How to make money on the cryptocurrency exchange: The main ways to make money on cryptocurrency exchanges with examples
As the popularity of cryptocurrencies grows, more and more users are interested in how to make money on a crypto exchange – a platform for trading bitcoin and other digital assets. Modern exchanges are equipped with such extensive functionality that they are far from being limited to the provision of trading services, but also make it possible to receive passive income, participate in contests and bonus programs, take part in farming, staking, and mining. The editorial staff of Btcnewsweb.com offers an overview guide on all ways to make money on cryptocurrency exchanges in 2022.
- 1 Choosing a cryptocurrency exchange for making money
- 2 How to make money on a crypto exchange: an overview of the ways
- 3 1. Earnings on trading
- 4 2. Earnings on automated trading (trading with bots)
- 5 3. Earnings on investment
- 6 4. Earnings on arbitration
- 7 5. Earnings on contests, trading tournament
- 8 6. Passive staking earnings
- 9 7. Passive earnings on pharming DeFi tokens
- 10 8. Passive earnings on landing pages (deposits)
- 11 Examples of earnings on exchanges
- 12 Newbie mistakes and how to avoid them
- 13 Advantages and disadvantages of making money on a crypto exchange
- 14 Conclusion
Choosing a cryptocurrency exchange for making money
Let’s start by choosing a trading platform that will provide a set of tools for generating active or passive income. Exchanges are classified according to several parameters:
- DEX or CEX (decentralized and centralized). Centralized crypto exchanges (for example, Binance, Huobi, EXMO, FTX, StormGain) are owned by a company that manages most of the processes, sets commissions, makes transactions, and in most cases stores user funds. Decentralized exchanges (for example, Binance DEX, Uniswap, Balancer) are essentially a mechanism for interaction between users’ wallets, and all transactions take place directly through the blockchain, without developer intervention.
- For trading the spot market or derivatives. Spot exchanges (for example, Currency.com, Coinbase, EXMO) allow you to trade with instant settlements on transactions, while derivatives (futures, options) are contracts that imply settlement after a certain time. When trading futures, it is not necessary to own the underlying asset, as they themselves are the object of exchange. This type of trading is supported on the Bybit, Binance Futures, BitMEX, FTX platforms.
- With or without verification. The KYC / AML check is needed so that regulators can, upon request, receive information about suspicious transactions and about the users who perform them. Some exchanges (for example, EXMO, Currency.com) require verification in order to perform any actions. Others, most of them, make this requirement optional (Binance, Huobi, BitForex). Still others (for example, YoBit) do not require verification at all.
- With or without fiat. If it is more convenient for you to deposit and withdraw funds in fiat – rubles, dollars, euros – then consider those platforms that support this possibility. For example – Crex24, Binance, Currency.com, Cex.io.
In addition, it is worth mentioning such a variety of exchanges as p2p platforms. Their users set their own terms of exchange and transfer assets to each other directly. Examples of such platforms are LocalBitcoins, LocalCryptos, Cryptolocator, Bitpapa, Paxful, etc.
How to make money on a crypto exchange: an overview of the ways
Now we will consider all the main ways of making money, with the help of which you can profit from working with a cryptocurrency exchange.
1. Earnings on trading
Trading is the process of exchanging one asset for another in order to generate income. To maximize profits, traders use different strategies that differ in how they work and the frequency of trades.
Trading as a method of earning money is used for all types of assets, but with cryptocurrencies, it has received a new life due to their high volatility. With the proper skills and a successful combination of circumstances, you can get a very high profit, because sometimes the growth of the coin rate reaches hundreds of percent in a matter of hours. However, the risks are just as high.
Examples of trading strategies for trading cryptocurrencies:
- Trend attack. Trading is carried out only along the trend, that is, in the direction of the rate movement. Specialized tools will help weed out flat areas (that is, periods in which there is no pronounced trend and the cost is approximately at the same level). Continuous movement with the trend helps the trader to make money and cover losses.
- CCI, Dema and RSX. The strategy is characterized by the fact that it well identifies the direction of the trend and weeds out sideways (flats). Due to entering the direction of the trend, the signal accuracy is quite high.
- Thriller. Suitable for any asset and provides a large number of signals, which increases the convenience of the trader and the range of possible actions. You may come across negative trades during a sideways movement, however, with a pronounced trend, they will more than overlap.
There are dozens of other options as well. Most of them can be combined into one concept of “scalping” – this is high-frequency trading, transactions in which are made every minute. Thus, the calculation is not made on large profits, but on many small incomes.
Technical and fundamental analysis
Technical analysis helps to predict where prices will go in the future using historical data. In the process, the graph of prices for the period is analyzed and each of their changes is correlated with certain indicators that affect the rate jumps. The most common type of technical analysis is candlestick. In this case, tools such as candles, indicators, oscillators are used. Technical analysis helps to determine the optimal conditions for opening a position in the market, that is, buying and selling cryptocurrency.
