The truth about making money with crypto

Team Luno
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3 minute read

Money makes the world go ‘round. And you’ve got to do your own research when it comes to investing.

Managing our own finances leaves many of us with questions - particularly when it comes to making money and investing it. It’s not easy to know what to do or to know where to get (good) advice. Particularly when you take into account the modern financial tools that are re-inventing our outdated financial system.

the truth about making money

So you may have heard that you can make money from Luno and/or cryptocurrencies like Bitcoin. Now, while we are a cryptocurrency company offering an Exchange and Wallet we, unfortunately, are not a money tree.

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This perception that you can ‘make money’ from Luno comes from the fact that the cryptocurrencies we offer on our platform (ETH and BTC) are driven by market forces, so depending on when you buy and sell you can potentially make a profit (or a loss).

How market forces can get you profits

The price you pay for buying Bitcoin or Ethereum, and the price you sell it for will result in either a profit or a loss. That difference between the two prices is how you can potentially make money.

It’s not any different from buying and selling other things. You’d always hope to make a profit (unless it’s a depreciating asset like a car or a boat) but the reality is you could also be losing money, too. That’s why we warn against investing money you cannot afford to lose.

How can there be a profit? Essentially, due to demand, the price of the asset can increase and if it increases above the amount you paid when you bought it, then the amount you own is worth more.

Crypto’s new kicks

Think of it like this, let’s say you bought a pair of sneakers for $50.00 and kept them in the box. Then a celebrity is seen wearing those same sneakers and they become very popular. All of a sudden everyone wants a pair of these sneakers.

Since there aren’t enough sneakers for all of the people who want to buy them for $50.00, some people are willing to pay more to get them. The perceived value of the sneakers increases and everyone agrees that in order to get them you will have to pay $75.00 or even $100.00. The actual price depends on what people agree on, like bartering at a market. So now the sneakers that you bought for $50.00 are worth more, and if you were to sell them for the new price of $100.00 you would effectively make $50.00 in profit. This same principle applies to cryptocurrencies.

So why not just increase the price?

The prices are set by market demand and supply. As such, Luno doesn't set the price of Bitcoin or Ethereum. The price, therefore, may differ between countries, and exchanges. How the price of Bitcoin is determined is by the market in which it trades. Traders determine the price of Bitcoin on an exchange by agreeing on how much they’re willing to pay for it.

To summarise,

We do:

We don’t:

  • Offer investment profits
  • Manage assets
  • Provide set returns
  • Give financial advice
  • Set the prices

This is a long-term business and upgrading our world to a better financial system is a big task — one we’re aware will take time. That's why we’re committed to education, security, and longevity. In the end, the appeal of a get-rich-quick scheme wears off as you come to realise they’re all just that: schemes. To build a house quickly you compromise quality, to build a house to last you slowly set the foundation.

We encourage you to learn more about financial markets, cryptocurrencies and the blockchain technology that underlies them. Education is the first step forward and with our Learning Portal, blogs, and Medium articles you can begin to dive into the world of investing in crypto. If you have questions about any of these feel free to reach out to us on Twitter.

Avatar Team Luno

Team Luno

On our way to the moon, we write about all things crypto. And don’t forget we’re humans too. Our blog conveys the views of Luno and the many unique opinions and characters within our team. We’ll never provide you with financial advice, and we urge you to conduct your own research before purchasing or trading any cryptocurrencies. It’s a brave new world out there, and the market can be volatile at times, so never trade with funds you can’t afford to lose. Want to let us know how much you love our blog? Tweet us @LunoGlobal.

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