Thanks to the accessibility of the internet, making money in one’s sleep is no longer merely a dream. Passive income, money that is generated from different types of investments or side hustles, can be a great way to boost savings or plan for retirement. However, can you make passive income with cryptocurrency?
Cryptocurrency can be a reliable source of passive income for anyone who knows how to navigate the market. However, cryptocurrency is a high-risk investment because it is volatile in nature. The online cryptocurrency market can be difficult to negotiate, especially when one first enters it.
Here’s some more information about how you can make cryptocurrency a reliable source of passive income. Alternatively, click here to discover the best cryptocurrency to invest in.
Cryptocurrency Vs. Traditional Passive Income
Though its name suggests otherwise, passive income does require some work to set up.
Typically, it comes in the form of recurring investments, properties that can be rented out, or “side hustles”— secondary jobs or businesses that require minimal upkeep.
Today those might include earnings from renting out a spare room or advertising money from a YouTube channel.
Attributes that define a good source of passive income are consistency, reliability, relative predictability, and relatively low risk. Certainly not terms synonymous with cryptocurrency!
Cryptocurrency, or “crypto,” is a form of investment and therefore a valid potential source of passive income.
However, it comes at a higher risk than most sources of passive income. Educate yourself on the market and assess whether cryptocurrency is a good investment for you.
How Does Cryptocurrency Work?
In the traditional investment market, you invest in stock.
Cryptocurrency functions similarly as you invest in a “token” or “coin” which carries a real-market value. Crypto’s digital nature allows for a bank-free exchange of wealth or decentralized currency.
Where banks rely on physical money, crypto is instead a single digital unit of value. This digital unit of value is “minted” via special encrypted coding and stored in a digital wallet that saves the data.
To invest in cryptocurrency, an individual needs to choose a coin or token to invest in and purchase a number of them with regular currency through a digital wallet. This digital wallet functions as a conduit to the crypto “marketplace.”
Each token has a concurrent market value which fluctuates similarly stocks. When a particular coin holds a lower value, many can be purchased at the same time and grow in value over time.
Let’s look at a real-life example. Dogecoin, a form of cryptocurrency that was created based on a popular meme, rose in value in early 2021. In March of 2021, 1 Dogecoin had a real-market value of about $0.058. This means that one dollar can be used to buy more than 1700 Dogecoins.
By early April of that same year, Dogecoin had increased in value to $0.16 per coin. People who had purchased $1 worth of Dogecoin in March now had the equivalent of $2.11, which is a return of more than 110%.
What is the current value of dogecoin? Let’s take a look:
What Are The Pros And Cons Of Cryptocurrency?
Having a currency that does not rely on the economy of one nation or another has some great benefits. The first is that without a direct tie to any one nation or banking system, cryptocurrency can serve as a type of global currency.
Without needing to rely on banks or third parties that charge fees, have confusing regulations, and can take more time than is convenient, transactions can be made from peer-to-peer anywhere in the world in minutes.
Using this bank-free method gives more control to the individual over their own finances and leads to less complicated international transactions.
Instead of seeking to transfer money from one country’s banking system to another, one form of currency is exchanged between consumers instead. This currency can then be exchanged for a different type of physical or digital currency.
This decentralization allows for more transparency between individuals without any accounts to hide behind. Little to no outside regulation limits the number of fees required for each transaction, regardless of where in the world they take place, which means people get to keep their money.
The downside to this is the risk involved in trading cryptocurrency.
The value of each currency can vary and negatively impact investments made using crypto. It doesn’t come with the benefits of using a bank-backed system, so asset protection and recovery are difficult or nearly impossible based on which market you use.
Things You Should Be Aware Of When Trading Cryptocurrency
Make sure you fully understand the cryptocurrency market before making any investments. Like any kind of investment, making informed decisions is critical if you want to benefit from cryptocurrency.
While it is possible to earn a high rate of return, total loss of the investment is also a possibility.
Making an effort to stay educated on the market is doubly important for people who seek to earn passive income via cryptocurrency. An easy way to become more crypto-savvy is to take an online course through a reputable program. Alternatively, just read our crypto blogs!
The last big step in setting up potential passive cryptocurrency income is to find a good digital wallet. Some of the more popular digital wallets include:
- Coinbase: Utilizes the decentralized app (Dapp) web browser to facilitate purchases of over 500 types of coins and tokens. It also allows you to recover lost or stolen assets.
- Exodus: Voted best for desktop by Money.com, this wallet offers 24/7 customer support, trades with 145+ types of coins and tokens and additionally allows its users to buy Bitcoin with Apple Pay.
- Ledger: This offline crypto wallet uses bluetooth to trade a large amount of cryptocurrencies live within the app. It also uses special protection hardware to keep your investments secure.
- Electrum: While this wallet only supports Bitcoin, it offers greater security than other wallets and is easy to set up. Because it only serves one cryptocurrency, it is highly customizable.
- Mycelium: This mobile-only wallet offers online educational material on cryptocurrency exchange. It also offers online transactions.
How To Make Passive Income With Cryptocurrency
There are a variety of ways to make passive income with cryptocurrency.
- Staking: Some cryptocurrencies allow staking. This basically means locking your crypto up for a set time-period to earn passive income. Ethereum (Eth) is one of the best cryptocurrencies for staking.
- Buy and Hold: The most traditional and straightforward form of passive income is simply buying cryptocurrency and holding onto it. Once it increases in value, you are accumulating passive income that will be realized once you sell. Simple.
- Buy other assets: Use cryptocurrency to purchase other assets like NFTs. Much like any asset, if the NFT increases in value, you’ve made passive income. Some NFTs can also be staked.
- Cryptocurrency savings accounts: Yep, these exist now. They function much like a regular savings account. These will store your cryptocurrency and pay an agreed amount of interest. Make sure to research this carefully before trusting them with your crypto!
- Day trading: We listed this more to make a point… This is not passive income and can be incredibly time consuming. Moreover, most retail investors will actually lose money. We don’t recommend it.
- Make Crypto Content: You can make passive income by setting up a cryptocurrency based content resource and earning advertisement/affiliate revenue. We definitely recommend starting a blog or youtube channel. This might not be passive at first but could pay dividends for years to come.
Summary: Can You Make Passive Income With Cryptocurrency?
You certainly can make passive income with cryptocurrency.
Moreover, some people have managed to retire early purely from their passive income.
If you’d like to venture further into the world of cryptocurrency, try this: