On the Internet, advertising, search engines or in public chat rooms, there are constantly people who will readily tell you how you can earn a lot of money without work and risk. On closer examination, it is clear that this is most likely either a scammer, or promotes the projects of other scammers, getting some profit as an advertiser. Either you will be offered not the most honest ways of withdrawing money from the public, such as cheating, spam, or reselling the same 'credits' at 100,500% to minded people.
I will try to dilute this stream of garbage information with something useful, relatively honest and not very risky ways to increase my capital.
To begin with, a disclaimer is an attention, the cryptocurrency market is not regulated, and
carries a large number of risks, even with the help of these
strategies here, you can lose all attachments, get temporary
blocking "not in time" or even falling under the prosecution of representatives
Be prepared to spend only those funds that are willing to lose.
Need to decide - how to determine what your income
The value of the currency in which you decide to do this can vary greatly over time. An excellent example is that you chose fiat currencies as an indicator of income, and you can keep cryptocurrency, but its value during the year may fall, and your calculations may show losses at such moments.
One of the solutions is to use the concept of a currency portfolio, which will determine for you a list of currencies and their percentage relative to each other in storage volumes. For example 30% bitcoin 70% US dollars.
You can monitor large funds that publish their currency portfolios and adjust their estimates based on them. Other people's funds are generally a good source of information, but using this information is directly fraught with losses, since it is published with a noticeable delay, and in this market there is a rule that those who are late pay their money to those who arrived on time.
1. Strategy - buy and hold 'in long'
The most stupid and simple strategy, but, so far, the last 7 years, with the first bitcoin cryptocurrency, it works. Various "experts" give predictions on the limiting cost of bitcoin at a level from $ 100k to $ 10kk over the next several decades. You buy the entire amount of bitcoin available, put the coins in your local wallet and wait for significant growth, sometimes for years, and sell some or all of the deposit.
I do not recommend buying during the growth rate. The best time to buy bitcoin is a negative news background. When news sites on a halt predict the death of cryptocurrency, the rate falls below the 'plinth' at 30% -40% of the previous maximum and in general everything looks very bad.
You should not succumb to the "provocations", do not sell your coins if the rate has fallen lower than you purchased the coins. You hold a long position and must hold it as long as possible, and it’s about years.
I highly recommend a local electrum bitcoin wallet available as a desktop and mobile version of windows / android / ios. Paranoids can create their own wallet without a computer connecting to the Internet, for example, on a specially purchased mobile phone, with a clean firmware installed, or use a special hardware wallet. Be sure to backup, write down or even memorize a mnemofrase (in electrum it gives full access to the coins on the wallet, even without a password) and keep it in a safe place. Recheck your backups and passwords before transferring money, there were cases when people wrote down the wrong password from the wallet and actually lost access.
I also recommend mastering mult-signed wallets, when in order to remove coins, consent from several people is needed (the number of consonants can be equal to or less than the total number of wallets), if we are talking about large amounts, it is safer to spread responsibility on several trusted . This will improve the reliability of the security of access to coins, as another backup tool, as well as increase protection against theft.
- the strategy can bring about 100-300% per annum in US dollars
- maximum volumes, almost unlimited, at the moment it is - millions of dollars, and the possibilities are growing.
- loss or physical theft of a wallet
- the course is not obliged to grow forever
- long periods are possible, during which you will not have income, for example, a year or three
- full or partial ban on the use of cryptocurrency in the country (you can have a wallet on your hands but have problems with its use)
- additional costs when using 'old' addresses or technologies (for example, after a few years, translation from addresses with the use of blockchain transactions may be unreasonably expensive), if the problem of bitcoin scaling is not solved correctly.
2. Issuance of loans on stock exchanges
It is very easy to buy a cryptocurrency and just keep it in your wallet, but it's boring and will not increase your cryptocurrency income. If you are willing to take a little risk, then the most reliable of all ways to generate additional income in cryptocurrency, at the moment - to give it out to a loan to someone else, at small interest rates.
