How To Stop Missing Out on Crypto Airdrops
Crypto airdrops are a marketing strategy like giveaways that help the adoption of tokens and NFTs. Social media users get free assets for joining a list, holding tokens, or completing tasks, depending on the airdrop type. They often have user and time limits.
Crypto Airdrops Explained
Launching a crypto project isn’t easy. Anyone can list an NFT or create a token. But how do you make it stand out?
With thousands of tokens out there, having better features isn’t enough. You need enough people to test how valuable it is in the market. But here comes the catch-22:
Creators need users to create demand, but no one wants a project that has no users in the first place.
Crypto airdrops help creators get those initial followers by giving away free tokens. Users just share their wallets on social media, follow the steps, and on the air-drop day, the creator sends tokens to those addresses. If you type “airdrop” on any social media, you’ll find an endless list of crypto and NFT airdrops.
They’re popular because they work:
- Users have no pressure in selling free items. It might take months before reaching a decent exit price, so they are likely to forget and never sell. This helps creators because it solidifies the floor price, market cap, and the number of owners.
- People tend to talk well about their investments. They want others to buy, either because they want to sell high, or they believe there’s long-term price potential.
- Once there are enough holders or NFT owners, others are more likely to buy (for the same reason people prefer crowded restaurants).
- It’s easier to attract users with free crypto, even if it’s worthless. The best example of this (although not exactly an airdrop) is Pi Network. A whopping 33M people have this app where they click a Mine button every 24 h to earn Pi tokens (currently without value).
- If the project goes well, early users will talk a lot about it. For example, hundreds of users joined HEX in its first year, won big, and became long-term followers. Now, it’s a large, enthusiastic community that promotes the token for free.
How to Participate in Crypto Airdrops?
Airdrops are opportunities for users to support a new project and for the founders to get it off the ground. Here’s how to join one:
- Standard airdrops are social media giveaways. You respond to the post with your wallet address and follow the steps (e.g., like, share, tag friends…)
- Bounty airdrops work like weighted lotteries. You can post your address and do the bare minimum, or you can increase your odds by doing quick tasks. Typically, it’s sharing on other platforms, joining all their channels, or bringing referrals.
- Holder airdrops limit the giveaway only to those who own a certain token. For example, an NFT creator may have an ERC-20 token, and only those who hold those tokens can get a free NFT. Different rewards may apply for holding different amounts, and they can occur without you signing up anywhere.
You should join these whenever you have the chance because airdrops are one of the few opportunities with zero risk. It’s only risky if you have to hold cryptocurrency or pay high gas fees for an NFT.
learn about the 11 common types of Important! Just because it’s free, it doesn’t mean you should do anything they ask. Scammers sometimes run fake airdrops trying to steal your private keys or make you sign a fraudulent web contract. It’s recommended to crypto scams .
Crypto Airdrop Taxes
Crypto airdrop taxes are unclear depending on the type and national regulation. According to the IRS , crypto airdrops incur:
- Income tax for the token amount at the market price it had when you received them.
- Capital gains tax for the profits you earn after selling above your cost basis.
Income tax also includes new coins received from hard forks (e.g., Pulsechain), crypto payments, referral bonuses, and staking rewards. In the USA, long-term capital gains tax is 0, 15, or 20 percent depending on your annual income bracket. If you sell at profit within 12 months, it’s instead considered income tax.
Some questions yet to address are:
- What’s your cost basis on a token that’s not public yet? If it launches the airdrop, that means you received them for $0.
- What about unsolicited holder airdrops? Or tokens received on inactive or lost wallets? How do you account for something you don’t know you have?
- Do you include spreads and network costs as your cost basis?
Many times, new tokens are overpriced for the first few days and then fall by 90%. Imagine you receive the airdrop for a token at $10, you choose not to sell, and it goes to $2. So while you don’t pay capital gains taxes on losses, you can lose a LOT in income tax.
PulseChain Crypto Airdrop
The launch of PulseChain will become the largest crypto airdrop in history. That’s because the Pulse network is the first hard fork with the full system state of Ethereum. Every ERC-20 token will be compatible in PulseChain as a PRC-20, including NFTs.
All you need to do is get a wallet with private keys (e.g., Metamask) and buy some coins on Ethereum Mainnet (the default blockchain). You then add PulseChain as a custom network , and when it’s live, you’ll get a copy of everything bought on Ethereum.
There are a few differences:
- PRC-20s use a naming system starting with “p.” For example, pBTC for Pulsechain’s Bitcoin, pETH for ETH, pXRP for XRP…
- PulseChain markets are about price discovery. While p-named tokens have real equivalents, they start at $0 and move up based on trading. While it may seem risky, people are more likely to buy an undervalued coin (e.g., if pETH is $500 and ETH is $1500, pETH should go up once selling pressure declines).
At the time of writing, the PulseChain crypto airdrop is open. Follow Pulsechain.com for news and instructions.
How to Make Money From Crypto Airdrops
Making money with crypto airdrops is as easy as selling right away. However, you may not earn as much as if you held them, and it’s not easy to win one in the first place.
Luckily, dozens of airdrops happen every day. Explore them on social media, sign up for as many as possible, and you will increase your odds of winning something. Once you win tokens or NFTs, the selling decision depends on the project’s value.
Maybe it’s not just free crypto. Or it’s the next CryptoPunks NFTs. Maybe it’s a DeFi platform that pays you interest for staking.
Or maybe you just like the project and want to support it. Because airdrops are free of cost (and risk!), it’s in the end a subjective decision.
Disclaimer: Please note that nothing on this website constitutes financial advice. Whilst every effort has been made to ensure that the information provided on this website is accurate, individuals must not rely on this information to make a financial or investment decision. Before making any decision, we strongly recommend you consult a qualified professional who should take into account your specific investment objectives, financial situation and individual needs.
Originally published at https://learn.liquidloans.io on September 15, 2022.