“Ahead of you stretches your future like a road leading into the distance.
Along the road are ambitions you wish to accomplish….desires you wish to gratify.
To bring your ambitions and desires to fulfillment, you must be successful with money.” – The Richest Man in Babylon.
How to Become Financially Free
Everyone wants to be financially free to have enough time to do what they love.
This could be having a small or large family, doing your hobbies, travelling, buying one or several fast or luxurious cars, working on things you are passionate about, etc.
However, having financial freedom takes work. If it were easy, everyone would have been financially free.
This is one of the reasons why the number of financially free people is very few compared to the poor and those running the RAT RACE combined.
The fact that few people are financially free means financial freedom is achievable if you have the right knowledge and take action.
The first step to having financial freedom is to develop a high-income skill. This would enable you to pay your bills and have some savings left for investment.
When you must have accumulated some funds for investment, the next proper thing to do is to look for safe investment vehicles that would double or multiply your investment.
In this post, I will discuss different investment vehicles you can participate in. With these investment vehicles, you can make $100k in crypto every year.
Some of them have a higher risk than others. Generally speaking, the rule of investment is that the higher the risk, the higher the reward.
A good investor finds a way to handle the risks, not avoiding them. Because life itself is risky, should we stop existing because life is risky?
If you had a successful crypto investor who started crypto in 2017 and is still in the crypto market to date, given the opportunity, wouldn’t you be glad to pick his brain?
In Web3, you hear about one person who made a fortune overnight with $1,000, but what you don’t hear are the thousands whose $1,000 turned into $0.1
You want to avoid finding yourself on the side of the thousands that turned $1,000 to $0.1, where your capital is being used as exit liquidity for people who are smart enough to buy when everyone was panicking.
Five ways to make money in crypto with money.
- Spot trading
- Futures trading
- Arbitrage trading
- Yield farming
1. Spot trading
Do you have ice in your veins and access to advanced algorithmic bots? You could be part of the 5% of crypto traders who don’t lose money.
Spot trading is buying a coin low and selling it high on an exchange. The process goes like this.
- Do research.
- Identify facts that would make the token get attention. It could be the technology, hype, die-hard community, etc.
- Buy it.
Imagine if Binance coin($BNB) has prospect, you would
- login to $BNB
- buy $BNB
- wait for it to appreciate
- Then sell.
Mere buying $BNB on Binance exchange is spot trading.
Different people have different approaches to spot trading.
- Non-active traders.
- Active traders.
We call this set of people investors. They are more interested in earning a passive income in crypto.
However, they buy and HODL (Hold On for Dear Life – crypto slang for hold) for months or years.
They do not have the time to check the prices of their investment now and then.
This kind of person dedicates a small amount of time from their busy schedule to doing research.
And when they are convinced that a project has a prospect, they buy the coin and send them to their cold wallet.
Sometimes, the prices of tokens in the crypto market are too high to invest your money. You must wait for it to come down (it could take weeks or months). Patience is part of investing.
If you were given the correct information, would you buy a bitcoin at $69,000 and hold than wait for it to go below $20,000 before you buy?
They allocate a certain amount of money from their earned income to buy cryptocurrency every month. Waiting could take weeks, months, or years.
People who bought bitcoin at $20,000 in 2017, sold their crypto out of frustration, and later met bitcoin at $50,000 understand the importance of patience and the need to allow the market to come to you.
The market is always dynamic. It will do things that would trigger you.
This is one of the reasons why, if the market activities easily trigger you, you better spend less time in the market.
You don’t have to lose money before understanding the need for patience and emotional intelligence when actively trading.
Of course, a loss is inevitable, but if you listen to experienced traders, your win rate will be higher than your loss rate.
This is one of the reasons I am writing this and putting it out in public for you to learn from my experience.
A little bit of my experience in Web3.
I have been in crypto since 2017 and have seen all these things play out.
It is better to listen to experienced people and learn from their mistakes than to learn from your own.
When you learn from your mistakes, you lose time and money. Money can be recovered, but time cannot be recovered.
If an experienced person spent ten years figuring out what works and what doesn’t, would you prefer to listen to him to learn to figure it out by yourself?
I was hearing, not your keys, not your coins. It never made sense to me until after this happened to me.
A week later, after I took out my funds from cryptopia.co.nz, it was hacked, and users’ funds were locked.
I was shocked and lucky simultaneously because the money left there was my only hope after losing so much money on Bittrex, Poloniex, and some ICOs that rug pulled.
However, I wouldn’t attribute this to smartness. I was simply lucky. Since then, I learned that “not your keys, not your coins,” and started taking it seriously.
I made money and lost more than 60% of it before I knew the bear market existed and was already on my portfolio.
