keys written on a piece of paper which can be stored in a safe place. Before the creation of hardware wallets, this was a good way of storing your coins long term. 

However this method has become impractical due to hardware wallets that easily let you store, send and receive crypto without anyone else knowing your keys.

Bottom line:

If you are regularly buying and selling different cryptocurrencies, keeping your coins on a trusted exchange (like the ones mentioned in this guide) is a safe bet. 

If you want to easily send and receive crypto between your friends and family, then a software wallet like Exodus is a good choice.

If you are holding your crypto for the long term (6 months to over a year) then a hardware wallet like Ledger is the best choice.

Which cryptocurrencies should you invest in?

When investing into cryptocurrency for the first time, a good strategy is to buy and hold “blue chip” cryptocurrencies for the long term. 

The term “blue chip” refers to cryptocurrencies with a market capitalization of over $2 Billion. Market capitalization is the total value of all the coins in circulation.

Examples of blue chip cryptocurrencies include:

  • Bitcoin (BTC) – The first and most popular cryptocurrency.
  • Ethereum (ETH) – Decentralized blockchain development platform.
  • Dogecoin (DOGE) – Meme cryptocurrency with a massive and growing community.
  • Polkadot (DOT) – Platform that aims to connect multiple different blockchains.
  • Uniswap (UNI) – Decentralized exchange for Ethereum tokens.

The following article provides in depth information on different blue chip cryptocurrencies with great investment potential:

It’s also good to invest in cryptocurrencies with a lower market cap as long they are backed by legitimate use cases. 

Whilst lower market cap coins are more risky, they have potential for larger upside gains in the short to medium term.

The article below outlines 3 cryptocurrencies with great upside potential, with two of those being lower market cap coins.

Now that you know the basics of cryptocurrency, let’s go more in depth with investment strategies.

Cryptocurrency investment tips

In this section we’ll look at the best tips for the majority of cryptocurrency investors.

Best time to buy crypto

If you’re buying to hold (which is recommended for most people since it’s the most profitable), the best time to buy is now. This is due to two reasons:

  1. It’s very difficult to time the market. You cannot predict exactly when the price movements of a cryptocurrency.
  2. If you’re holding for the long term, eventually overtime, your overall gains will cover any potential losses.

Crypto buying strategy (DCA)

A good strategy to use when investing into crypto is the Dollar Cost Average (DCA) strategy. This means buying a fixed amount of crypto currency at regular intervals, for example you could buy $200 worth of crypto every week or buy $1,000 every month.

Dollar cost averaging works well because the total cost of your investment evens out over time, regardless of the price movements. 

For example, a crypto coin might cost $0.15 today, $0.13 next week, $0.18 the week after and $0.20 at the end of the month. 

When you buy the same dollar amount at regular intervals (in this example, every week), the price will average out to $0.16 by the end of the month:

(0.15 + 0.13 + 0.18 + 0.20 = $0.66) 

($0.66 divided by 4 weeks = $0.165)

So even though you paid more on some weeks and paid less on others, the average price you paid was $0.16 for a cryptocurrency that is now worth $0.20.

DCA strategy protects you against the volatility of price movements in the crypto market.

When to take profits on crypto

When selling your crypto, you should take profits instead of selling your whole bag. 

If you hold a smaller amount of cryptocurrency (under $5,000), I recommend holding your entire bag until you at least double your money. Since you’re dealing with smaller amounts, you have a lot less to lose and more to gain.

If you’re holding larger amounts ($5,000+) you can take profits every time your investment grows by 20%. For example, if you gain 20% on $5,000, you now have $6,000 which is $1,000 profit. 

You can take profits on the way up and the way down. For example you can take profits for every 10%, 15% or 25% gain you make. This way you can secure profits as the price increases, just in case a downturn happens in the future.

On the other hand, if your investment has grown by 3x, 5x or 10x and the price is coming down, you can take profits for every 10% or 15% drop. This will allow you to secure your profits if a coin is starting to dump.

How to take profits on crypto

If you made your profits on an altcoin, you can add your profits to Bitcoin or Ethereum for the long term and keep the rest until your altcoin makes you even more profits.

A good trick is to invest some money into an altcoin, double your money and take out the initial investment. 

This way you basically bought the coins for free, and any additional gains you make have less risk.

For example, you invest $5,000 into Altcoin A. After 3 weeks your investment is now worth $10,000, so you take out the initial $5,000 and store it into Bitcoin or Ethereum.

You now have $5,000 worth of Altcoin A, if the price falls you only lose out on the profit, but if the price continues to grow you’re technically making money for free. 

This is because you’re making money from your profit and not the original money you invested.

Where to store your crypto profits

During a bull market I recommended storing profits in Bitcoin and Ethereum, for a fairly safe place for your profits to accumulate and grow.

During a bear market, I recommend storing your profits in stable coins like USD Coin (USDC) and Tether (USDT). 

