Let’s face it. We can’t all be skilled traders and make massive gains from trading cryptocurrencies.
With such high volatility, trading this asset class can be very risky indeed. But if you want to do more than simply buy and hold (HODL), there are now a host of ways you can make a passive income from your crypto assets.
Mining crypto may not be for everyone and, in many cases, it’s no longer profitable for most individuals (unless they have free electricity on tap and access to highly expensive equipment).
However, the industry has been growing up over recent years. There are several reputable services available to help you make the most of your crypto holdings.
From staking cryptocurrency to lending it out, if you’re comfortable making some trade-offs (such as not retaining control of your private keys), you can earn passive income from your crypto. Here are some of the ways.
Earn a passive income from your crypto
Just as in the traditional banking world, if you have a substantial amount of money, it doesn’t make sense to keep it sitting around in a current account. If you hold different crypto assets, then you can make them work for you in a high-interest account.
Companies like BlockFi and Celsius Network provide a simple way to earn up to 10% interest on your crypto-assets per annum. Compare that to the nonexistent rate your bank gives you on your fiat.
You have to read the fine print and do your own research as there are many different companies around offering to pay interest on different crypto coins. Be sure you know the lock-up period (if any) and what rates you get on each coin.
Celsius won’t pay you 10% interest on your BTC, for example. But they will give you somewhere between 4-5% depending on how much you hold with them. If you want to earn the big interest rates, you could consider purchasing a stablecoin like TRUEUSD or Gemini Dollar with your fiat and holding there rather than with a bank.
Loaning out your cryptocurrencies
Another way to earn a passive income from your crypto is by lending it out. There are several different providers who allow you to do this, including the peer-to-peer lending provider CoinLoan. You can lend out the amount of your crypto that you choose and get up to a 12% rate of return.
You can also select your own lock-up period ranging from just one week up to three years. Hop over to the company’s site to check out the rates and times that suit you best on your favourite coins. As a quick example, if you have two BTC to lend over six months, you’ll earn 12%, which is the equivalent of 0.12 BTC, for doing absolutely nothing.
As previously mentioned, you have to be comfortable with not being in control of your private keys. So, at least take the time to research who the platform’s custodian is.
Stake different cryptocurrencies
Staking cryptocurrencies works by holding Proof-of-Stake coins in a designated stake pool or wallet. Just as with interest accounts and lending, you’re not in control of your crypto-assets if you decide to stake coins, but you can make substantial rewards depending on the coin.
Some of the top-performing PoS coins are Tezos, Decred, Stellar, and Dash. Both Binance and Coinbase allow you to bake Tezos coins (XTZ) from within your exchange wallet. They’ll take a percentage of your earnings, however, so you may be better off using a different wallet.
Staking isn’t just a way to earn a passive income on your crypto, though. The more coins you stake, the more power on the network you rack up. So, ask yourself whether you’re interested in the financial gain only or you want the right to vote on issues on the network as well.
At the end of the day, with all these solutions, you have to give up custody of your coins. If that’s not a problem for you, earning some additional benefits on your crypto makes a lot of sense. If you’re a firm believer that you should retain your private keys at all times, you may be better off simply HODLing after all.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.