When I learned that the market trend had changed, I had to convert all my investments to USDT and left crypto for good to complete my degree in Chinese studies, which I don’t intend to practice.
I came back in Q2 2020 to play the bull run game. But this time, I intend to play the long-term game, build things that educate new and old investors, and share my experience as the industry evolves.
……..end of digression.
We have this set of people actively trading cryptocurrencies.
They include day traders and scalpers. They use different time frames to trade the market, such as 15 minutes, 30 minutes, 1 hour, etc.
Any timeframe they see an opportunity to buy low, they do that immediately and wait to sell high.
Their trades usually stay within a day or a week. When they find out they entered a bad trade, they cut their losses and wait for another opportunity rather than lose more money and time waiting for the market to come in their favour.
Active traders trade the market every day. In comparison, inactive traders invest what they can afford to lose in the market and continue their day job. They do not check their portfolio daily.
In addition, if you still ask this question “How much should I invest in cryptocurrency as a beginner?”. It simply means you don’t have your personal finance in order.
I say this because if you earn $4,000 monthly after paying your bills, you know how much money is left to invest in crypto. You could divide the balance into two. Save half and invest the other half. This decision is solely at your discretion.
2. Futures trading
Futures trading is the same as Spot trading, but this time around, you use leverage.
Let me explain.
If the price of bitcoin is $30,000 per bitcoin, and you have $30,000 USDT to buy a bitcoin. With futures trading, you can increase your leverage to 2x, and your $30,000 USDT can buy you two bitcoins.
You can also increase your leverage by 3x, which will give you three bitcoins with your $30,000 USDT. On Binance, you can increase your leverage up to 125x.
There is more to buying two bitcoins with your $30,000 in futures trading. It comes with its downside. Take a look at the picture below.
This liquidation price means that if you bought two bitcoin with your $30,000 USDT and the price of bitcoin reaches $20,000; you will lose your $30,000. I mean, the exchange will wipe out your money forever and ever.
The risk of trading futures is that you can be liquidated if you don’t have enough equity to draw down your liquidation price. In Spot trading, you only lose when you sell.
If you want to engage in futures trading, learn how it works first from those who are successful already.
3. Arbitrage Trading
Arbitrage Trading is taking advantage of the slightest price difference between two exchanges or markets.
Sam Bankman-Fried, the former CEO of the FTX exchange, made his first million as an Arbitrage trader before starting the FTX exchange.
Sam Bankman Fried saw an opportunity to buy bitcoin in the U.S. and sell it in Japan for up to 30% more.
Imagine he purchased a bitcoin for $10,000 in the U.S. if he moves it to Japan, he will sell it for $13,000 per bitcoin.
An Arbitrage trader buys a bitcoin at $1,000 in exchange A and sells at a percentage increase in exchange B.
4. Yield farming
This is the process of investing your cryptocurrencies in DeFi Protocols in other to maximize return on your capital. There are different kinds of yield farming you can engage in to increase your cryptocurrencies.
- Liquidity Providing.
Since Proof of Stake(POS) was introduced, DeFi protocols prefer using POS to validate transactions on their network to POW(Proof of Work).
Blockchain projects use POS because it is better than POW in the following sense.
- Saves energy.
- Has better security.
- Investors don’t have to spend additional money to set up a mining farm or facility. All they have to do in POS is to buy the coins and stake them on the project network.
The last point is where you come in as an investor. You buy tokens of these blockchain projects and stake them on their network.
You don’t need to do anything else. Your monthly interest depends on the activity of the network.
Most blockchain projects promise their stakers 5-100% or more APR(Annual Percentage Rate). Most of these APRs are generated from transaction fees from the project.
It is then shared amongst investors who provide their tokens to keep the network running.
Sometime in 2021, Pancakeswap APR was 180%APR.
If you are a long-term investor and believe in a coin, if the coin is a POS, stake it to earn some interest while waiting for it to appreciate before you sell.
It is important to note that the higher the APR, the higher the risk.
Some Blockchain projects disguise as Ponzi Scheme. One of the risks with staking crypto is that some protocols promise high APR to attract people and then scam exit.
Some, the APY is only sustainable for a short-term period. DYOR before investing.
Then we have a liquidity provider. This is predominant in Decentralised Exchanges(DEXs).
The order immediately executes the best price when you use exchanges like Uniswap to buy ETH. Then you ask yourself; these exchanges do not have an order book.
How was it able to complete your transaction?
DEXs have pools. Investors buy coins and invest them in these pools. Investors get a percentage of the transaction fees for every transaction involving using funds from the pool.
