How can you get passive income on cryptocurrencies?

Written by Anna Komashko
Written by
Investing reporter
ECOS community manager...
10   min.
Alternative investments 

Investing has been a reliable way to gain passive income for centuries with capital that can work for you. For more than 10 years, there has been an investment object in the world, in addition to gold, real estate, and minerals. These are cryptocurrencies.

Passive income on cryptocurrency is a process of earning income with a minimum number of actions. Of course, to start receiving such income, you first need to either work hard or invest and only then enjoy the flow of money.

If we draw an analogy with real life, then you first earned money for real estate, and then you started renting it out and receive passive income. This is not achieved overnight and the same can be said for making money on cryptocurrencies. The ideal passive income model is when you get paid over and over again for the work you once did. This is how investments work, for example.

HODL investment

The method involves buying cryptocurrency at a lower price and subsequently selling it at a higher price. For the profit to be tangible, strong growth in the exchange rate is required, as well as significant investments. This is how many Bitcoin investors got rich, who bought several coins at the start of development, and sold when the price of one coin was estimated at thousands of dollars.

The first was Bitcoin, on the account of the success of which there was a lot of strife, but it is growing and shaping the market. A large number of useful implementation methods, a high level of security, the absence of inflation and regulation by a single digital bank, as well as a number of other factors form the investment attractiveness for depositors.

The investment market is replenished with new players from China and India, therefore, in October last year, following the announcement of the Chinese leader about the support of the blockchain, BTC rose in price by 40% per day. This shows us that the same laws and principles apply in the cryptocurrency market as in the stock market.

Technical analysis also works, which allows you to calculate risks, choose the right time for investments and a strategy. The availability of digital currency is increasing thanks to the installation of street financial machines for making payments, as well as new tools for storing funds, mining is developing, and the world’s largest online stores began to accept Bitcoins, thereby popularizing the currency and increasing user confidence.

The choice depends on opportunities, skills, and the amount available for investment. Like all other high-yielding instruments, cryptocurrencies come with a high risk, although the potential dividend percentages muffle the voice of doubt and fear in the minds of investors. However, a sharp collapse of the rate, after a long growth, can also play against the investor, plunging him into a panic.

This is where consultants come in handy, who will competently explain what nuances may arise during the investment period. Using the example of Bitcoin in 2020, you can see how it works. Then the bullish trend was clearly traced, despite all the global processes, but if you turn to the quarterly analytics at the beginning of the pandemic, you can see colossal recessions that made investors nervous, although by the summer the situation had stabilized.

But if we compare March 2020 and March 2021, then we can understand that when investing several thousand dollars, the potential return can reach tens and even hundreds of thousands of dollars.

However, in most cases, in order to achieve sufficient passive income, you will need to invest a decent amount of capital. The profitability depends on the risks: the higher they are, the higher the potential profitability. But highly profitable tools will require experience and knowledge.

Passive income by mining

A method that was previously very popular and relevant, but today it has too high an entry threshold. Home mining is gradually fading away, this prerogative goes to corporations. Nevertheless, we will definitely consider this method too. This can be a relatively affordable way to make money on cryptocurrencies. You can get income even without knowing the technical features of the process, but understanding the nuances can make the work many times more profitable. How to organize the mining of cryptocurrencies in 2021 and make it a source of passive income?

Cryptocurrency mining is the process of providing transactions and making coins. To get them, you need to solve math problems in digital asset networks. For this work, computers and other equipment are used that can provide the necessary computing power. Those who do this kind of work are called miners.

After setting up the equipment, the user only has to maintain its operability. Thus, mining can be viewed as a passive source of income in the realities of 2021. Cryptocurrency mining can be divided into two camps. The first one involves renting computing power. This method is called cloud mining. You can find out more about how it works from our material.

The second way involves purchasing equipment. In this case, the miner does not depend on third-party companies and the performance of their devices. Therefore, many people choose this approach to organizing passive income by mining cryptocurrencies.

Equipment selection

In 2021, digital assets can be mined using different equipment. Here are the options, and these are their features:

– CPU. This is the least powerful option. In 2021, there are not many cryptocurrencies on the market that can be mined with a CPU. Among the popular coins for mining through the processing power of the processor, Monero, Litecoin, and ZCash can be distinguished.