Currently, in cryptoeconomics, there is no p2p lending, with some exceptions, but some exchanges offering margin trading services allow their clients to lend to each other on the security of a deposit, acting as intermediaries between them and guaranteeing that the lender will get his money back.
Margincol is an automatic closing of an open position with a trader, until the end of the collateral in his account (usually 10% -15%), the pledge is taken to cover the lender’s losses.
Exchange offer a full-fledged platform for trade in offers for loans, where the equivalent of the transaction price is the interest on the loan per day or per year, and warrants - offers and requests for issuing loans. The loan itself is issued for a short period, which can be specified by anyone, but most often all clients specify a period of 2 days. For a trader using margin trading, everything happens fully automatically, his open position is automatically recalculated, all necessary interest is withdrawn from the account and stops are set for the margin trading company, at the moment of opening a position a new loan will be automatically taken, within the limits that he specified in the settings .
Where can I give loans
An example of such exchanges can offer - poloniex, bitfinex, coincheck (Japan). ETHLend, which develops a fully decentralized credit exchange, based on ethereum contracts, which allows working with any tokens based on the ERC20 standard, also looks good. Bitfinex also
develops a fully decentralized exchange based on ethereum
contracts, to trade tokens. The etherdelta
exchange is already working, not exactly p2p, but deals are made on contracts. These projects may well complement themselves.
In practice, interest on loans issued rarely rises above 18% per annum, especially since the liquidity on the lending market is not always high, and it may not be possible to immediately issue large volumes of loans. But the less popular the cryptocurrency - the higher the interest on loans. For example, on the bitfinex exchange, the average percentage per day for bitcoin is 0.015-0.035, and zcash stays at 0.02% -0.058% per day - this is very little, 10zcash will give an income of 0.0058, which at a price of $ 170 is $ 1. At the same time, it is necessary to have time to 'sell' your volumes at a bargain price, and this is best done with the help of special trading applications (bots), rather than using exchange tools.
Choosing lending as a tool for earning income, you must remember that if you issue loans in cryptocurrency, then you must take its course into account when evaluating your income. Those. Before issuing loans, you need to purchase this cryptocurrency. Such a strategy makes sense if you already hold a cryptocurrency portfolio for a long time and are not going to sell them even if their exchange rate drops.
- 10% -30% per annum in crimped forests, but depending on the chosen strategy of automatic issuance of loans, this percentage can be significantly increased;
- only small volumes are available, depending on the liquidity of margin trading on the stock exchanges, it is usually good (hundreds of thousands and millions of dollars) only during strong fluctuations, which does not happen often - several times a year, and lasts a maximum of a couple of months.
- a strong drop in the rate of cryptocurrency used, and if you are not using bitcoin - you can never wait for growth, i.e. incomes from crediting can be completely covered by losses from falling prices;
- the exchanges may close due to an attack by hackers (theft of users' funds), the actions of the financial regulator or on their own initiative, and it may not be possible to return your money promptly.
3. Strategy - arbitrage deals between exchanges
Speculative trading, one of the most potentially profitable instruments, as well as the most risky. But trading only on one stock exchange and even within one of the currency pairs, it is very difficult to achieve a stable income. Studying the large forex market, it is clear that really effective traders who receive income, about 2%, the rest sooner or later merge their deposit into zero. In most cases, the reason is the inability to manage your risks. And also, the main reason is very difficult to predict chaos. In the end, all possible income is received by intermediaries - brokers and the exchanges themselves.
Spatial or interbinding arbitration
The simplest and most reliable trading strategy on the stock exchanges - leveling courses on different exchanges. If an order is executed on one exchange or several, or changes occur in the list of limit orders, then if you do not do the same on other exchanges, the exchange rates on these exchanges will differ. With significant differences, it is possible to buy cheaper on one exchange and sell more expensive on another. Accordingly, if in advance to hold on all exchanges some balance in several currencies, and to level them in a timely manner, transferring assets between exchanges, it is possible to receive regular income.
It is important to remind that the exchange rate is not the one published in quotes (tickers), but the operational information from the current glass (the list of pending orders of the exchange's clients), i.e. what volumes and at what price you can buy to sell this second, without waiting for a suitable course.