Uniswap, one of the best decentralised exchanges, charges 0.3% on transaction any on their protocol. This is shared among investors who provide liquidity.
As the name implies, you can lend your cryptocurrency to a platform to earn interest.
Imagine you have more money than you can spend within 12 months or more. You would go to the traditional bank to deposit the excess cash as a fixed deposit.
The banks knowing that it is a fixed deposit, can use your funds to make medium to long-term investments.
The same thing is applicable in decentralized finance(DeFi). The only difference here is that you buy digital coins of a blockchain project and lend them their coins. You can lend a blockchain project stable coins too.
These blockchain projects, in turn, lend your funds to users and earn interest on it. This interest earned is another way blockchain projects make money to pay Stakers.
As you lend money to the bank, people enter banks to borrow money to fund ther businesses, vacations, houses, etc.
The same thing applies to a blockchain niche, specifically decentralized finance. (DeFi)
People borrow money from DeFi protocols. It is important to note that DeFi Protocols can’t borrow you more than you have on their platform.
I mean that if you want to borrow $200 from a platform, you have to have at least $400 on that platform to be eligible to borrow money from that platform.
However, if you have $400 DAI, and you believe Ethereum is going to go up in the future, you can buy $400 worth of Ethereum and use it as collateral to borrow another DAI.
You can either top up your Ethereum to borrow another DAI or withdraw the funds for what you intend to use it for.
Borrowing DAI comes with interest as well.
PS: DAI is another type of stablecoin, just as we have USDC, USDT, and BUSD. I used DAI because most DeFi uses DAI as their stablecoin.
Cryptocurrency is a market, and it behaves like any other market.
The stock market, Real estate market, commodity market, foreign exchange market, etc., and the basic investing principles can be applied to all.
You need to understand the crypto market is not “different” from the rest.
The more you understand how markets work, the smarter you’ll be with your investment.
Benjamin Graham, author of “The Intelligent Investor,” and mentor of Warren Buffet, pointed out in his book the irrationality and group thing that was often rampant in the stock market.
It also happened in the crypto market. The Intelligent Investor was written for beginner investors and long-term investors. It teaches you the basic principles of investing.
As my rule goes, pick one working course and practice it over and over and over. It is enough for you to be a master.
Investing has some set of rules. They always sound simple, but our emotions conquer us when it is time to take action.
Something as simple as “buy when there is fear in the market, and sell when there is optimism,” yet people always do the opposite and expect to be successful investors.
One of the best and safest ways to invest in a coin is to think long-term. AXS, LUNA, MANA, Doge, BNB, ETH, etc., made their early investors a lot of money because they spent hours researching the project before investing in them.
They ensured they understood its technology, tokenomics, and what they wanted to offer in the crypto space and ensured their team could deliver results.
They invested in these tokens when they were underrated and when no one was paying attention to them.
Below are the strategies for long-term investing.
- Stay away from ICOs. If you are not among the seed phase or Angel investors, chances are that you are someone else’s exit liquidity.
- Diversify your portfolio. Invest in different prospective niches in the crypto space. You could invest in Alpha projects in Layer 0, Layer 1, NFT, meme coin, DEX, DeFi, etc.
- You cannot time the market. Being right once doesn’t give you the privilege to predict the market confidently. Work with facts.
- Understand the coins you are investing in. Don’t follow Twitter mobs or influencers. Make your research. By the time a coin is mentioned on Twitter, people have taken position and waiting for the mob to enter to dump on them.
- Invest only what you can afford to lose. Don’t invest your school fees, house rent, etc. Invest funds you won’t need in the next 12+ months.
- Don’t sell/buy on emotions. If you don’t have a tangible reason why you are buying or selling, do not take any action. Not investing is part of investing.
Is Crypto Investing a Good Idea?
According to Compare Forex brokers, in 2023, the Forex market is worth $2.409 quadrillion. Approximately $6.6 trillion daily trading volume.
In comparison, according to the picture below, look at the crypto market cap and the daily volume.
The crypto industry is new. It is only a matter of time before some of this money from FX, Real Estate, traditional banking, etc., will enter the crypto market.
One of the things that would lead to that is if blockchain applications begin to solve real-life problems.
This will get the attention of the mainstream. And this means that new and more money will enter the crypto market.
A wise investor doesn’t invest when everyone is investing. A wise investor only invests when he sees an opportunity other people are not seeing.
Crypto is vast, and just like any other thing in the world, if you want to make money from it, you have to specialize in one niche, just one niche, and make the best out of it.
Many people in the crypto space have achieved their dreams within a short period, which they couldn’t get after spending years in the traditional system. You can change your life too. The information is there. You have to take action.
Disclaimer: This post was made for educational purposes. I am not a financial adviser.