Fundamental analysis works in a completely different way. In the process, an assessment is made of economic, technological, and political factors that may affect further changes in the state of the crypto market. With the help of such an analysis, it is possible to identify assets that have long-term prospects and thus are suitable for long-term investments.
2. Earnings on automated trading (trading with bots)
A trading bot is a program that combines a set of tools and rules, based on which the optimal time to create a buy or sell order is determined. The bot also creates orders on its own, after the user connects it to the selected crypto exchange using API keys.
Signs of bots for making money on crypto-exchanges:
Robots differ in such parameters as supported exchanges, built-in trading strategies, additional options for the user. As a rule, the programs are paid, but the payment method may differ: either a fixed subscription fee, or a percentage of the earned profit.
3. Earnings on investment
For those who do not want to devote a lot of time to trading, tracking signals, creating orders, it is preferable to invest in cryptocurrencies, be it Bitcoin, Ethereum or another asset.
The method involves drawing up a portfolio of medium and long-term investments. A portfolio is a complex of all purchased cryptocurrencies, selected in such a percentage to minimize risks and maximize profitability.
Finding coins for investment is the most difficult stage. First of all, you need to make sure that the coin is not a scam, but that the project behind it has a fundamental and promising idea. There is no doubt that only those assets that are created not for the sake of hype, but with a specific purpose and concept, grow for a long time and successfully.
Then it remains to buy assets in the desired ratio and provide them with reliable storage (it is better to withdraw from the exchange and store in
4. Earnings on arbitration
Popular cryptocurrencies are simultaneously traded on dozens of crypto-exchanges, but the difference in rates on different platforms can be significant. You can make money from this, and this method is called inter-exchange arbitrage.
The scheme of action looks like this:
- Buying cryptocurrency on one exchange.
- Transferring funds to an exchange with a higher rate.
- Selling cryptocurrency at a bargain price with a profit.
It should be noted that each of these operations implies commission fees, so the total income will be an order of magnitude lower than it might seem.
Another type of arbitration is intra-exchange.
- A trader buys one cryptocurrency for fiat.
- Exchanges it for another cryptocurrency.
- Withdraws the second cryptocurrency to fiat.
The profit in this case is based on the fact that the first and second currencies have different rates in relation to fiat. Although the method is working, it is usually unprofitable given the high fees for depositing and withdrawing fiat money.
Thus, before you can make money with the help of arbitrage, you need to carefully select sites and coins that will provide the best conditions for generating income.
5. Earnings on contests, trading tournament
There is strong competition between crypto exchanges. It is not surprising that each of them is trying to attract and retain customers in one way or another. Contests, bonuses, promotions, discounts, tournaments are quite common and working methods.
As a rule, contests have simple rules, for example – who will reach the highest trading volume for a certain period or for a specific trading pair. The prizes can be cryptocurrency, fiat funds, physical prizes (phones, headphones, game consoles), additional discounts and bonuses for trading, etc. There were also larger-scale prizes – there are cases when cars, a helicopter, a ticket to the Maldives were raffled off.
On our website, we track existing contests on the Binance exchange – see if some of them will suit you.
6. Passive staking earnings
Staking is the mining of cryptocurrency using the Proof-of-Stake (PoS) algorithm. Allows you to receive passive income for generating new blocks in the blockchain, without the cost of purchasing mining equipment and paying for electricity. The user just needs to install the wallet, send a certain number of coins to the blocked account, after which he will receive some interest income throughout the time the coins are blocked.
Ethereum, the second most popular cryptocurrency, is in the process of transitioning from Proof-of-Work to Proof-of-Stake. The first phase has already started. Anyone can invest 32 ETH (this is the minimum amount) and count on profit, but not momentary. Users will receive their income within 1-2 years when the next phase is launched.
Since 32 ETH is a high entry threshold, Eth 2.0 staking pools are organized to lower it. For example, the Binance exchange has such a pool. The principle of its operation is described here. Thanks to such pools, everyone can participate in supporting the project and rely on profit. There is no minimum investment amount.
Decentralized finance markets have become very popular in 2020 and offer a wide range of passive earning opportunities. In DeFi, staking pools are decentralized by the investors themselves, based on protocol-specific smart contracts.
To popularize DeFi and lower the entry threshold, such a pool was launched by the Binance exchange. With its help, the user can invest various popular coins and receive regular income.
7. Passive earnings on pharming DeFi tokens
Farming, or profitable farming, is a way of earning money in which the participant receives a reward for injecting liquidity into a decentralized protocol. It can be a protocol for trading, lending, synthetic assets. The yield farming strategy allows you to receive native protocol tokens, which can then significantly increase in price, which means they are a valuable investment asset.
To make money on the crypto exchange by farming, you can use the Binance Launchpol platform. It makes it possible to receive new tokens by staking certain coins (BNB, BTC, BUSD or others). The amount of income depends on the volume of investments and the duration of their retention.