Usually, the difference in exchange rates on exchanges appears when asset transfers between them are very difficult, for example, cryptocurrencies can be transferred between exchanges without any restrictions and notable costs, but fiat currencies strongly depend on the jurisdiction in which the exchange and its customers are located, as well as from the conditions of replenishment and withdrawal of fiat currency, used payment systems and electronic money. For example, the bitcoin rub exchange rate differs from the calculated one, through the bitcoin usd rate and the official usd rub rate from the central bank by almost 9%. But to use this difference is very difficult, due to difficulties in fiat transfers towards Russia.
But more profit and profit for cross-exchange arbitrage, bring strong movements on the exchanges, more liquidity, more often there are discrepancies.
It is important to understand that if you first make a purchase on one exchange, make a transfer to another and try to sell there, during this time the situation on the exchange will change and you may get a loss instead of income. It is necessary using balances on exchanges, first make a couple of transactions that will bring income, and then make a transfer.
To build arbitrage strategies, it is important that exchanges provide tools for timely delivery of information about events on the exchange to the trader’s automated trading tools, such are the FIX protocols and the websocket popular in cryptoeconomics, on the basis of which each exchange invents its own protocol. It is almost impossible to use rest http for arbitrage trading, since due to the limits in the number of requests to the exchange per minute, the efficiency decreases and it is possible not to have time to react to the discrepancies that have appeared.
Based on the above, it is almost impossible to successfully arbitrate manually, a person is simply unable to respond quickly enough, plus the income from one transaction is usually very small, most of the stock exchange eats up, therefore such transactions need to be done very often. Therefore, we need an automated trading system (bots) that can work with the API of several exchanges at once.
Another very popular example of using arbitrage is mediation services, if we consider the private exchange market between users in chat rooms and forums as an exchange, then the exchange services and money changers offering their sale and purchase services use the arbitration strategy while providing liquidity, offering your orders and adding your commission to their price.
- money changers and exchangers can receive for one transaction 1% -5% of the volume of the transaction, communicating with some it is clear that the volume of the day only in Russia can be millions of rubles;
- Volumes of the order of 0.1% -1% of all trading on the stock exchanges.
- as in all strategies where you have to keep a cryptocurrency, - this is the risk of a fall in the rate on them, able to cover the income from arbitration, but you can protect yourself a little from this if you keep the total cost of cryptocurrency available within the same dollar amount, it is expensive and also very dangerous, since in the end you can end up with a large number of useless altcoins;
- lower liquidity on the stock exchanges will lead to a strong decline in revenues;
- the risk of closure / scam exchanges increases, because instead of one, some exchanges have to work with several at once, but the losses are also smeared.
Strategy - Liquidity Provider
In order to earn more on the stock exchange, you will have to work a little. For example, supply liquidity for the stock exchange, filling its glass with your own money. In its pure form on an abstract exchange, this strategy is meaningless, but as a combination of another strategy, such as arbitration between exchanges, it is quite suitable.
Its main point is that instead of buying and selling coins at the current rate (or rather the execution of counter orders from the list of limit orders), you need to place your limit orders near the market, ideally, at the same time to buy and sell, you need to rearrange the transaction, after by the market. This reduces the spread on the exchange, and makes it attractive to other customers, respectively, if both transactions are executed, you will receive income from the difference in their prices.
On the stock exchange, with a lot of liquidity, you can not receive income, as it will be fully covered by commissions, but this may allow you to quickly recruit and hold the necessary volume of transactions per month. Many exchanges reward their customers with high trading volumes by lowering commissions for trading, but with this difference of commissions, you can have something.
If the exchange has weak liquidity (the difference between limit orders for buying and selling in a glass is large, or the volumes of these orders are very small), this strategy usually gives a guaranteed income, especially if you place orders right next to the closest rates.
Obviously, this strategy is not suitable for manual trading and will need a bot for automatic. You will also need special tools, for example, a trading terminal for the selected exchange and / or the ability to program trading strategies.