– GPU. Most often, devices are used in conjunction – to amplify power. A combination of several video cards in the crypto community is called a farm. In the case of GPUs, the list of cryptocurrencies available for mining is starting to grow. Thus, you can mine Ethereum, Litecoin, Ethereum Classic, Bitcoin Gold, Monero, ZCash, and even Bitcoin. In the conditions of 2021, GPU mining is the most common option.

– Asic. This is special equipment made for the only purpose. These are also often arranged in blocks. This is necessary to increase the computing power, since the higher it is, the more cryptocurrency you can mine.

After choosing the equipment for mining, you need to prepare it for the extraction of coins. In the case of video cards, you may need to combine devices into a farm.

Next, you need to install a program that will combine the computing power of devices for the extraction of digital assets. These applications are called miners. Their choice depends on the type of equipment and the algorithm of the cryptocurrency of interest.

Mining cryptocurrencies on a PC

Some cryptocurrencies can be mined even on ordinary computers. Unfortunately, due to the low level of computing power, it will not be possible to make good money in this way. Despite this, many still use personal computers for mining.

Cloud mining

This type of cryptocurrency mining can turn out to be more profitable as you can get access to cheaper electricity than the tariffs in your area. In addition, you do not need to buy, configure and repair the equipment yourself, because you simply pay the rent, and the companies do everything for you.

However, the risks involved in purchasing cloud contracts will be higher. If you mine cryptocurrency on your own equipment, then when the crypto collapses, the profitability will turn out to be negative, but you will still be mining Bitcoins. If this happens with cloud mining, then payments will simply stop and you will start losing money.

To attract customers, the calculators on their websites may not include service fees when calculating the profitability of cloud contracts. This is usually an advertising gimmick. And after the purchase, investors will be disappointed, as the yield turns out to be lower than promised. Therefore, carefully read how much you would pay for the service and calculate at what Bitcoin rate the payments will stop altogether.

In 2021, against the background of the active growth in the value of cryptocurrencies, there is still an opportunity to organize profitable mining. To do this, you can use special devices or programs that will help to use the computing power available to the user. When using modern technical solutions for the extraction of digital assets, mining can become a profitable source of passive income.

Passive income by investing in DeFi

The decentralized finance market has brought us a new way to generate income – Yield Farming. One of the most popular types of profitable farming is liquidity mining, which brings investors an average of 10% to 20% per annum.

This method, of course, has risks associated with possible vulnerabilities in smart contracts and volatile losses that arise due to the difference in cryptocurrency rates on different platforms. The latter also affects profitability. That is the profitability may be lower. You also need to take into account that as the pool grows, profitability will decrease.

To become a liquidity provider and earn cryptocurrency passively, you need to connect MetaMask or other crypto wallets, depending on which one the DeFi platform supports. Then add any supported cryptocurrency pair to the pool.

The profitability also depends on the cryptocurrency in which the reward is accrued and how active traders exchange cryptocurrency. For example, Uniswap rewards in UNI tokens, the rate of which can be adjusted on the crypto exchange. This will affect profitability as well.

You can find DeFi platforms for mining liquidity and compare their profitability on specialized sites, such as CoinMarketCap or CoinGecko, in the Yield Farming section.


This method is somewhat similar to Yield Farming, only holders delegate cryptocurrency to validators – the nodes that process transactions and maintain the blockchain network. Validators charge stakers with rewards that range from 3% to 20% per annum.

But profitability can grow if tokens rise in price. Some tokens have increased in price by several hundred percent since the beginning of the year. Therefore, staking can be viewed as an additional source of income. But in the event of a collapse of cryptocurrencies, significant losses can be incurred, which are not compensated for by such low profitability.

For staking, you need to install a crypto wallet, replenish it with cryptocurrency, and delegate tokens to validators. Staking, like liquidity mining, is also supported by the well-known crypto exchange Binance.

You will need to first replenish the deposit with any available cryptocurrency, buy the token that you want to stake directly on the site if you do not have one, and then select the term and stake the tokens.

Passive earning on masternodes

Masternode is a blockchain network node responsible for processing transactions or performing any special tasks. They can also be characterized as a storage location for a complete copy of the blockchain that is updated in real-time.

Masternodes must meet certain criteria, they differ depending on the cryptocurrency. One of them is the amount of collateral, which is blocked in the wallet. The owner of the masternode receives passive income for the operations performed. But in order to launch a masternode on your own, you will need significant cash investments, providing a dedicated IP and other conditions. Cryptocurrencies such as Dash, ZCoin, PivX, ImageCoin, SysCoin, among others, provide the ability to create a masternode.

