Crypto Airdrops: How and Where to Find Them
Imagine being an early crypto adopter in 2009 and receiving free bitcoin. That ship has sailed, but there are many startups that give out free crypto to spread awareness and increase trading activity for their coins and tokens. These opportunities are called crypto airdrops, and they can give you exposure to new altcoins.
While the cryptocurrencies delivered via airdrops aren’t guaranteed to perform well, when you can get them for free, there is little to no risk involved. Of course, if you’re in the U.S., the IRS treats them as ordinary income. But beyond that, you’re not losing anything extra if the crypto falls in value.
Some crypto wallets, crypto brokerages and crypto trading platforms put you in a better position to receive crypto airdrops. If these cryptos fail, you don’t lose anything. However, if any of the crypto airdrops enjoys a meme rally or sustained success, you can end up with some serious, risk-free profits.
Like the idea of free assets? This guide will reveal some of the ways you can get free coins and tokens through crypto airdrops.
How to get crypto airdrops
Although crypto airdrops give you free coins and tokens, you’ll have to put in some work to find and secure them. One way of doing that is by monitoring crypto news sites that discuss airdrops and pouncing on opportunities as they arise.
Being an active member in crypto communities can also expose you to crypto airdrops before other investors get word. These communities can also teach you valuable lessons about crypto investing and put you in contact with like-minded individuals. Many of these can be found on social platforms like Reddit and Discord.
Airdrops require a crypto wallet
Regardless of where you find out about crypto airdrop opportunities, you will need to have or create a crypto wallet to receive them. Whether that’s an anonymous wallet without KYC like Best Wallet, or a wallet provided by a centralized crypto exchange like Coinbase, there are numerous options. Other popular wallets that allow you to receive crypto airdrops include Ledger Nano X and Exodus.
Before you choose a crypto wallet, it’s good to compare them based on the following parameters:
- Features
- Fee structure
- Number of cryptos available to trade
- User experience
- Security
Types of crypto airdrops
Not every crypto airdrop is the same. A few nuances impact what rules you have to follow before receiving free coins and tokens. The following are some of the most common types of crypto airdrops:
- Standard airdrops: Anyone can receive free crypto if they sign up
- Conditions-based airdrops: Some airdrops require that you are an active participant in the community, an early adopter or someone who has a large enough stake
- Surprise airdrops: Some airdrops are truly a matter of luck of the draw, and surprise airdrops encompass all airdrops in that category
- Bounty airdrops: You have to complete an action — such as a challenge, game or social media engagement — before receiving your airdrop
- Snapshot airdrops: Investors who hold the crypto on a specified date qualify for the airdrop, similar to how a dividend stock pays shareholders up to its ex-dividend date
Like many components of the crypto landscape, some crypto airdrops can get complicated. However, they demonstrate that there’s more to airdrops than receiving free tokens. Sometimes you have to work for them, but most airdrops involve holding a cryptocurrency for a prolonged period of time.
Before getting involved in a crypto airdrop, you should assess a cryptocurrency’s value and determine if it’s something that you actually want to buy and hold, thereby making it worth the time and effort required to qualify for the airdrop. As airdrops aren’t always announced, you can be stuck with a crypto token for several months before receiving an airdrop.
It’s worth mentioning that it can be worthwhile to hold onto a crypto that performs well leading up to its airdrop. However, if it’s a pump-and-dump scheme that requires holding during the dumping phase to receive an airdrop, it’s usually not worth it. That’s why it is important to know the type of crypto airdrop before participating and, when possible, the intrinsic value of the coin or token.
Should you look for crypto airdrops?
Crypto airdrops can help you accumulate new crypto and diversify your portfolio without tapping into your own capital. Some airdrops may give you exposure to a cryptocurrency that becomes hot and outperforms the stock market, but be mindful that like most digital assets, the crypto you receive in an airdrop is likely to be highly speculative.
Some crypto airdrops are fraudulent attempts at obtaining your wallet’s seed phrases and private keys. If you give up this information, you will have to immediately move your crypto out of the wallet before the scammer steals your assets.
While it won’t matter for your overall balance if the cryptocurrency is a pump-and-dump dud, it will result in a higher tax bill. If you receive a $1,000 crypto airdrop, for instance, your ordinary income goes up by $1,000. That’s a taxable event according to the IRS.
Even if the crypto becomes worthless and you sell at a $1,000 loss, it doesn’t cancel out the original income. You still end up with a higher tax bill since you can only deduct up to $1,500 in capital losses per year if you are single, or up to $3,000 if you are married and filing jointly. (Any excess losses carry over into the next year.)
Before accepting a crypto airdrop, consider the token or coin’s legitimacy and how it will affect your taxes. If you participate in a crypto airdrop and have to buy a cryptocurrency first, it’s good to assess your financial situation and risk tolerance before making any commitment.