Passive income is a hot issue among millennials. They have more investment possibilities compared to prior generations. And this is entirely justified: the establishment of new sources of income is a requirement in an increasingly unpredictable economic climate.
Fortunately, the emergence of cryptocurrencies has opened up new avenues for passive crypto income with a low entrance barrier into decentralized finance. As a result, participants do not require a big amount of capital to invest.
Ways of earning passive crypto income
The most popular choices that will assist you in obtaining extra revenue are listed below.
1. Holding
Portfolio investing, sometimes known as holding, is a low-risk passive income technique. However, it is intended for long-term asset storage until the coin's worth exceeds its purchase price.
The greatest risk of owning is making a mistake while selecting an asset. If you purchase the "wrong" coin, its value will plummet relative to fiat currency or other crypto assets. As a result, rather than profit, the investor will suffer a loss.
However, you can easily protect yourself against losses. You should not buy just one asset, but rather a diverse portfolio of cryptocurrencies. In this instance, losses in one or more assets are compensated by gains in others.
It is best to form a portfolio of three types of crypto assets:
• The biggest in terms of capitalization. You can create a separate service (CoinMarketCup or something similar) and select the top coins based on their capitalization. The obvious choices are bitcoins and ethers.
• Long-term marketable projects. Their inclusion in the exchange listing ensures that blockchains with coins or tokens are legitimate projects that will last for a long time. However, because they do not have the highest capitalization, the prices of crypto assets are typically lower. That is, you can invest with a lower initial sum.
•. Beginners. New ventures that have lately entered the market. You can invest as early as the initial offer (ICO). This portion of the portfolio should be regarded the most hazardous. However, it is advisable to include such currencies, as their value is likely to rise significantly. That means, the investor may obtain a significant income.
2. Staking crypto assets
Staking is one of the most popular and simple methods for generating passive income from cryptocurrencies. You "block" your crypto assets on an exchange or wallet for a period of time, resulting in interest on crypto platforms. This option is ideal for investors and traders with a medium to big amount of cryptocurrency.
Aside from that, you will need to discover which coins provide additional interest or benefits.
• Some cryptocurrency assets, such as NEO and VET, offer rewards for staking (storing cryptocurrency) in another token. All you have to do is keep your coins in a wallet or an exchange that pays rewards. This technique is regarded more safe because the coins are still in your possession and hence under your control.
•. Alternatively, you can engage in bonus programs on prominent trading platforms (like as Binance, Crypto.com, and Phemex). This method allows the platform you're using to temporarily access your funds and use them for its own purposes (for example, margin trading, loans, etc.).
3. High Yielding Savings Account
Another popular technique to produce passive income is through high-yield savings accounts. This is probably the easiest option.
Landing occurs on both controlled and decentralized exchanges, as well as specialized platforms for borrowing funds. The terms of grant and the amount of remuneration are determined separately. Centralized exchanges pay the highest interest rates — up to 45% per year. One advantage is that the platform guarantees a return. As a result, the investor does not suffer any losses.
Another possibility for crypto lending is to lend to cryptocurrency exchanges for margin trading. Return insurance is a trader's leveraged deposit. As a result, the person who gave the crypto assets does not face any danger of loss.
4. Mining
Each PoW-based cryptocurrency can be mined with specialized hardware. You can select from a variety of miners, ranging from cheap secondhand models to strong and pricey ones. Some coins can be mined with a smartphone without the need for any other equipment.
As with most things, you will most likely need to make a big investment before you can begin receiving passive income. The initial investment required for cryptocurrency mining can vary significantly. Mining hardware prices vary based on the market.
Once you've broken even (which normally takes 4 to 8 months in a bull market), altcoin mining may be a lucrative business.
5. Cryptocurrency lending
Lending is a type of lending in which traders transfer assets to others for trading in exchange for a commitment covering the loan and interest rate.
There is a belief that landing means a relatively substantial income, but in reality it does not significantly exceed the return on deposits and rarely exceeds 12-15% per year.
Depending on the currency, the lending percentage can be determined independently, and loans can be made at a fixed rate. However, the yield may be lower or higher than the predicted one, depending on how frequently traders borrow your funds.
6. Farming
Yield farming is a new way to earn cryptocurrencies that DeFi has introduced to us. Liquidity mining entails investors acting as liquidity providers (LPs), i.e., providing liquidity to platforms in exchange for spreads and commissions.
As with loans, the yield varies with the overall volume of the liquidity pools. When the sites first became popular, their annual yield approached 100%. However, when the number of users increased, it dropped to 5% to 20% per year.
The farming procedure is nearly identical to lending, with one exception: a pair of bitcoin is put to the liquidity pool rather than a single one.
7. Cloud mining
Cloud mining compares favorably to traditional cryptocurrency mining methods. All you need to do is pay for rented computing power and get passive money. At the same time, many of the issues related with the placement and maintenance of round-the-clock operational capability of the equipment are eliminated; the burden is entirely on the service provider. Equipment maintenance is a time-consuming and specialized task. However, there are several drawbacks: cloud mining is substantially less profitable than traditional mining on personal physical equipment. There are also occasions when mining is unproductive; this should be considered when developing an investment business plan.
Conclusion
There are various ways to generate passive income from cryptocurrency holdings. The user can use one or all of them. Investment regions can be expanded to provide even more risk diversification. A dividend investment approach is also suitable for those who require monthly passive income.