22.08.2022 Advanced Topics By George Gus

How to earn passive income with cryptocurrency

Passive income is a popular topic among millennials. They have more investment options than previous generations. And this situation is fully justified: the creation of additional sources of income is, rather, a necessity in a growing economic unstable situation.

Fortunately, the introduction of cryptocurrencies has created new opportunities for passive crypto income with a low barrier to entry in decentralized finance. So participants do not need to have large capital to invest.

Ways of earning passive crypto income

Below are the most common options that will help you generate additional sources of income.

1. Holding

Portfolio investment or holding is a passive income strategy that involves almost no risk. However, it is designed for long-term storage of the asset until the value of the coin rises compared to the purchase price.

The main danger of holding is a mistake with the choice of an asset. If you buy the “wrong” coin, its value will fall relative to fiat currency or other crypto assets. As a result, instead of profit, the investor will receive a loss.

But it’s easy to protect yourself from losses. You need to buy not just one asset, but collect a diversified portfolio of several types of coins. In this case, a drawdown in one or more assets will be offset by profits in others.

It is best to form a portfolio of three types of crypto assets:

  • The largest in terms of capitalization. You can open a special service (CoinMarketCup or similar), as well as choose those that are in the top by capitalization. The obvious option is bitcoins and ethers.
  • Projects that have been on the market for a long time. Their presence in the listing of exchanges ensures that blockchains with coins or tokens are not fraudulent projects and will exist for a long time. But since they do not occupy a leading position in terms of capitalization, the price of the crypto assets is usually lower. That is, you can invest with a smaller initial amount.
  • Beginners. New projects that have recently appeared on the market. You can invest even at the stage of the initial offer (ICO). This part of the portfolio should be considered the most risky. But it is advisable to include such currencies, as they can expect a sharp increase in value. That is, the investor can potentially receive a high income.

2. Staking crypto assets

Staking is one of the most popular and easiest ways to earn passive income from cryptocurrencies. You “block” your crypto assets on an exchange or wallet for a while and as a result earn interest on crypto platforms. This option is great for investors and traders who hold a medium to large amount of crypto.

Other than that, you will need to research which coins offer additional interest or rewards:

  • Some crypto assets such as NEO and VET pay rewards for staking (storage of cryptocurrency) in another token (GAS and VTHO respectively). All you have to do is store your coins in a wallet or on an exchange that offers rewards. This option is considered more secure as the coins remain in your possession and therefore under your control.
  • Alternatively, you can choose popular trading platforms (Binance, Crypto.com, Phemex, etc.) to participate in bonus programs. This process means that the platform you are using will be able to temporarily access your funds and use them for their own needs (for example, for margin trading, loans, etc.).

3. High Yielding Savings Account

Another common way to generate passive income is through high-yield savings accounts. This option is probably the easiest.

Landing takes place on centralized or decentralized exchanges, as well as specialized platforms for borrowing funds. The conditions for granting and the amount of remuneration are set individually. Centralized exchanges pay the most — up to 45% interest rate per annum. The advantage is that the platform guarantees a refund. Therefore, the investor does not lose them.

Another option for crypto lending is lending to crypto exchanges for margin trading. The return insurance is the deposit of a trader who uses leverage. Therefore, the person who provided the crypto assets also does not risk losing it.

4. Mining

Every PoW-based cryptocurrency can be mined using specialized hardware. You can choose from different types of miners, ranging from cheap used ones to powerful and expensive ones. There are coins that do not require special equipment at all and can be mined using a smartphone.

As with most things, you will most likely need to invest a significant amount before you can start earning passive income. In the case of altcoin mining, the initial amount you need to invest can fluctuate a lot. Mining hardware prices tend to fluctuate depending on the market.

Once you break even (which usually takes 4 to 8 months under positive market conditions), altcoin mining can be a great way to make money.

5. Cryptocurrency lending

Lending is a form of lending in which some traders transfer assets to others for trading, in return receiving a pledge covering the loan and interest rate.

There is an opinion that landing implies a relatively high income, but in reality it does not greatly exceed the return on deposits and rarely exceeds 12-15% per annum.

Depending on the exchange, the lending percentage can be set independently and loans can be provided at a fixed rate.

However, the yield may be lower or higher than the calculated one, depending on how often traders borrow your funds.

6. Farming

Yield farming is a new form of earning income in cryptocurrency that came to us from DeFi.

Liquidity mining means that investors act as liquidity providers (LPs), that is, they act as liquidity provider to the platforms, and earn on spreads and commissions during the exchange.

As in the case of loans, the yield varies depending on the total volume of the liquidity pools. At first, when the sites just started to gain popularity, the yield exceeded 100% per year. But later, as the number of users grew, it fell to 5% – 20% per annum.

The farming process is practically the same as lending, but with one caveat: not a separate cryptocurrency is added to the liquidity pool, but a pair.

7. Cloud mining

Cloud mining compares favorably with the traditional way of mining cryptocurrencies. All you need is to pay for rented computing power and receive passive income. At the same time, a lot of problems associated with the placement and maintenance of round-the-clock operability of the equipment disappear – the cares are completely on the service provider. equipment is a complex technical task that requires time and specific knowledge. But it does not do without minuses – the profitability of cloud mining is significantly lower than traditional, on personal physical equipment. There are also periods when mining is unprofitable – this should also be taken into account when drawing up an investment business plan.


There are several ways to earn passive income from crypto assets. The user can choose one of them or use all of them. For even greater risk diversification, investment areas can be expanded. And if there is a need to receive passive income on a monthly basis, a dividend investment strategy will do.

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