As the cryptocurrency market works through a growth phase which I (and others) are calling the “Great Crypto Gestation,” major cryptocurrency market prices have decreased or gone sideways and I’m increasingly asked the question: “how does one make money when the market is like this?”
For most people, the answer is simple: don’t do anything. If the basic fundamentals haven’t changed — why you bought and the other big picture components — and you can afford to do so, wait out a sideways market. Stick to your convictions.
But if you’re interested in a more active strategy, I have a few new tools you can consider.
Quick note: I’m not a financial advisor or lawyer of any kind. This is not financial or legal advice of any kind. Do your own diligence and decide if these methods or tools are right for you and your risk profile.
Trade the Spread: Arbitraj.io
The newly-launched Arbitraj.io simplifies cryptocurrency arbitrage trading. The Arbitraj homepage alerts you of price discrepancies you can, armed with accounts at multiple cryptocurrency exchanges, take advantage of.
In this screenshot, you can see a clear opportunity for a strong trade: you can buy VET on KuCoin for $0.00718, sell it on Binance for $0.00829, and make a quick 15%+ profit.
Arbitraj.io scans more than two dozen exchanges for opportunities like these —it’s an excellent resource for quick trade ideas as long as you’re open to opening (and keeping track of) a few dozen exchange accounts.
Links: Arbitraj homepage, Google Chrome extension, Product Hunt listing
Trade the Pairs
In cryptocurrency, “trading pairs” describes a trade of one cryptocurrency for another. This is a departure from the way most think about cryptocurrency pricing — “Bitcoin was $5,000 today” only takes the BTC/USD pair into account.
That’s a fine way to operate in your day to day, but consider this hypothetical: you buy 1 BTC (worth $5,000), hold $5,000 USD, and want to acquire 10 ETH (at a rate of $500/ETH).
The next day, BTC increases in value by 10% — it’s now worth $5,500/BTC — while ETH stays the same ($500/ETH). You can now afford 11 ETH for the same 1 BTC you had on day one while you could still only afford 10 ETH with your USD.
The real profitable trade strategies are more complex — I recommend looking for some Forex trading books or resources— but anytime that one major cryptocurrency moves differently than another, there is an opportunity.
Offer Loans
If you’re a loyal hodl-er of major crypto on an exchange like Poloniex, you can make your stake available for a loan and earn interest.
I’ve seen rates vary wildly so your milage may vary, but these are considered low-risk loans since Poloniex ensures a leveraged margin trader liquidates at a level where they repay the loan. (I’ve only done this on Poloniex and can’t speak for any other exchange experience.)
Consider a Short
If you’re watching your BTC lose value or tread water while CoinX skyrockets, you may want to consider opening a short position, a bet the price of an asset (in this case CoinX) will decrease.
You’re effectively selling CoinX at $1.00 and then hoping to buy CoinX at $0.75 in the future so you can keep your $0.25/CoinX profit. Many of the major exchanges allow for such a trade.
An important note: it’s easy to think in terms of USD here but it’s critical to understand trading pairs before opening a short. If you open a short on a BTC/CoinX pair, it won’t really matter where CoinX goes in terms of USD value — it will only matter that BTC does well vs. CoinX.
Remember: “bulls make money, bears make money, pigs get slaughtered.”
Good luck out there.
Andrew J. Chapin is the Co-Founder & CEO of Benja, head of the benjaCoin token project, andauthor of Art of the Initial Coin Offering. This November, Andrew is running the New York City marathon for Athletes to End Alzheimer’s.