After nearly two years of hitting record-breaking market caps, the crypto market as a whole has become bearish in the last few weeks. Across the board, crypto prices have dropped to their lowest levels this year.
For example, Bitcoin (the leading stablecoin) has seen its valuation plunge approximately 58 percent. Similarly, significant dips have also been observed with other coins like Cardano, Dogecoin, and Ethereum. In addition, a recent crypto update by Lucy Fraser states that layoffs have been rampant at crypto companies. Recently, top crypto exchanges like Crypto.com slashed 5 percent of their jobs, while industry peer Gemini Trust slashed 10 percent.
This, understandably, has caused many crypto stakeholders to pull out. As per a Bitcoin performance report on Forbes, up to $3 trillion worth of Bitcoin may flood the market as creditors opt for repayment. If this happens, analysts believe the crypto market could be in for a severe black swan event that will be difficult to bounce back from. On the flip side, many crypto advocates maintain that the decade’s biggest financial diversifier will recover. In fact, some even believe that crypto may soon expect more positive movements. In the meantime, though, there are ways in which investors who choose to hodl can still make money with their volatile cryptocurrencies. Here’s how:
Among the most popular ways to make money on the blockchain is via yield farming. As detailed in an extensive guide to yield farming by FXCM, in this approach, investors “pledge” their crypto assets in return for compensation. Simialr to traditional investments, this makes yield farming like purchasing conventional certificates of deposit or putting money into a time deposit. Although people participating in yield farming must be careful about gas fees and the potential for rug pulls, the process is very straightforward. After pledging their crypto assets to a liquidity pool, the allocated cryptocurrency is subject to a lockup period. During this time, the coins cannot be accessed and are used by other investors. After a predetermined amount of time, investors will regain access to their coins and receive payouts in the form of additional coins or interest rates. To date, yield farming is the single largest driver in the DeFi sector, which had a $10 billion market capitalisation in 2020.
Despite the natural volatility of the crypto market, lots of projects continue to emerge. To make themselves known, developers are more than willing to offer incentives for early adopters. One means of doing this is via airdrops or crypto airdropping. For example, a CNBC overview of crypto airdrops explains that several Ethereum projects started distributing tokens into specific investor wallets, too. In these situations, investors can either choose to accept said tokens or have no choice but to accept them in their wallets. In the best-case scenario, the airdropped tokens grow in value without the investor needing to do anything on their end. The only caveat here is that airdropping can also be used by scammers. In some cases, scammers will airdrop fictitious tokens in the hopes of attracting investors to their phishing websites. As such, investors who want to explore the prospects of airdropping must do their due diligence before staking their other assets into the developer’s project.
Considered the “purest” form of earning passive income through cryptocurrencies, crypto staking can result in high returns over time. Not to be confused with yield farming, staking has a more technical purpose of supporting the blockchain. The blockchain uses the proof of stake (PoS) mechanism, so staking is used to validate transactions on a chain’s network. To take part in crypto staking, investors allocate tokens that are then locked up for a period of time. Business Insider’s introduction to crypto staking states that PoS participants are rewarded for their participation. Take note, though, that the potential rewards of staking are directly proportional to how much you’ve put at stake. Since not every cryptocurrency can be staked, it’s best to do this when you’ve got some of the more popular coins like Solana.
At the end of the day, risks and uncertainty are natural parts of the crypto world. However, there are ways in which investors can optimise their holdings without needing to be such active players. By adopting such passive methods, crypto investors who choose to hodl can still make the most of their investments while waiting out the cryptocurrency storm.