How to make money on cryptocurrency forks
Every trader needs to know how to make money on cryptocurrency forks. After all, such simple ways of earning after a little careful study are available even to inexperienced traders.
We already know what a cryptocurrency fork is and what types of it exist. There was a publication about this in the article Types of Cryptocurrency Forks. Now let’s look at how to make money on cryptocurrency forks. Indeed, as a result of a surebet, you can increase your capital, knowing in advance information about the upcoming event.
Of course, most often you can earn on the cryptocurrency hard fork. This is a situation when another cryptocurrency is formed from one – a new one. The result is two separate cryptocurrencies. However, the soft fork also has opportunities for earning.
Types of earnings
There are two common options for earning on forks;
Firstly, as a result of a soft fork, a new cryptocurrency is not formed and the network operates within the same blockchain. Therefore, earnings here may be due to the growth in the value of the cryptocurrency from the news about the upcoming event.
Traders expect the news of a soft fork improving the network to increase the value of the asset. Therefore, they buy this cryptocurrency as soon as they find out about the fork. Next, it will be necessary to sell the cryptocurrency as soon as this news is known to most traders.
You can also use the news about the hard fork. You can trade both in the spot market and in the futures market. However, it is worth remembering the increased risks in the second option.
During the period when information is just appearing, experienced traders go long. Everyone starts buying this cryptocurrency and its rate is growing.
After the hard fork has occurred, or when the time for the hard fork is just approaching, the growth in the price of the cryptocurrency slows down and the sale of coins begins. Therefore, we open a trading position for a fall and also earn.
Secondly, with a cryptocurrency hard fork, you can participate in the airdrop of a new coin. You also need to know about the upcoming fork in advance. To do this, it is necessary to study the relevant sources and channels of cryptocurrency developers.
At the time of the fork, there must be a cryptocurrency in your cryptocurrency wallet from which there will be a branch. You must meet all the conditions of the developers to receive this airdrop.
Find an exchange that supports the upcoming hard fork in advance. It is necessary to take into account the amount of cryptocurrency. It must be free – that is, not involved in orders on the exchange at the time of the snapshot of the coins.
As a result, you will have two cryptocurrencies. And then you need to monitor the rate of these cryptocurrencies and, if you wish, sell some or all of the cryptocurrencies participating in the hard fork.
If you leave the cryptocurrency to yourself for long-term storage, it is better to withdraw it to the appropriate wallet. Always remember that the funds on the balance of the exchanges do not belong to you. They are on the wallets of the exchange, so withdraw the cryptocurrency to your crypto wallets for storage.
Rules for earning on forks
Also, compliance with the rules of money management is a guarantee of the safety of your funds. You should not buy one cryptocurrency for all available funds. It is always necessary to divide your funds into several parts for different types of cryptocurrencies. Also, before depositing your funds on the exchange before the fork, you need to make your personal thorough analysis of its reliability.
Also keep in mind that during the period of forks of cryptocurrencies, their price can behave unpredictably. You need to analyze this cryptocurrency in advance, its popularity and the popularity of the fork itself.
Generally, a new cryptocurrency initially has little support and the growth of its price may be insignificant. Of course, it is possible to increase the value after a certain period. Therefore, it is necessary to make the right decision about the long-term storage of a new cryptocurrency.