3 Ways to Create Passive Income With Crypto: Part 1

Just like any investment, buying and selling cryptocurrency is a great way to earn returns. Despite this, trading cryptocurrency requires time and patience. What if there was a way to leverage your existing cryptocurrency as a way to earn passive income? Earning passive income is a dream for most of us. Making money from cryptocurrency without active management is undoubtedly an attainable goal. Here, we explore three ways to create passive income with cryptocurrency..

1. Earn Interest.

While traditional cash savings accounts no longer yield much in interest anymore, some platforms allow users to deposit cryptocurrencies to earn decent yields. These platforms consist of centralized and decentralized accounts.

Platforms such as BlockFi, Nexo, and Crypto.com offer centralized cryptocurrency savings accounts. These platforms use your funds to provide loans to borrowers.

Decentralized savings platforms like Anchor, allow users to earn interest on stablecoin deposits. Be wary of “lockup periods” where users can’t access funds for a fixed amount of time.

Some cryptocurrency exchanges like Binance allow users to earn a yield on their cryptocurrency deposits.

Because these methods don’t require in-depth knowledge to get started, it is the most straightforward way to earn passive income with cryptocurrency.

You Become Financially Free When Your Passive Income Exceeds Your Expenses.

1. Provide Liquidity.

Becoming a liquidity provider is a new way for cryptocurrency holders to earn a yield on their assets. A liquidity provider, also known as a market maker, is someone who provides the crypto they own to a platform to facilitate trading.

The liquidity provider can then earn passive income on their deposit. The passive income is made via the fees generated by trades on that platform. During this time, the assets are subject to a lockup period. The liquidity provided by the user is deposited into a liquidity pool. The higher the fraction of liquidity combined with higher trading volume will result in more earnings. Understanding the concept of impermanent losses will be beneficial if you are providing liquidity for a volatile asset

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1. Yield Farming.

Yield farming can be a very lucrative way to make a passive income with crypto. Yield farming is also known as yield or liquidity harvesting, which involves lending cryptocurrency. To yield farm, an investor deposits tokens into a liquidity pool.

Some yield farms allow you to earn yields through a new cryptocurrency or the native token offered on the platform of your choice. The investors who provide liquidity via yield farming will receive a fraction of the fees generated through traders using the pool.

At first, yield farms offer very high yields, but yields can drop of the token crashes in value. Staying on top of estimated yields is essential to being successful in yield farming.

Conclusion

Crypto traders have so many ways to use their holdings to their advantage. Generating passive income with cryptocurrency is becoming a sure-fire way to earn more money. The strategies involved range from easy processes to more involved activities such as yield farming. Whichever method you choose to employ, always be aware of the benefits and risks involved