Financial independence and security can be achievable goals, not just distant dreams, if you identify consistent sources of income that don't require your active involvement.
The world of cryptocurrency offers many such opportunities for earning without the need for daily effort.
This guide is designed to simplify the idea of generating income passively through cryptocurrencies and to introduce practical strategies for doing so.
We will concentrate on the top eight easy-to-understand methods and discuss the benefits of using platforms like Ledn, which can help you turn your cryptocurrency holdings into a regular source of earnings.
Read more: How to Earn Interest on Crypto - The Definitive Guide
What is Passive Income?
Passive income refers to earnings derived from ventures in which you are not actively involved on a daily basis.
Unlike traditional employment income, passive income streams generate regular earnings from initial investments or assets without requiring constant attention or effort.
Related Content: Crypto vs. Stocks: Which is the Better Investment?
Can You Make Passive Income with Crypto?
Yes!
Generating passive income with crypto is not only possible but has become increasingly popular with investors looking for ways to maximize the potential of their digital assets.
The decentralized nature of cryptocurrencies offers many opportunities to earn income through various means, many of which beat traditional financial options in terms of returns.
Best Ways to Earn Passive Income with Crypto
1. Crypto Lending Platforms
Platforms like Ledn offer a straightforward way to earn interest on your cryptocurrency by depositing it into a savings or Growth account. Crypto savings accounts resemble traditional ones but with higher interest rates, ideal for long-term holders looking to earn passive income without trading. These platforms lend your crypto to borrowers, paying you interest, typically monthly.
They’re one of the best ways to earn passive income through interest on your cryptocurrency holdings.
Unlike decentralized platforms, where lending and interest earnings are managed via smart contracts with variable rates, platforms like Ledn provide a structured, secure environment via Growth Accounts. Ledn Growth Accounts are a place to grow your assets while knowing you are benefiting from industry leading safeguards.
By offering competitive, stable interest rates (currently up to 11% APY) and enhanced safety measures through ring-fencing of assets, they ensure that your holdings are not only generating returns but are also protected from broader operational risks.
How It Works: Your deposited crypto is lent out, and in return, you earn interest over time. Ledn manages risk with strict criteria and asset-backed loans, safeguarding your investment.
Read more: The Ultimate Guide To Crypto Lending - Everything You Need To Know
2. Savings Accounts
These are the accounts offered by lending platforms, such as Ledn. Crypto savings accounts resemble traditional ones but with higher interest rates, ideal for long-term holders looking to earn passive income without trading.
Ledn, for example, allows you to you HODL and earn up to 10% APY. Their Growth Accounts are a place to grow your assets while knowing you are benefiting from industry leading safeguards.
How It Works: You deposit crypto to earn interest over time, benefiting from rates higher than traditional banks. Your earnings compound, increasing your holdings passively.
Read more: The 8 Best Crypto Savings Accounts For 2024
3. Dual Cryptocurrency Notes (DCNs)
Ledn's new Dual Cryptocurrency Notes (DCNs) are designed to offer two main advantages: higher returns and more control over cryptocurrency investments, specifically with Bitcoin (BTC).
DCNs provide the opportunity to execute a strategy based on your market outlook, with options to sell BTC at a high predetermined price or to buy BTC at a low predetermined price at a specific future date, referred to as the "Strike Price."
How It Works: You can choose between BTC to USD and USD to BTC pairs, depending on your market outlook. You set a target price at which you would be happy to sell or buy BTC in the future, enabling you to automate your holding strategy based on your expectations of future price movements.
4. Long Term Holding
Holding cryptocurrency for the long term can yield passive income as the value of assets appreciates.
How It Works: Known as "HODLing," this strategy involves buying and holding crypto in the hope that it will appreciate over time.
5. Decentralized Lending Services
Decentralized platforms allow you to lend your crypto, and earn interest payments as passive income.
How It Works: You offer your crypto as a loan on decentralized platforms to earn interest. Smart contracts automate the process, ensuring security and varying interest based on market dynamics.
Read more: How to Earn Interest on Bitcoin - Actionable Guide
6. Staking
Staking involves locking cryptocurrency to support a blockchain network, earning rewards in return.
How It Works: You lock up crypto to participate in network operations, securing transactions and receiving rewards based on the staked amount and network requirements.
