Nowadays, traditional streams of income bear meagre returns, and investors are in search of alternatives. It’s never too early to start considering new sources of passive income. As the famous Warren Buffet’s quote goes, “If you do not learn how to make money while you sleep, you will work until you die.” With the cryptocurrency revolution sweeping the world, have you considered the various streams of income with crypto?
The fast development of the cryptocurrency markets induces everyday crypto enthusiasts to jump on the bandwagon to make easy money quickly. You need to keep in mind that steady yet lower returns are the best way to achieve life-changing profits long-term.
Today, we explore the various ways that you can earn an income through cryptocurrency.
How to Earn an Income with Crypto
Each of the approaches presented below carries pros and cons. There isn’t a single best way to get a passive stream of income. Combining them and allocating resources according to your specific needs, you will be able to create a long-term sustainable source of passive income.
Crypto Mining
Cryptocurrency mining became a thing in 2009 after the introduction of Bitcoin. Since then, there has been an exponential increase in digital currencies. If you could have started mining back in 2009, you could be on your way to becoming a dollar multi-millionaire. Even if mining is likely not to get you rich overnight if you enter into the business today, it still provides exciting opportunities.
Bitcoin is the best crypto to mine if you are starting on a small scale. The easiest way to make passive income with crypto mining is by joining a mining pool. These are the factors to consider before choosing a mining pool:
- Security and reliability – ensure that the mining pool is safe from hackers and that the individuals running it are trustworthy.
- Pool size – the larger the pool, the frequent the payouts but the amounts could be smaller. Smaller pools will have a higher payout but less frequently.
- Fees – most mining pools will charge fees, and they might charge as much as 4%
However, you will need to set reasonable expectations. It is an expensive process and requires massive resources. For this reason, you will need to put in the work and work your way up with the lessons you learn along the way.
Best if
- you have access to a cheap source of electricity
- you are tech-savvy
- you are “here for the technology.”
Stacking
Staking is the process of holding a cryptocurrency or tokens to support a network operation. You will then earn a percentage-rate reward in time. Like mining, you will need to join a staking pool.
By staking coins on the blockchain, you will contribute to the network’s security and validate the transactions. In return, you get compensation. The cryptocurrencies use a ‘consensus mechanism,’ known as proof of stake.
The ‘proof of stake’ ensures that all transactions are secured and verified without a middleman acting as the payment processor. Staking is similar to making your assets work for you. Moreover, staking allows you to contribute to the efficiency and security of blockchain projects. There is no set staking amount, and you can start with a small amount and increase your investment for a better payout.
Best if
- you look for a stable and predictable return over time
- you believe in the long-term development of a project
Liquidity Mining
Liquidity mining has become one of the best income streams with crypto, especially in the decentralised finance (DeFi) space/protocol. These DeFi spaces depend on users to keep them liquid. Other users can then use the tokens to trade other tokens or borrow loans with the present liquidity.
Users who provide liquidity in the DeFi spaces are known as liquidity providers or liquidity miners. The incentive you get from liquidity mining is the interest from the funds you inject into the pool and the transaction fees charged.
While liquidity mining is one of the best streams of income with crypto, you will need to exercise some caution. A flaw in the code can be the backdoor used by hackers to steal funds from the mining pool.
Moreover, it would be best if you researched extensively before joining a liquidity mining pool. It would help if you considered the security protocols used in the pool, its reliability and the returns you will get. Fortunately, you will find all the information you need by doing extensive research.
Best if
- you want to achieve above-average stable fixed returns
- you want to discover the true potentials of the DeFi ecosystem
Lending
Cryptocurrency holders are often encouraged to keep their tokens stored in wallets until the price of the currency increases. However, this is a low-risk strategy that generates low interest.
Crypto lending not only allows you to receive interest, but you too can unlock the value of your currency and use it as collateral for a loan. This concept took off in 2020 amid the COVID-19 pandemic, and crypto loans became one of the easiest ways to access fiat currencies.
Unlike typical loans, crypto loans are over-collateralised, and this provides insurance for the lender if the currency price plummets. On the other hand, this will have a massive blow to the borrower if their platform requires them to maintain a loan-to-value (LTV) ratio.
Best if
- you want to add a passive stream of income on top of your long-term holdings
Automated Trading
Trading is among the most used streams of income in crypto. Even if you are not a professional trader, thanks to automated trading, you can trade cryptocurrencies without constantly monitoring your trading platforms actively. The platforms use algorithms to trade the currencies at set times.
You will need to formulate a trading strategy. The automated crypto trading platform will execute the trades based on technical indicators, asset price, or simply the rebalancing of your portfolio to optimise the return over time.
If you are a beginner in cryptocurrency trading, you will need to study the various trading strategies and choose the right platform. To use an automated crypto trading platform, you will need to open an account with a trading bot and select one of the available trading strategies.
Before you dig into crypto trading, read more about some tips you should always keep in mind.
There are plenty of trading strategies you can run, each of them has a specific purpose.
- Dollar-cost average strategy – Buy your favourite assets periodically to get the best possible purchase price long-term, smoothing the effect of short term volatility.
- Momentum Trading – Catch assets on a solid uptrend for profit from further upside or downside. When the trend is strong enough, the earnings from such strategies may be pretty relevant.
- Rebalance your portfolio – optimise the allocation of the assets in your portfolio depending on how the market move. You can, for example, increase exposure to those overperforming and reduce the balance of trending down.
- Short-term scalping – Trade automatically tiny price swings of the market to make small yet frequent profits.
Again, no approach is better than another. The best approach is likely to blend your portfolio allocation across all these different approaches to reduce the volatility and increase the stream of income you can achieve with no significant effort long-term.
Learn more about the strategies you can run automatically on Coinrule.
Trade safely
DISCLAIMER
I am not an analyst or investment advisor. Everything that I provide here site is purely for guidance, informational and educational purposes. All information contained in my post should be independently verified and confirmed. I can’t be found accountable for any loss or damage whatsoever caused in reliance upon such information. Please be aware of the risks involved with trading cryptocurrencies.