Passive income from cryptocurrency is an effective type of earnings with a minimum of time and labor costs. Agree, it is convenient to invest any amount of free funds at any time, being in any place – and start receiving a stable inflow of money.  In this article, we will consider how to get passive income from investing in crypto, what risks investors can expect, as well as the best strategies for passive earnings on cryptocurrency.

Benefits of passive income from cryptocurrencies

The key feature here and the main difference from other types of assets is the high profitability of cryptocurrencies themselves. By becoming an investor in a highly liquid digital asset, you get potential profits from the growth of the crypto price in the market plus additional income from the use of the crypto assets you own.

The main passive earning strategies

Staking

This is a way of investing in long-term passive income, applicable on blockchains with the PoS consensus algorithm, which determines the receipt of dividends from storing (not using) cryptocurrencies for a certain period of time. The essence of the strategy is that the blockchain provides an opportunity to earn in exchange for supporting its own performance by blocking funds. This method of passive earnings on crypto is akin to a bank deposit: the longer the period of storage of your coins, the higher the percentage of remuneration you receive.

Mining and Masternodes

If you have hardware and/or software of a certain configuration, it is possible to generate passive income with the help of technical tools. 

• Mining is a way to generate cryptocurrency where a PoW consensus blockchain uses your hardware and electricity to solve security issues and improve network performance. 
• Masternodes (masternodes). This method requires setting up a server and installing a special application. After binding a certain number of tokens to it (not less than a threshold number), you will receive a constant profit from them (on the principle of steaking, but with a higher reward).

Decentralized Financial Platforms (DeFi)

Most decentralized exchanges present ample opportunities for liquidity providers. By participating in liquidity pools with cryptocurrency assets, you build your passive income through lending programs, trading and other schemes for which interest is earned.

Fiduciary Management

You can give your crypto assets to professional market participants to manage them for use in arbitrage trades or other types of trading. 

Choosing cryptocurrencies 

Here you need to rely on analytical data and personal priorities. We can mention such popular cryptocurrencies for steaking and masternodes as Ethereum, Dash and Polkadot. In the field of DeFi, Uniswap, Aave, Compound and MakerDAO are in great demand. The listed ecosystems offer convenient programs and high yield percentages.

Passive income for investors: tips and recommendations

• Consider the risks. All types of digital assets are subject to risks associated with the general volatility of the cryptocurrency market. You should be aware that your personal earnings may depend on its global fluctuations.
• Analyze the stability of the project. Before choosing a crypto asset to invest in, gather information about the development team, its funding sources and development plans. You should be sure that you have chosen a project with transparent and reasonable financial goals. The healthier and more reliable the startup is, the lower the rate of return it offers to its investors.
• Make sure it is safe to apply the strategy. For example, stealth and masternodes can expose investors to the threat of network hacks, and the DeFi marketplace can carry risks of smart contract vulnerabilities.
• Diversify your portfolio. Invest in different types of crypto and apply different strategies to them to reduce your overall risk. Review the types of crypto assets and the financial performance of the methods used at least every three months.
• Research the market. Subscribe to specialized independent sources to get up-to-date information on the current situation and expert opinions of analysts. Based on this data, it will be easier for you to make a personal objective picture.
• Read reviews from other crypto investors. The experience of people who have had a live experience of receiving passive income (both successful and not so successful) will be definitely useful to you. You can read one such story with personal advice from a crypto-enthusiast on our website, in the article “How to earn your first bitcoin in a passive way“. 

The personal success stories are impressive. Many investors become rich people, competently allocating assets and using various strategies. Passive income from cryptocurrencies can be your key to prosperity as well. Learn, analyze and diversify – and you will definitely achieve financial success!

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