There is no universal and simple formula.
... by which it would be possible to calculate how and when to bet. It is necessary to determine how far the orders should stand, and the 'purchase' and 'sale' can be at different distances, as well as when and how often it is necessary to rearrange these orders and even for how much, and also the maximum effective values change depending on the market situation. Volume is also important, as large stakes in a glass can force foreign traders to move their orders closer to the market, rearranging them in front of your orders, this approach is even used for market manipulation and market research for bots and evaluating their strategies in order to replay, find mistakes and deceive. Some varieties of the 'liquidity supply' strategy smear volumes in a glass, placing several orders at once at small volumes at different distances from the market, smearing and hiding their behavior from other traders.You can choose the parameters using the tester of a trading strategy
- a special application that, having historical data on transactions on the exchanges, emulates the exchange trades and trades according to your algorithm, calculates the final deposit and builds reports. It happens an order of magnitude faster than in reality, and by constantly changing the starting parameters of your algorithm and driving it over and over on the tester, you can find the optimal values and use them in real trading. You can use any multi-dimensional optimization algorithm to select the parameters of your strategy.
Unfortunately, there are not so many trading terminals working with cryptocurrency exchanges in the public domain, or rather, there are practically no such terminals, or they are tied to a particular exchange. Moreover, very often, high-quality tests are simply impossible to conduct, because there is no adequate trading history
. For example, the popular MetaTraider 4 allowed to test its strategies only on the basis of historical data that does not contain any information about the spread and current liquidity
, namely, the 'liquidity provider' strategy collects from it. You cannot build quality strategies based only on data from the minute chart (time, min, max, open, close, volume) and even if you have a history of deals (time, buy / sell, amount, volume), namely Historical data allows you to download almost all the exchanges in cryptoeconomics - this may not be enough.
I strongly recommend trading on those exchanges that provide complete level2 information about trading, namely, not only the trading operations themselves, but also the actions of users with limit orders - their addition and cancellation.
In cryptoeconomics, all exchanges, historically, give http rest api to get the current list of limit orders (glass or depth) and a copy of the latest trading operations (trades). If you collect this data yourself, making periodic requests, at an acceptable speed (usually tens of requests per minute), you can accumulate enough data to test your trading strategies.
In recent years, some exchanges have begun to add the FIX protocol, although its support is usually not up to par, and hope that you can find a trading terminal and easily connect it will not work. Additionally, the exchange introduces websocket api to get the flow of events on the exchange in real time, in json / text format. There is no standard for this API, but the data itself is more than sufficient to enable you to develop your strategy tester, since the library provides popular exchanges for popular programming languages for its APIs. Such exchanges are, for example, gdax (coinbase), bitmex (pure derivatives exchange), bifinex, poloniex, okcoin, etc.
Decentralized exchanges - full access to all trading information
I strongly recommend to look at the decentralized exchanges, such as, for example, bitshares, which is currently built on the basis of graphene. This blockchain stores all actions performed by users, and not only orders are visible, but also by whom they are committed. Moreover, there is a huge amount of currency pairs on this exchange with very weak liquidity.
These candles are down and up and the strategy of the 'liquidity provider' should catch
Be careful, decentralized exchanges do not guarantee that transactions in the glass are executed in the order they are received, manipulators can skip other people's orders and execute only their own, exposing them at a considerable distance from the market, emitting such candles. This only affects the charts, but in the transaction history on the blockchain all information will be available for analysis.
- low volumes, as a direct consequence of low liquidity on the stock exchange used, for example, at most bitshares in most markets a transaction is not more than $ 100 and only a few can be made per day;
- relatively high interest rates of 10% -30% per month, sometimes you can very successfully catch a candle at 50% of the market, and double the deposit in a couple of deals (the amount allocated for trading on a particular pair is assumed)
- as in all the strategies where you have to keep cryptocurrency, - this is the risk of a fall in the rate on them, able to cover the income from trading;
- lowering trading volumes on the stock exchanges will lead to a strong decline in revenues.