Planning to make some investments in the crypto? Let’s understand about the top crypto passive income generators that will help you generate crypto passive income.
Cryptocurrency has evolved as one of the most prominent digital assets in the modern technology landscape. It revised the conventional definitions of money by removing the role of central banks in creating, issuing, and managing currency. Cryptocurrencies were considered a mysterious take on digital currency for years since their inception. However, financial institutions, companies, governments, and people all over the world have recognized the potential of cryptocurrencies for transforming the traditional global financial infrastructure.
Interestingly, people are seeking top crypto passive income generators as an option to capitalize on the financial prospects associated with cryptocurrencies. On the other hand, it is important to wonder about the feasibility of methods to earn passive income on your crypto assets. The following discussion offers you an outline of some of the best methods for generating passive income from crypto assets.
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Is It Possible to Earn Passive Income in Crypto?
Many cryptocurrency holders surpassed the barriers of uncertainty and discovered opportunities for profitable returns in cryptocurrency trading and investment. However, crypto investors have to deal with many prominent issues such as frequent fluctuations in the value of cryptocurrencies. In addition, you have to keep track of your crypto investments, monitor the portfolio of investments, and work on managing your positions.
You can clearly notice that investing in crypto is no child’s play after all! First of all, you have the risk of losing your money invested in cryptocurrencies. On top of it, you have to deal with the complexities of investing in crypto for ensuring the best returns. The only solution to active involvement in crypto investments would be passive income.
You can earn crypto passive income by following a specific investment strategy or investing crypto assets in a specific platform. With the right methods and strategies, you can find some great ways to make your crypto assets work for you. One of the most common methods used for earning passive returns on crypto assets without any involvement is ‘HODL’ or holding your cryptocurrencies.
However, holding a cryptocurrency in the hope of an increase in its price in the future qualifies as a long-term strategy. Generally, investors opting to ‘HODL’ their crypto assets have to hold their assets for around six months to five years. Therefore, you cannot consider ‘HODL’ as a crypto passive income generator.
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Methods for Earning Passive Income with Crypto
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Just like the traditional financial instruments such as derivatives and stocks, cryptocurrencies can also serve as a helpful tool for generating passive income. However, people want to know about the best crypto passive income generators which focus on methods other than crypto trading or holding your crypto assets for extended periods of time. The methods for earning passive income on crypto assets must not require any sort of active involvement from the investors. Interestingly, you have many methods to earn crypto passive income without the need for staying updated with the market. Here are some of the top picks in the methods for earning passive income on your crypto assets.
1. Crypto Lending
The first and easiest method to earn passive income on your crypto assets is lending. As a matter of fact, crypto lending is one of the most popular services in the centralized and decentralized domains of the crypto ecosystem. Investors can lend their crypto assets to borrowers in return for interest, through different lending strategies. Some of the top crypto passive income generators in 2022 include lending strategies such as peer-to-peer lending, margin lending, or DeFi lending. Here is an outline of each lending strategy suited to different investor requirements.
Peer-to-Peer Lending (P2P)
Peer-to-Peer or P2P lending platforms help investors in setting the terms of the loan. Investors can use the services of P2P lending platforms for determining the amount they want to lend to borrowers and the interest on the loan. The P2P lending platforms help in matching lenders and borrowers just like matching buyers and sellers on peer-to-peer trading platforms. Investors may practically access a crypto passive income calculator with P2P lending platforms. In addition, they also offer better control over the way you want to lend or invest your assets.
Centralized Lending Platforms
The next noticeable lending strategy for generating passive income on crypto-assets is centralized lending. However, investors have to depend on third-party platforms which come with fixed lock-up periods and interest.
One of the emerging crypto lending strategies among top crypto passive income generators obviously draws attention towards DeFi lending. Decentralized finance or DeFi lending takes away the intermediaries from traditional lending. On the contrary, borrowers and lenders depend on smart contracts for automated lending without any proactive involvement from your side.