It is enough to keep the computer on and go about your business to receive passive income. If you find a promising new coin, you can buy its masternode for little money and secure yourself a tangible profit in the future. You can more or less accurately predict how much income a masternode will bring in a month. Masternodes are essential to the functioning of any blockchain.

However, investing in masternodes has a high entry threshold. For example, you need to pay 1000 coins, which can be tens or hundreds of thousands of dollars. There is also the complexity of the initial technical setup.

Deposits on exchanges

Some crypto exchanges charge interest on user deposits like banks. At the same time, if you do not want to risk it, then it is not necessary to deposit Bitcoin, Ethereum, or Binance Coin cryptocurrencies. You can deposit stablecoins such as USDT or DAI. However, the yield will be low – from 4 to 6% per annum. But deposits of stablecoins are safer and are subject only to the volatility of the currencies to which they are pegged.

Deposits are available with fixed and floating rates. As a rule, the longer the term of the deposit, the higher the profitability. To increase it, you need to regularly reinvest profits. If you invest in Bitcoin and other cryptocurrencies, then it is better to use them. This way you will reduce possible losses and increase the return on investment.

You can combine different methods to hedge risks: allocate large amounts for mining and deposits, and allocate a smaller share for staking and private equity.

Passive income by lending 

This method is very old. You give your savings to the turnover or the exchange, or directly to other users, and then return them with interest. Cryptocurrency lending is an easy way to passively earn money on cryptocurrency that you do not plan to use or sell in the near future. It allows you to receive much greater interest income than if you just keep fiat on a deposit with a bank.

The implementation may vary from site to site, but the idea is the same everywhere. The lender gives away their cryptocurrency as collateral for margin trading on the crypto exchange. A borrower who thinks that the price of a currency will rise creates a long position by asking the exchange for additional funds. At the end of the loan term, the lender gets his money back with interest.

Of course, margin trading is risky, the exchange rate may not go up, but down. But in this case, a guarantee is provided for the lender. In the event of a sharp decline in the exchange rate, the creditor is refunded his entire amount with interest. In addition, some websites offer lending directly to the exchange itself, which is almost completely safe.

Crypto exchange lending programs

You can offer financing at convenient terms and rates, or use the FRR (Instant Return Rate) feature. When the offer expires, there is an option to update it.

Setting up an account on an exchange is much easier than opening a bank account and can be done anonymously. The user can track the path of his funds, how they are issued on credit. The risk factor usually falls on the shoulders of the borrower, and the lender’s money will be returned to him in any case. The process is automated as much as possible. You can make a deposit and subsequently withdraw income in a couple of clicks. <

Despite the fact that the risk in cryptocurrency lending is extremely low, it still exists, and this must be taken into account. It is not recommended to invest too large amounts. You also need to pay attention to the selection of a site with a good reputation. Some exchanges charge quite a high commission on the loan amount.

Lending Platforms

Special lending platforms that make it possible to passively earn money on cryptocurrency are arranged in a completely different way. Consider the advantages and disadvantages of making money on lending platforms.

As a rule, there are no commissions or they are lower. The interface and conditions are more thought out compared to exchanges, since platforms specialize in the functionality of lending, and do not provide it as an additional service. The passive income also often exceeds the stock exchange, however, there are many fraudulent projects. You need to carefully study the reputation and reviews of each platform.

Invest correctly

Check out a few tips before turning to cryptocurrency as an investment vehicle. Invest only the money, the loss of which will not be critical for you and will not disturb your financial stability. Do not take out a loan to invest, do not get your last nest egg.

Be mentally prepared to lose up to 60% of your investment at first and do not panic if this happens. The crypto market can grow as quickly as it can fall. If you are strictly targeting income of 50, 100, or 1000%, then maybe you just want to gamble in the casino? But this does not apply to investments, this is gambling. Research the coin carefully before investing in it. This is especially true of newly emerging assets. Diversify your investment.

The standard scheme is to invest 50% of the funds in Bitcoin and distribute another 50% between promising altcoins, as well as third-party assets such as stocks. It is believed that investing should be based on a belief in technology, not a desire for quick money. Approached from this point of view, it will not be difficult to survive the volatility of the market and wait for a really good moment to sell.

The choice of methods for passive income on cryptocurrency is wide and varied, but they all imply initial labor or financial investments. Study and test different methods for yourself, find sites with the most profitable and comfortable conditions. Then you will find a path to follow to receive stable additional income with a minimum amount of effort.

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