Read more: How to Earn Interest on Ethereum - Actionable Guide
7. Cryptocurrency Mining
Mining refers to the use of computing power to validate blockchain transactions. The newly minted coins can be seen as passive income.
How It Works: You invest in computing hardware and electricity to solve mathematical problems, validating transactions and earning mining rewards.
8. Dividend-Earning Tokens
Certain tokens provide dividends from project profits or transaction fees to their holders, offering a steady income stream.
How It Works: You hold dividend-earning tokens to receive a portion of profits or fees, with dividends typically paid in additional tokens, depending on the project's success.
9. Yield Farming
Yield farming maximizes returns on crypto investments through lending, borrowing, and staking across DeFi protocols.
How It Works: You engage in lending or staking in DeFi protocols to earn rewards, strategically moving assets to exploit the highest interest rates or rewards, requiring active management and understanding of smart contracts.
Read more: Stablecoin Yield Farming: Is it Worth it?
The Risks Associated With Earning Passive Income From Cryptocurrency
Like any investment activity, using your cryptocurrency to generate income comes with its share of risks. Different strategies come with different levels of risk, so you’ll be able to find an option that works for you.
Bankruptcy Risk
The risk of a platform holding your assets going bankrupt could result in the total loss of your investments.
Insurance Risk
Not all platforms offer insurance on your deposits, leaving you exposed in the event of theft or hacking.
Interest Rate Risk
Fluctuations in interest rates can affect the returns on your investments, potentially reducing expected earnings.
Regulatory Risk
The ever-changing landscape of cryptocurrency regulation can impact the viability of certain passive income strategies.
Volatility Risk
The inherent volatility of cryptocurrency markets can lead to significant fluctuations in the value of your passive income streams.
Is Passive Income the Best Way to Earn from Crypto?
Earning passive income through cryptocurrencies is a more conservative and steady approach to asset growth over the high-stakes, high-reward nature of active trading.
It reduces the need for constant market monitoring and in-depth trading expertise, so is particularly suited for investors who seek a balance between earning potential and risk management, aiming for a more predictable growth trajectory for their digital asset portfolio.
That said, while passive income offers a less hands-on approach to earning from crypto, it's not without its risks.
How to Get Started Earning Passive Income With Crypto
Growth Accounts
Ledn's interest earning Growth Accounts are an accessible, straightforward, low risk way to make your digital holdings work for you.
Ledn Current Growth Account APYs
Bitcoin (BTC) APY: up to 3% APY
Ethereum (ETH) APY: up to 4% APY
Tether (USDT) APY: up to 11% APY
USDC: up to 11% APY
Dual Cryptocurrency Notes (DCNs)
If you’re looking for higher APYs that a Growth Account, Ledn's DCNs are another great option for passive income due to their potential for even higher BTC yields and the ability to automate investment strategies based on future price expectations, providing a hands-off approach to capitalizing on cryptocurrency market movements.
Why Ledn?
As the global leader in crypto lending, you can rely on a safe and transparent experience from Ledn, with stringent vetting, underwriting, and risk management policies.
Growth Accounts are "ring-fenced," meaning they are insulated from the risks associated with other yield-generating activities Ledn might engage in. This ensures that in the event of any losses from other activities or even bankruptcy, assets in Growth Accounts remain unaffected.
Ledn's monthly Open Book Report gives you insights into how interest is generated with a revamped client dashboard.
Here's how to get started
- Create an account on Ledn.
- Complete the required KYC (Know Your Customer) process.
- Deposit your cryptocurrency into a Ledn Transaction Account. From there, you can transfer it to a Growth Account or DCN.
- Start earning interest immediately on your deposits.
- Monitor your account and adjust your holdings as necessary to maximize returns.
Conclusion
If you're aiming to grow your crypto assets passively without the volatility of active trading, plus a stable and predictable growth trajectory for your digital assets, Ledn is a great option. Whether it’s Growth Accounts or Dual Cryptocurrency Notes, Ledn has a passive income solution for you. Get started.
Sponsored by 21 Technologies Inc. and its affiliates (“Ledn”). All reviews and opinions expressed are based on my personal views. There are risks involved with buying, selling, or holding digital assets as explained in Ledn’s Risk Disclosure Statement, which can be accessed here.
