5 Top Strategies to Earn Passive Income With Crypto
When the market is trading sideways, it is the best time to put your crypto to work and earn passive income from it. In this video, we analyze several options for earning a passive income using crypto and identify five that seem the most attractive to us based on multiple criteria. Let’s delve into the benefits and risks of each one by reaching out to several experts in the field. Most of my money is in ether, and I’m comfortable staking all of it. If you don’t understand the source of the yield or where the yield is coming from, it is most likely that you are the yield. Let’s jump right in!
Staking: A Way to Verify and Secure Transactions
Staking is a way of verifying and securing transactions on the blockchain. Unlike traditional financial services managed by a centralized entity, cryptocurrency networks allow anyone to contribute to running them and get rewarded for it. In staking, you essentially lock up your crypto for a certain amount of time and earn yields from it. Staking is available on proof-of-stake blockchains such as Ethereum, Solana, Cardano, Polkadot, Avalanche, and many more. There are mainly three ways to do staking:
- Native staking: Running a node directly on the blockchain
- Requires high technical expertise
- High barrier for many due to minimum staking requirements
- Exchange staking: Letting your exchange handle staking for you
- No technical knowledge required
- Centralization risk if the exchange goes under
- Liquid staking: Staking your crypto in exchange for a liquid token
- Access to the value of the staked asset through a liquidity token
- Centralization risks involved
Earning Realistically through Staking
How much you earn through staking highly depends on the crypto you stake and the platform you choose. For example, staking $5,000 worth of Solana with a 2.41% APR could earn you $323 in staking rewards over a year. It’s important to select a cryptocurrency for staking based not only on the reward rate but also on the long-term potential of the cryptocurrency and the details of the staking operator.
Crypto Savings Accounts: Earn Interest on Your Crypto
Crypto savings accounts allow you to earn interest on your crypto similar to depositing money in a traditional bank savings account. These platforms usually offer higher interest rates than traditional savings accounts, with rates higher than 10% on certain cryptocurrencies. However, the risk lies in centralization, as you don’t have control of your crypto, and the platform may not offer the same safety guarantees as traditional banks. Platforms like Celsius have posed risks to customers’ funds in the past, emphasizing the importance of understanding where the yield is coming from.
Yield Farming: Providing Liquidity to Decentralized Exchanges
Yield farming involves providing liquidity to decentralized exchanges to earn a share of transaction fees. By depositing two assets that form a trading pair in a liquidity pool, you can earn yields based on the annual returns of the cryptocurrency pair you stake. While yield farming gives ownership over your crypto, it comes with high technological risks and potential exploits common in smart contracts. Rates provided by liquidity pools also fluctuate, making it challenging to generate consistent returns.
Mining: Generating Passive Income Through Validation
Mining allows you to generate passive income by validating transactions on proof-of-work blockchains and receiving block rewards. While traditional mining requires technical expertise and significant investments, cloud mining offers a way to lease hashing power without running expensive hardware. Cloud mining outsources the mining process but comes with risks such as dependency on the provider and limited flexibility to adapt to market conditions. Scams in the mining space highlight the importance of choosing trustworthy providers.
Affiliate Programs: Promote to Earn Rewards
Earn money by promoting specific crypto platforms or products through affiliate programs offered by many crypto exchanges. By sharing your unique referral link, you can earn commissions or a percentage of transaction fees when someone signs up through your link. While affiliate programs don’t require technical expertise, significant income may require a large social media following. Consider factors like commission rates, payout frequency, and platform reputation before signing up for an affiliate program.
Hot Take: Diversify Your Income Streams in Crypto
Earning a passive income with crypto offers a way to limit the negative impact of market volatility and maximize profits during bull markets. Each method comes with its risks and advantages, and returns depend on market conditions. Diversifying your income streams in crypto can help you offset losses during bear markets and amplify gains in bull markets. Share your favorite methods for earning a passive income in crypto in the comments below!
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