Using your cryptocurrency to earn passive income is a fruitful way to make money on your idle digital assets.
There are many ways to put your cryptocurrency to work, and throughout this guide we will explain the best ways to earn passive income with cryptocurrency, what the safest methods are and which platforms. We also explore the best cryptocurrency to invest in for passive income.
What Is Passive Income In Cryptocurrency?
Passive income is money generated from methods which the individual or investor is not actively involved in. Essentially, the investor will put their cryptocurrency assets into a platform or investment strategy and it will generate profit.
Investing in cryptocurrency UK means you may adopt different types of investing strategies. One of them is long-term crypto investing or ‘hodl’. This is when the investor buys his cryptocurrency and then stores it in a wallet and waits for the price to increase to take action.
This is a common strategy, but by using your assets to gain passive income you make money on your investments while also making money with the increase in price. For example, simply buying cryptocurrency and then holding it over the long-term isn’t a guarantee you will make a profit.
However, by earning passive income with your cryptocurrency you are also decreasing your risk as price fluctuations in cryptocurrency market cycles won’t have so much of an impact, especially if you’re making money just for holding a specific cryptocurrency.
There are other ways to reduce your risk, such as dollar cost average investing (DCA investing) in crypto. This is an investment strategy where you buy a certain asset periodically (each week or month) with the same amount. Thus reducing effects of short time price fluctuations.
Best Ways To Earn Passive Income In Cryptocurrency
There are several different ways to earn passive income on your cryptocurrency. Passive income is one of the main unique selling points of cryptocurrency. Below we explain 4 different methods of earning passive income in crypto:
Staking your cryptocurrency coins helps to maintain the decentralised consensus, which is vital for blockchains to remain functional. Staking can only be done on a proof of stake blockchain
You are essentially helping to secure the network, however, as a thank you for doing so you are also earning good returns on your cryptocurrency assets.
However there are a few things to consider before staking. For example, select one of the best crypto wallets that supports your staking method, research the payout terms, there are sometimes lockup periods to be aware of, and of course, check the staking returns.
Interest Crypto Platforms
Holders of certain cryptocurrencies can take advantage of the interest-bearing accounts. This means you can earn fixed interest on your investments. Basically, think of this method as putting in a bank account that gains interest. The only difference is that your account is cryptocurrency and not fiat.
Instead of holding your idle digital assets in a software or hardware wallet you can put them into these accounts where you will receive interest on top. This is perhaps the simplest way to earn passive income with cryptocurrency in 2022.
4 of the best platforms to use and gain an account on is:
When you open a Nexo account you have 34 different digital assets (at the time of writing) that you can earn interest on. This includes Bitcoin. Nexo boasts the world’s largest lending institution in the digital finance industry.
To start earning: you must firstly open an account or the Nexo wallet app. Then transfer your assets to the Nexo wallet and start earning.
- Celsius Network
Celcius is a centralised lending platform that runs on blockchain technology. It offers good interest for those who wish to earn passive income. For example at the time of writing users who deposit their cryptocurrency to the wallet can earn up to 18.63% on over 25 cryptos and over 10 stablecoins.
To start earning: deposit cryptocurrency into the Celcius app. The company then loans the funds out to retail and other borrowers. Each Monday you will receive interest rewards from those loans.
Swissborg is one of the best and easiest ways to earn passive income on your crypto. The app comes with an excellent user-friendly interface. Your cryptocurrency assets will earn daily yield.
To start earning: open a Swissborg yield wallet by downloading the app. Then buy or transfer one of the yield-earning assets to the wallet and begin earning daily.
BlockFi is one of the most popular crypto passive income streams. With the BlockFi interest account you will accrue interest daily and be paid out monthly. There are no fees. The wallet is also available to buy, sell and store your cryptocurrency.
To start earning: enter your information to open a new BlockFi wallet. Transfer your USD or your cryptocurrency to the wallet. Select one of the cryptocurrencies that is eligible for interest and start earning from the wallet.
Decentralised Finance or DEFI is an ecosystem of blockchain-based applications – known as Dapps. The Dapps present a selection of different financial services. However, the main difference between traditional banking services and Dapps is that there’s no third party acting as the middleman. This is because they are powered by smart contracts – a specialist computer programme.
These are known as the crypto pick and shovel investment and are usually medium to low market cap projects.
DEFI lending allows you to use lending services on the blockchain. Lenders and borrowers use a self-execution known as smart contracts. These smart contracts periodically set interest rates. The smart contracts sety interest rates based on supply and demand.
To participate in DEFI lending you must have a web 3.0 wallet that allows you to connect to Dapps.
Yield Farming also sits within the DeFi space. This is another way to earn passive income using your cryptocurrency digital assets. But what is Yield Farming? You lend or borrow crypto via a DeFi platform and earn more cryptocurrency in return for the services. In short, investors are incentivised for lending their tokens to the liquidity pool. The incentives are usually a percentage of the transaction fees. Investors will firstly stake their stablecoins, such as UST or USDC. As crypto investors get more advanced there are many other tokens to use.
4 Best Yield Farming Protocols
Aave helps to create more money within the markets. It’s an open source decentralised lending protocol. Basically, users can borrow and earn compound interest for lending through the Aave token. It has Some of the highest TVL locked up in the DeFi space- over $21 million.
- Users can earn up to 15% APR
Compound is a lending and borrowing market. You can earn compound interest rates or the nattive token ‘COMP’.
- Users can earn up to 3%
Uniswap is one of the best and most popular DEX in the cryptocurrency space. A DEX enables users to swap or trade their cryptocurrency ERC20 tokens (any crypto on the Ethereum blockchain). You can earn by putting your digital assets inside a liquidity pool at a ratio of 50/50.
- Users earn a portion of the transaction fees
Balancer is a portfolio manager and trading platform. One of the top features is flexible staking, which is different from a liquidity protocol. You do not have to have a 50/50 ratio, you just create a new customised liquidity pool with the varying tokens on the platform.
- Users customise the liquidity pools based on the token selected
Best Cryptocurrency Passive Income Platforms, Wallets & Apps For Beginners 2022
The cryptocurrency market and the blockchain technology engine that powers the tech is always evolving. Utilising the likes of DeFi and staking platforms, it’s never been easier to gain returns on your digital assets.
Below we explore some of the best and easiest ways to earn passive income with cryptocurrency in 2022
Coinbase offers a selection of cryptocurrencies that earn interest just for holding them. Once you’ve set up your account it’s simply a case of buying and collecting your rewards each month.
Swissborg has their own smart yield wallet, which allows you to earn daily yield on your cryptocurrency, including Bitcoin. Simply create an account and manage this from your phone via the app.