Easiest Strategies to earn passive income from Bitcoin and other Cryptocurrencies
One of the biggest benefits of converting fiat money into cryptocurrency is that you can earn yield. I was a young child in the 1980’s and I remember the rewarding feeling that I had when I would go to my bank and get an update in my bank book on how much interest I earned per month. The feeling that my money could grow and work for me just by me saving confirmed that saving it was the right thing to do. Ironically, I earned more interest with less than $1000 in a savings account than what I would earn with 20x that amount in 2021.
Today, I look at my savings accounts and I feel akin to Edvard Munch’s painting, The Scream. I am embarrassed to see how little my account has grown over the past 10 years. Meanwhile, the cost for life’s biggest expenses: rent, medical, and schooling are going up annually. Unfortunately, there are few places that I want to put my hard earned money. The stock market has been on fire, but things like P/E ratios and the Buffett Indicator give me pause. The whole Gamestop/Reddit fiasco makes me realize that the wall street casino is rigged against the retail investor. Real estate isn’t very liquid, has exorbitant fees, and tends to move in conjunction with stocks. The counterparty risk is high if you are renting property with 30% of renters not paying rent. Not to mention, the Fed’s policies can either make or break the real estate market. Additionally, where I live in California it’s nearly impossible to get positive cash flow and I don’t want to deal with buying out of state. Precious metals are a good option, but I don’t really want to store them and they also involve fees and don’t provide cashflow.
This doesn’t leave too many options. On the one hand, my dollars are being devalued in the bank. On the other hand, I will have to take risks in order to beat inflation. That is one reason that I have chosen to diversify a portion of my portfolio into cryptocurrency. I am not a financial advisor and this is not financial advice. I’m just sharing my opinion and my strategy for gaining passive income and an opportunity to earn yields. I enjoy doing research and would like to share how I am earning passive income in a relatively easy way.
There are many ways to earn yield on cryptocurrencies. The spectrum and ease of doing so range and, while I am technologically capable, I am by no means skilled above average. My wife has to show me how to use the scanner on our computer every few months and I have yet to make a Facebook, Tik Tok, or Instagram post. So how does someone decide from the myriad of options there are for earning yield on crypto: do I use DeFi on financial platforms like Compound or Aave or Venus and if so do I use Binance Chain or Ethereum? Do I provide liquidity on a DEX like Uniswap, Sushiswap, or Pancake Swap? Do I figure out how to stake specific coins and look for ones with the best yield? Do I keep coins on exchanges that pay interest or another token as a dividend? Do I use foreign owned dividend paying services or search for ones based in the US? With so many options, how can a person decide which is best and easiest?
Based on my experience, I will run through the options in order of what I have found the easiest to what I find to be the most complicated. I am self taught through what I’ve found online and via YouTube videos so your experience may be different. Additionally, I am in the US so I am only able to use Binance.us which has fewer options than the international site. I will try to dissect some of the good and bad with each option.
Easiest: Buy and hold/stake on an Exchange
Pros- easy to do
Cons-limited options, may need to set up accounts on multiple exchanges
There are a couple of coins that I hold on exchanges that earn yield. I am not recommending these coins, but I have invested in them, and like that I earn some yield on them. On Kraken, I have invested in Polkadot and you can easily stake (google search how to stake DOT on Kraken) directly on the exchange and earn 12% yield paid in DOT tokens. On Binance.us, by simply holding VET (Vechain) tokens, you get a small amount (Binance states 1–3% per year)of VTHO periodically added to your account. It’s not a lot, but over time it can add up and if the value of VTHO goes up (it has this year), so does the value of your dividend. I also believe that other investors are like me and and want to take the path of least resistance so these coins may outperform as they have added incentive to hold. It may make sense to research other coins that are easily staked on Binance.us such as Algo, Atom, XTZ, QTUM, EOS, and ONE. You can also stake a few coins on Coinbase, but they pay lower yields than Binance.us.
Lend Coins on managed sites like BlockFi or Celsius
Pros- Relatively easy to do, more coin options (depending on platform)
Cons- Requires transferring coins, withdrawing from platforms takes time and withdrawal options are limited
There are several different platforms that you can lend your crypto and I encourage you to do your own due diligence and use whichever you are the most comfortable with. I like to use BlockFi and Celsius the most because they are based in the US, they are extremely large, and had extremely good reviews when I researched them online. I have written a separate article going into more detail about these platforms that you can check out by clicking this link. I have also shared my strategy for building my stacks that you can read by clicking this link . At the end of this article, I will include referral links to BlockFi and Celsius that will provide us both a referral bonus if you choose to use them.
Staking using a web wallet
Pros- You can earn higher yields and invest in a variety of coins
Cons- Can be complicated. Gas fees can cut massively into earnings. Sometimes requires keeping coins staked for certain periods of time.
Many coins offer staking rewards. You can own the coin and use a web3 wallet like metamask and stake your coins on their platform. This is not very easy to do the first time, but once you get the hang of it, it’s not too hard. Unfortunately, the process varies depending on the coin and the platform the developers created. Additionally, most coins are on the Ethereum network and it requires a gas fee to stake, withdraw rewards, and unstake. I hate the high price of gas fees so I avoid this option. Binance is offering their own platform in competition with the Ethereum network, but I was unable to configure my Metamask wallet to conform to Binance Chain so I aborted that method. Some wallets like Coinbase’s wallet, Polkawallet, and Cosmostation allow for staking, but I haven’t used them because it didn’t seem necessary for the coins that I own. One coin that I do stake is Cardano (ADA) on the Yoroi mobile wallet. It’s easy to do and I like the ADA project and leadership. However, staking of ADA is in the coming soon section of Celsius so it may just make sense to wait for it to arrive there.
Yield farming on DeFi sites like Aave, Compound, etc.
Pros- You get to keep the coins in your wallet. You can earn higher interest. You earn governance tokens by lending on the platform.
Cons- Complicated. High gas fees.
Yield farming is a very lucrative option, but it’s more complicated and time intensive and harder to use. It also gives the bonus in that it reward both lenders and borrower with governance tokens which have mostly increased in value dramatically. I would recommend looking up how to do it on YouTube or via a google search. I tried it and my loan on a stablecoin got liquidated. That was enough to turn me off and move my funds to BlockFi and Celsius. I may have missed out on some gains, but I am used to having some centralization that these platforms provide. Also, gas fees can eat up your gains if you are lending a small amount and the interest rates vary day to day and platform to platform.
Providing Liquidity on a Decentralized Exchange like Uniswap, Sushiswap, or Pancake Swap
This is another method for earning yield on your cryptocurrency. I have never done it and am not too interested in learning how to do it. It requires Ethereum and the token that you are providing liquidity for. Your coins can be slashed and, for me it’s over my head. It probably doesn’t belong in an article about easy strategies, but I did want to include it as it is an option for earning passive income on your crypto and may be worth researching elsewhere.
Thank you for taking the time to learn about how passive income can be earned on your cryptocurrency. If you found value in this article I invite you to read some of my other articles on Medium. Additionally, below are some referral links to BlockFi, Celsius, and Binance.us. Remember to lock in gains and expect another correction at some point and try to enter and maintain a strategy for entering and exiting the market.
BlockFi referral code: f6357635
**BlockFi is now accepting waitlist for the first-ever Bitcoin rewards credit card with some great features. Click here to be on the waitlist And to learn more details about the opportunity.
Join Celsius Network using my referral code 120824ba06 when signing up and earn $30 in BTC with your first transfer of $200 or more! #UnbankYourself
Celsius referral code: 120824ba06