In 2020, cryptocurrencies seem to have returned to 2017 crypto boom. Bitcoin once again showed rapid growth at the end of the year and made almost the entire cryptocurrency market to grow. Bitcoin is already near the $20,000 level and has even reached a new all-time high on some exchanges. A lot of crypto enthusiasts and investors predict further bitcoin growth in the long term after the recent halving.
Also, it seems that altcoins season also takes place right now and some investors expect that it is only the beginning, especially for decentralized finance projects (DeFi) that have skyrocketed in popularity recently and have become the hottest topic of this year.
Is it too late to jump on a rocket to the moon and benefit from the current crypto market boom? And how to find a better way to do that? Let’s try to figure it out.
Trading is one of the most popular ways to earn on the cryptocurrency market, which becomes even more common during the market boom. All due to the volatility growth and sharp price changes. The price may change by tens of percent in just a day. This attracts both experienced traders who want to benefit from volatility, as well as beginners who expect further growth and fear of missing out.
When trading during a market boom, it is worth remembering that a significant price change may be followed by a movement in the opposite direction or a so-called correction. Correction can take place both on short and long intervals. For example, some traders may buy cryptocurrency after a fall in a short period and then sell the asset when the price starts to rise again. This trading method can be profitable, but you should be ready that the price will not always move in the direction you expect.
Besides, a huge price rally is most often followed by a deep correction which can take several weeks or months. Therefore, it may be worth looking into opening a short position one day that allows you to benefit from the price fall.
If you just entered the market expecting further growth of cryptocurrencies, then don’t forget that during a boom, a lot of coins rise in price only because the rest of the market is growing. Before investing in any coin, you should do research and find out more about the project behind the coin, evaluate its growth prospects.
In turn, when entering the market during a cryptocurrency boom, you need to be prepared that investments may not pay off immediately or not pay off in general. For example, those who bought bitcoin for $18,000 in 2017 and did not manage to sell it for $19,000 had been waiting three years for the price to reach the same level again. At the same time, a lot of coins popular in 2017 have not yet returned to their previous highs.c
Over the past few years, staking has become more popular since many projects are switching to the Proof-of-Stake consensus protocol instead of Proof-of-Work. For instance, Ethereum, the second most popular cryptocurrency, will switch to Proof-of-Stake and will support staking. One of the reasons for the growing popularity of staking is also that it is much cheaper and more convenient compared to mining.
To benefit from staking, you just need to keep a certain amount of cryptocurrency in your wallet or on the balance of the exchange. The staking reward varies depending on the network and may be determined by the “age” of staked coins.
Rewards are distributed in the same coins you are staking at the end of the staking period. Therefore, if the coin price rises, then staking becomes more profitable. A lot of staking-supported cryptocurrencies have surged during the current cryptocurrency boom, so it can be an excellent option to benefit from it as well.
However, it is worth remembering that staked coins in most cases are locked and can’t be moved. Rewards distribution timeline is not always fixed. Some networks pay out rewards after a fixed time interval but sometimes it can also get delayed. That is why it is important to check the reward distribution criteria with the validator.
DeFi’s rise in popularity is one of the reasons for the current cryptocurrency boom. Many DeFi coins began to show explosive growth back in 2019 and reached their all-time highs in 2020. This is because DeFi platforms have become more commonly used. If in December 2019 the total value locked in DeFi was around 600 million USD, then now it’s more than 14 billion USD.
The process of earning on DeFi is called yield farming. It allows you to receive a reward in the form of protocol tokens for lending/borrowing crypto, participating in liquidity pools, etc.
Yield farming can be viewed as a cryptocurrency cashback for participating in the DeFi platform. Some projects also provide governance tokens for participating in the network that can be used to vote for further project development.
Other ways to benefit from the crypto boom
There are many separate events taking place in the cryptocurrency market where you can benefit from. For example, the Bitcoin Cash fork that took place on November 15th. Many exchanges and wallets supported this fork, so you could buy bitcoin cash with a credit card, store them until the fork and get a new BCHA coin in a 1: 1 ratio. The fork is one of the reasons why the BCH price has surged in November. Talking about similar events, the upcoming Spark airdrop for XRP holders also may affect the XRP price.
In addition, more coins are increasingly being added to cryptocurrency exchanges because of their growing popularity during the cryptocurrency boom. It makes them even more accessible for trading, staking, and other things. To attract investors‘ attention to the coins, many projects and exchanges are also announcing a giveaway or bounty program, where you can get cryptocurrency in just a few small steps.
Cryptocurrencies provide a lot of ways to earn money and everyone can find the one that suits the most. However, before entering the crypto market, you need to decide whether you are here only for the sake of the current boom and some events, or you have more long-term plans. This will help to determine which strategy and way to benefit you should pay more attention to.