How to Make Money When Bitcoin Prices Are Stagnant – A Comprehensive Guide
Long-term Bitcoin holders find market stagnation frustrating since it limits their money-making opportunities. Most of them usually choose to stay out of the market until BTC breaks out of a tight market range.
However, if you are a long-term investor, you no longer have to sit on the sidelines. This guide explains strategies to use to generate profits during price stagnation. Read on to learn more.
Bitcoin Price Stagnation Explained
When Bitcoin’s price remains relatively unchanged for weeks or months, such a period is known as price stagnation. It happens when uncertainty creeps in among traders, fueling a balance between sellers and buyers.
During price stagnation, Bitcoin makes minimal movements (consolidate) within a considerably tight range. As mentioned, this period frustrates long-term investors since it offers limited opportunities for making profits.
Here are some strategies to consider if you want to make money during Bitcoin price stagnation.
Range Trading Strategy
This strategy allows you to make money when Bitcoin is trading sideways. It involves placing buy orders at support levels and sell orders at resistance levels within a particular range. While it does not require deep knowledge of sophisticated technical indicators, you need to understand how to conduct technical analysis.
So, how do you identify a trading range to apply the range trading strategy? After opening Bitcoin’s price chart, draw trend lines to mark support and resistance levels. After that, buy or sell when the price approaches these levels.
It is worth pointing out that the range trading strategy is as risky as other methods. Therefore, it’s crucial to specify stop-loss levels to protect your capital if Bitcoin’s price breaks out of the trading range.
Use of Grid Trading Bots
Once you manually identify a trading range, you can use grid trading bots to automatically open buy and sell orders at specific points. These bots are useful, especially for traders who make decisions based on emotions. Moreover, they place orders 24/7, ensuring you don’t miss any profitable trading opportunities.
Earning Interest on BTC Holdings
The introduction of decentralized finance has opened up new opportunities for Bitcoin investors to earn money during price stagnation. Several protocols allow users to deposit their BTC holdings in exchange for annual yield, which ranges between 3% and 9%.
Crypto exchanges like Binance and Crypto.com let you deposit your BTC in an interest-bearing savings account to earn interest. The good thing is that you don’t need trading knowledge to participate in decentralized finance. Instead, you only deposit BTC to start earning passively.
Lending Bitcoin to Earn Passive Income
Besides earning interest by depositing Bitcoin into a savings account, you can lend it to others via DeFi protocols like Aave and Compound to earn more. To lend your BTC, you must first wrap it to make it compatible with blockchains like Solana, Polygon, and Ethereum, where many DeFi protocols live.
While crypto lending promises higher yields than traditional lending, it carries more risks due to extreme price volatility. Moreover, most lending platforms are not regulated, so you might lose your Bitcoin if the developers block access.
Investing in Bitcoin-Focused Companies
You do not need to own Bitcoin to make profits. Instead, you can invest in Bitcoin-related projects or companies. For instance, you can buy shares of MicroStrategy, the largest institutional BTC holder, rather than investing in BTC directly. Firms like MicroStrategy have seen their stocks perform extraordinarily since the start of 2024.
Exploring Arbitrage Opportunities
Rather than speculating on Bitcoin’s price, you can make a profit by participating in arbitrage trading, where you buy BTC at a lower price from one exchange and sell it at a higher value on another.
While this may sound easy, it comes with several challenges. For example, the price of BTC on the second exchange could match that on the first exchange before completing your transaction. Also, network fees could be higher than the expected profits. Nonetheless, arbitrage trading can be a profitable strategy if executed wisely.
Conclusion
If you are fed up with the BTC price being flat, then you can use any of the strategies mentioned above to earn profit as you wait for the coin to make significant bullish moves.
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