The option of margin lending to earn crypto passive income largely focuses on lending crypto assets to traders who want to borrow them for trading. Such type of traders uses the borrowed funds for expanding their market position and return the loans with a specific interest. However, you have to rely on a crypto exchange for margin trading.
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2. Yield Farming
The next biggest entry among the best crypto passive income generators would refer to yield farming. It is a decentralized method in DeFi for earning passive crypto income and has been fostered largely by the dynamic operations of decentralized exchanges. DEXs or decentralized exchanges have evolved as prolific trading platforms which rely on smart contracts and liquidity from investors. Users don’t have to trade with brokers or other investors in decentralized exchanges. On the contrary, you can interact with smart contract-based liquidity pools or collections of funds deposited by investors, also referred to as liquidity providers. The liquidity providers receive a certain share in the trading fees incurred from the pool.
You can try yield farming as one of the reliable crypto passive income generators in 2022 as a liquidity provider on different DeFi exchanges. The best practice to start generating passive income on crypto with yield farming is to look for credible decentralized exchanges like Uniswap. You can become a liquidity provider by depositing a specific ratio of two or more digital assets in liquidity pools on the exchanges. You would receive LP or liquidity provider tokens from the decentralized exchange as a representative of your share in the liquidity pool. Now, you can stake the LP tokens on other decentralized platforms for additional interest. Therefore, yield farming provides a practical option for generating two separate streams of passive income from a single crypto deposit.
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3. Interest-Bearing Crypto Accounts
Another top mention among top crypto passive income generators would also bring interest-bearing crypto accounts into question. The interest-bearing crypto accounts serve as a flexible solution for earning fixed passive income on idle crypto assets. You would notice many similarities between interest-bearing crypto accounts and traditional savings account in banks.
Investors can earn fixed interest on their crypto investments on different platforms offering such services. Users can receive earnings on a daily, weekly, monthly, and yearly basis from the interest-bearing crypto accounts. Some of the examples of best crypto passive income generators in interest-bearing digital asset accounts include BlockFi, Celsius Network, and Nexo.
4. Dividend on Tokens
Some companies offer a certain share of their revenue with the tokens they issue to investors. You can hold the tokens and receive your share in the revenue of the company according to the number of tokens you have. Therefore, the dividend-bearing tokens can definitely call for a crypto passive income calculator as they offer a flexible method for deriving passive income on crypto assets.
You can also look at another top entry among crypto passive income generators in 2022 with staking. The new Proof of Stake consensus mechanism in blockchain technology has been tailored for empowering network participants with governance privileges. The community-based approach aims to resolve all concerns of centralized intervention.
It is important to note that the Proof of Stake blockchain networks chooses validators from a broad pool of users. The users have to stake a particular sum of the native crypto asset to earn interest on their staked assets. Therefore, you can also choose to stake on PoS blockchains like Ethereum 2.0, Solana and Polkadot to earn crypto passive income without complications.
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6. Cloud Mining
The traditional method for earning passive income on crypto assets or crypto mining-focused more on the consumption of resources. However, investors can look at the possibilities of using cloud mining as an alternative to crypto mining. The concept of cloud mining basically focuses on the delegation of crypto mining tasks to third parties. Investors have to pay a massive upfront cost for renting or purchasing crypto mining services and machinery. Thereafter, investors have to pay for the maintenance of the mining hardware. On the other hand, you cannot ignore the risks associated with the best crypto passive income generators in cloud mining. For example, the risks of scams in cloud mining increase profoundly due to the remote location of mining facilities.
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On a final note, you can notice the simplicity of different methods used for generating passive income from crypto. The multiple options for generating passive crypto income provide unique opportunities and feature distinct methods. However, you need to start with a basic impression of the risks in the domain of crypto investment. You should be prepared for the uncertainty in the valuation of crypto. On the other hand, you cannot ignore the potential associated with the top crypto passive income generators available right now. Explore the best practices for leveraging your crypto assets to achieve the best returns.
*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!