8. Passive earnings on landing pages (deposits)
Landing (or deposits) of cryptocurrencies is the lending of your funds at interest to other users or the platform itself. There are specialized services that focus on such functionality, but since we are talking about exchanges, we will give examples of landing programs on popular cryptocurrency exchanges:
- Binance Lending. Deposits with a floating (for a period of 7 to 90 days) or a fixed rate (for any period).
- Gate.io HODL & Earn. Deposits for a period from 7 to 98 days with different levels of profitability.
- Bibox Treasure Box. Deposits for a period from 15 to 180 days with different levels of profitability.
- Bitmax BitTreasure. Deposits for a period from 30 to 90 days, as well as indefinite.
Examples of earnings on exchanges
Now is the time to be more specific and consider the income opportunities that are provided by some of the popular cryptocurrency exchanges.
Earnings on the Binance exchange
Binance exchange allows you to earn as follows:
- Trade. It supports spot, futures, margin trading, and also has a p2p platform (Binance P2P) and a separate decentralized exchange (Binance DEX). For trading, you can use one of two types of terminals – regular or advanced. The trading commission is 0.1% without applying the discount.
- Landing page. The Binance Earn platform allows flexible investment by investing coins such as USDT, BTC, BNB, BUSD. There are deposits with fixed or floating rates, as well as high-risk products (double investment, Liquid Swap, DeFi staking). In addition, participation in Ethereum 2.0 staking is available on Binance.
- Mining pool (Binance Pool) for SHA256 and Ethash algorithms. You can connect to them if you have equipment and are looking for a pool for more efficient earnings.
- Contests and promotions that can be tracked on the company’s blog. The site regularly draws prize pools of $ 10,000 – $ 50,000 and more, as well as valuable prizes.
Earnings on the Currency.com exchange
- Trade. The platform supports not only cryptocurrencies, but also tokenized variants of other assets (indices, stocks, bonds, raw materials). The total number of trading instruments exceeds 2000. Trading with leverage up to 500x is possible. 75 technical indicators help you assess the market situation. The trading commission is 0.075% for the market order creator, -0.025% for the limit order creator.
- Contests, promotions and bonuses. On the page https://currency.com/ru/events you can find information about current promotions and flash mobs. If necessary, you can view the details or immediately click on the “Participate” button.
Earnings on the Bybit exchange
The Bybit platform specializes in derivatives trading and provides the following ways to make a profit:
- Trade perpetual contracts with leverage up to 100x on Bitcoin, Ethereum, Ripple, Tether, EOS, Bitcoin Cash, Chainlink, Litecoin, Tezos. Forward and reverse contracts are supported. Reverse contracts use cryptocurrency as the base currency. That is, the trader must confirm the trading volume in USD terms and then use the base currency to calculate the margin, profit and loss. The trading commission is 0.075% for the taker, -0.025% for the maker.
- Contests and bonuses. Information about them is on the page https://www.bybit.com/ru-RU/prize_page. Valuable prizes, deposit bonuses, etc. are drawn from time to time.
Newbie mistakes and how to avoid them
The mistakes of novice traders can be both technical and psychological. Trading cryptocurrencies is not the easiest thing to do. Mindfulness and focus are required, as well as minimizing emotions. The following errors can be distinguished:
- Trying to recoup unprofitable transactions is one of the worst decisions. Also, you should not rashly increase profitable trades, since the market can turn around at any minute.
- Trading is not by strategy, but by intuition or by the example of some acquaintance who is poorly versed in the market.
- Trading without stop loss. This tool represents the best protection against serious losses – it automatically sells assets when the value decreases to a certain level.
- Trading against the trend. Experienced traders can afford such a move, but definitely not a beginner market participant who does not have enough experience yet.
- Unwillingness to learn and develop, as well as rejection of pointing out their own mistakes.
- Excessive greed. Having tried working on a demo account, having read about the main instruments, a trader often does not want to waste time on small trades and immediately tries to enter big. The end is predictable.
A well-defined strategy will help you get rid of unnecessary emotions. It is also better not to enter the stock exchange in a nervous, inflated state. This will reduce the risk of rash actions, and the market will not go anywhere the next day.
Advantages and disadvantages of making money on a crypto exchange
✅ A wide range of methods for generating income.
✅ You can earn both actively and passively.
✅ There are options for newbies.
✅ The exchange takes over the technical part without requiring deep knowledge from the user.
❌ Verification is often required.
❌ Cryptocurrency transactions are always risky.
In addition to the above methods, each exchange provides an opportunity to make money on the referral program. Therefore, if you have an effective channel for promoting affiliate links, then use it. In aggregate, several types of income generation at once are capable of giving tangible results, here one of the main nuances is to choose the sites with which you will work correctly. Consider all conditions – commissions, supported fiat and digital currencies, input / output methods, degree of security. And do not forget that it is better to withdraw inactive funds to the wallet, and not leave them on the exchange.