Crypto is a risky investment, and if you are tired of keeping track of your portfolio, here are 5 ways you can make the most out of your assets and make passive income with crypto.
Most people these days have some kind of crypto holdings that they hope will make them a good fortune in the future. Holding crypto is undoubtedly a good investment moving forward, but one underlying issue with your crypto is that you generally do not qualify for any passive income. Given that inflation is at an all-time high, even the useless fiat currency typically earns you some sort of passive income when stored in high saving accounts.
However, there are several ways to earn passive income on crypto, which can slowly increase the size of your crypto holdings. In this article, we will take you through some of the most effective ways to earn additional income from your crypto earnings and discuss some tips and tricks to maximize your profits and some common scams that you must watch out for. So, without further adieu, let’s get started.
Let’s first address a few techniques we can use to start stacking our cents.
Automating saving
Cryptocurrencies, just like traditional currencies, can also generate interest when maintained in a savings account. They can also be transferred to other platforms to earn a return. Some of these are centralized cryptocurrency savings accounts, such as those offered by Nexo, BlockFi, and Crypto.com, which use your funds to supply institutional borrowers with overcollateralized loans. Similarly, several exchanges, including Binance, Kraken, FTX and others, offer customers a return on their cryptocurrency deposits if they hold specific crypto in their wallets.
Although the interest rates are guaranteed, the yields are generally between 2% to 6% which is not as significant as others on the list.
Liquidity Provider
By offering a permissionless source of liquidity for a wide variety of cryptocurrencies, decentralized exchanges transformed the way traders access and capitalize on market opportunities. However, a sort of DEX known as an automated market maker has opened up a new option for cryptocurrency investors to earn a return on their investments by becoming liquidity providers.
So, what is a liquidity provider? In simple terms, a liquidity provider is a person who contributes their crypto assets to a platform to facilitate decentralized trade. They pay a small fee in exchange, which can be considered passive income.
The amount you can earn varies significantly on the volume of the overall liquidity. You can make anywhere from 10% to over 100% APY.
Cloud Mining
Most of us are familiar with mining crypto, which by itself is an excellent way of earning a passive income. However, crypto mining requires substantial upfront investment in computing hardware and the technical knowledge to execute it.
A good alternative is cloud mining, where people can “rent” hashing power from an established company rather than setting up new mining equipment. This works exactly like traditional cloud computing, where you have a powerful computer capable of executing complex operations up on the cloud. People can then purchase these cloud mining contracts for a small fee that entitle them to a specific hash rate for a set length of time. In proportion to the amount of their contract, the owner receives additional coins, thus making them a source of passive income.
How much you can earn through cloud mining will depend on several factors. For example, with a hash rate of 100 GH/sec and a price of $5 per coin, a year’s worth of bitcoin would cost around $1,900, including maintenance costs.
Cryptocurrency staking
Proof-of-Stake (POS) brought not just a more efficient mechanism to maintain consensus in a decentralized system but also a new way for crypto holders to create a form of passive income. Staking incentives are currently available on various cryptocurrencies, including the lights Ethereum, Solana, and Polkadot.
Cryptocurrency staking does have some restrictions like locking up the crypto for a specific period or enforcing a fixed minimum stake to earn rewards. But overall, staking is an easy way to earn income with crypto.
Dividend-Earning Tokens
Suppose you are familiar with the stock market. In that case, you might be familiar with the term “dividend”, which simply means an incentive ( usually cash, rewards or even more stock in the company) that a company gives out to its shareholders.
Similar to conventional dividends, Tokenized stocks are a type of cryptocurrency that is backed up by the equity of a company. These companies also offer dividend payouts which stack up to make a significant source of passive earnings in the long run.
How much you can potentially earn depends on the volume and duration of held tokens and different platforms’ different rates. In general, you can earn anywhere between 4 to 14 per cent.
Crypto Fund
Most passive revenue streams will require you to put some initial effort into getting started. But Crypto funds are an exception to this rule as you do not need to put much effort into getting started. You can create crypto funds, which will allow you to generate revenue using digital assets.
Crypto funds are extremely easy to set up, and you can make a decent source of passive income through crypto funds. However, these funds require large minimum investments that many investors may not have.
Affiliate Programs
Affiliate programs are available for various business formats, including crypto-related products and services. Many exchanges have affiliate programs which you can use to earn a passive income.
Affiliate programs might sound complex, but it is extremely easy to get started. All you have to do is signup for a program and invite your friends and family to start staking crypto, and the more they spend, the better rewards the platform provides.
Affiliate programs, in general, are a slow process and how much you can earn depends on how many people use your link to signup and start spending. If you have a good social outreach or can reach a large audience, crypto affiliate programs are best for you.
Common Scams to watch out
The world of crypto is flooded with elaborate scams that promise unrealistic returns on investments. Here is a list of the most common crypto passive income scams you must watch out for.
Trading Scam: These scams occur when a company or individual takes access to your account to trade on your behalf. Because these individuals often present themself as more knowledgeable, many make the mistake of giving them complete access, only to lose all their assets.
Cloud mining scams: Many fraudulent sites promise powerful cloud computers only to scam people for money. One of the biggest frauds in cloud mining is bitclub which allegedly scammed people with over 722m dollars.
Lending platforms: Scammers use targeted Facebook and google ads to promote their fake websites, which lure people to invest in different landing platforms. These platforms may not always be safe so it is important to only stick to popular landing platforms and not switch to a less reputed one just because they offered you a better rate.
Final words
“If you don’t find a way to make money while you sleep, you will work until you die.”- Warren Buffett.
Passive income is probably the best way to monetize your time as you do not require your active participation. There are several great ways to make a living from your crypto holdings, and most of them pay well in the long run.
However, because many people do not have a complete idea of how the world of crypto operates, there are many people who are engaged in scamming others. It is important to remember that if an offer is too good to be true, there is a high chance that it is a scam. So watch out for these traps and follow the steps discussed above to start earning your passive income.