Stablecoins are pegged to the US dollar so their prices stay around the $1 range, keeping your money safe from price swings.

Different ways you can make money from cryptocurrency

The easiest way to make money from cryptocurrency is by buying and holding or dollar cost averaging every week.

Day trading is another way investors can make money from cryptocurrency but that is not recommended for most people. Only experienced traders should day trade since it’s carries a lot more risk than simply holding or dollar cost averaging 

Buy and Hold

Buying and holding is simply buying a cryptocurrency at its current market price and not selling until you reach a price you’re comfortable selling at. 

For example, you can buy a cryptocurrency for $5 each and hold it until the price reaches $10, $15, $25 or even $50. 

It could take months or years to reach your target depending on how high it is. However during a bull market it could take weeks or even days.

Note: A bull market is a market where prices are constantly rising and expected to continue rising. 

The opposite of a bull market is a bear market, where prices in general are falling and expected to continue falling.

If you’re new to investing this strategy, alongside dollar cost averaging is the best bet for making money in the cryptocurrency market.

Dollar Cost Average (DCA)

Dollar cost averaging is an investment strategy where you invest a set amount of money on a regular basis. For example you can invest $200, $500, or $1,000 every week, into a single cryptocurrency or a number of different cryptocurrencies.

Dollar cost averaging reduces the impact of price volatility (price swings) since the cost will eventually even out over time. 

For example, a cryptocurrency might cost $5 today, $3 next week, $6 the week after and so on. Since you are buying $500 a week, over time the cost will average out.

When the price is low, your money will buy you more of the cryptocurrency and when the price is high, your money will buy you less. Since you are investing the same amount every week, the price swings won’t matter.

Dollar cost averaging removes the stress of trying to time the market, instead allowing you to gradually grow your account and make large profits in the long run.

Staking

Staking is a process where you’re buying and locking up your cryptocurrencies inside staking pools or special wallets. 

By doing this, you’re helping the blockchain to validate transactions via the Proof-of-Stake method. 

Staking is a great way of earning passive income with cryptocurrency. The following guide shows you how you can stake different cryptocurrencies:

When you choose to stake your crypto, you can earn anywhere from 4% to 10% per year depending on the coin and the number of users who are staking. Usually the returns are higher when there are less users staking their coins.

To get the most out of staking, it’s advisable to stake as much as you can afford, since the more you stake, the more you earn.

Day Trading

Day trading the process of trading cryptocurrencies over the course of day instead of holding them for the long term.

Day traders use technical analysis to determine when to enter or exit a position on a cryptocurrency. This usually involves looking at trading volume, chart patterns and price activity.

Day traders use the following strategies to make money:

  • Scalping – Profiting off small price moves in a day (for example 15% of 30%)
  • Range trading – Attempting to buy at price support levels or sell at price resistance levels
  • High-frequency trading (HFT) – Using trading bots to quickly enter and exit many different positions over a short amount of time.

Again I don’t recommend day trading for beginners, it’s best only for people who already have experience, for this reason I’ve made this section short.

Margin Trading

Another strategy recommended only for the experienced. Margin trading is a trading method where traders use funds borrowed from a third party. 

This allows you to trade larger amounts of cryptocurrency, which in turn allows you to make larger profits. When a margin trade is initiated, the trader is required to provide a percentage of the total order value.

This initial value is known as “margin” and the ratio of borrowed funds is known as “leverage”. For example, if a trader wanted to open a $100,000 trade with a leverage of 10:1 (or 10x leverage), the trader would need to provide $10,000 as margin.

Margin trading can be used to open long or short positions. Long positions are based on the assumption that the price will increase, whilst short positions are based on the assumption that the price will decrease.

The biggest advantage to margin trading is the increased profits with less starting capital. However, since you’re borrowing funds, you also increase your losses, which can lead to you being “liquidated” or losing all of the money in your margin account.

If you decide to margin trade, place stop limits on your orders to reduce your losses.

Conclusion

The simplest way to make money from investing in Bitcoin and cryptocurrency is to buy and hold. You can buy a large amount upfront or dollar cost average every week or month to build your portfolio.

If want to get started the following resources are highly recommended:

CEX – The easiest way to buy over 20 different cryptocurrencies with card or bank transfer, from anywhere in the world.

Bitpanda – The best crypto exchange for investors based in Europe, Canada and Mexico with over 55 cryptocurrencies that you can buy with card or bank transfer.

Binance – Trade over 820 different cryptocurrencies from anywhere in the world. I recommend using this exchange with any of the two mentioned above.

Ledger – Hardware wallets for secure storage of your cryptocurrencies long term.

If you have any questions or would like to see certain subjects mentioned in this guide or future articles, leave a comment in the section below.

Finally don’t forget to subscribe to the HomeGrown Income newsletter for more investment guides, tutorials and business tips sent straight to your inbox.

Founder @ HomeGrown Income. I create educational resources and provide startup services for business owners.

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