Among the less well-known methods of making money is to participate in a cryptocurrency. How you can earn money online with cryptocurrency, you will learn in this practical tip.
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Similar to classic currencies, you can also earn money with cryptocurrencies through interest and price gains. In addition, however, there are other options such as mining or staking, which you can not do with normal currencies.
- When making money through price gains, you only convert part of your normal money into cryptocurrency: As the price rises, you receive profits when selling the cryptocurrency. However, the classic Bitcoin is currently subject to strong fluctuations. It is also unclear how the course will develop in the future in the long term. This method is not particularly safe in the long run.
- In addition to investing, you can also trade with cryptocurrency. In so-called “day trading”, for example, you take advantage of small price fluctuations to achieve small profits. For this, however, you must constantly watch the course vigilantly. Within minutes, the price can change by a few percent, which makes the method very risky.
- For crypto currencies, there are numerous online banks on the Internet that – as with a normal bank – promise interest profits. With “crypto lending” you lend your cryptocurrency and receive relatively high interest rates in return. However, you should be especially careful if you are promised high interest rates per month or per day. Often these offers are high yield investment programs, in which the profit is primarily based on the fact that more and more investors are added. Previous investors are paid the money by new investors. You should definitely refrain from this, as it is basically investment fraud that will collapse one day, not real “interest”.
- One of the more classic methods of making money online is to mine cryptocurrency. Here you use the computing power of your PC to create new blocks and add them to the blockchain. If your computer has “cracked” a block, you will receive the fees of the transactions and the mined cryptocurrency in return. Unfortunately, this method is also not very profitable, as the cost of electricity and your computer is usually much greater than the amounts collected. However, with increasing overall computing power (due to new participants in mining), the difficulty of hashing is also increased, which is why the investment for competitive GPUs is usually much too high for private individuals.
- Finally, there is the so-called “staking”. Similar to mining, this is about validating transactions. In doing so, you block part of your cryptocurrency for transactions. Through a (theoretically) random algorithm, a validator is chosen that can validate the respective blocks according to its share of “locked” cryptocurrency. People with a particularly large amount of cryptocurrency are preferred by the algorithm. You will receive a reward for successful validation. With the “Delegated Proof of Stake” you have (depending on the amount of cryptocurrency) a “voting right” to choose the one who is allowed to validate the block. The work is outsourced to third parties.
Tax cryptocurrencies – Does it have to be?
- The European Court of Justice ruled in its judgment on 22.10.2015 that services consisting in the “exchange of conventional currencies into units of the virtual currency ‘Bitcoin’ and vice versa and which are exported against payment of an amount equal to the range represented by the difference between the price at which the economic operator concerned buys the currencies and the price, in respect of which he sells them to his customers, is formed, constitute transactions exempt from VAT within the meaning of that provision’.
- If you own the cryptocurrency for more than a year, the capital gains are tax-free. However, as soon as you earn interest, you have to pay tax on it. The speculation period is additionally increased to 10 years. It is helpful if you note all transaction data for bought and sold crypto currencies, as digital goods such as crypto currencies cannot be distinguished and here the one-year period for the purchase of the coin is set.
- If you make a profit as a private person with cryptocurrency, this falls under the so-called private sale transactions. These have an allowance of up to 600€. Once you get over this amount, you will have to pay taxes. It is important to note that this allowance also includes other private sales, regardless of crypto transactions, with profit that you have made over the year.
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(Tip originally written by:MS)