How to Generate Passive Income with Cryptocurrencies?

Written By Alla Levin
October 12, 2021

How to Generate Passive Income with Cryptocurrencies?

The crypto market is highly volatile but, cryptocurrency investment offers vast rewards. In the start, the only method to earn from cryptocurrencies was mining. But now, there are several ways to generate passive income with cryptocurrencies. Let’s find out how you can make money with cryptos.

Ways to Generate Passive Income with Cryptocurrency: Investment

Investing in cryptocurrency is the most common way of earning with cryptos. Investors buy cryptocurrencies such as Bitcoin, Ethereum, etc., and let them accrue value over time. When the prices increase, they sell it for more price.

But one thing to consider is cryptocurrencies are highly volatile. If prices increase in one moment, the next moment may prove to be bearish. Therefore, you need to be careful.

Crypto lending

Crypto lending is one of the most famous ways to earn passive income with crypto investments. It involves lender/investor and borrower. A lender locks up his cryptos for a specific time in a lock-up to earn interest on it.

A borrower offers collateral to get funds. Both individuals agree on terms and conditions such as loan amount, period, interest rate, etc. The interest rate may be fixed or variable, determined by the lending platform. You can earn up to 7% interest on lending Bitcoin, while interest on stable coins is as high as 17%.

Both CeFi and DeFi lending platforms typically pay dividends in the form of cryptos your deposit. Examples of crypto lending platforms are Compound, Aave, Nexo, BlockFi, etc. Crypto lending also involves some risks. You need to search for the most reliable and reputable platform to work with.

Provide Liquidity in Liquidity poolspassive income with cryptocurrencies

DeFi allows individuals to earn by depositing their cryptocurrencies into decentralized trading pools, called liquidity pools. These pools are autonomous, and for providing liquidity to such pools, investors are rewarded with liquidity provider tokens (LP). You can redeem this token later on.

With a liquidity pool, price fluctuation may result in impermanent loss. The better option is to invest in stable coins in liquidity pools. Examples of liquidity pools are Uniswap (UNI), PancakeSwap (CAKE), and SushiSwap (SUSHI).

Yield Farming

You can lock LP tokens earned from the liquidity pool in the yield farms to maximize your reward. This is called farming. Farmers lock their LP tokens in other DeFi protocols to earn more interest. It would help if you were careful when locking your assets in any DeFi protocol because there are chances that developers may steal your funds.


Mining is the most common and oldest method of earning rewards in the crypto space. Mining involves powerful computers to solve complex computational problems for transaction verification. Each successful miner gets a reward in the form of cryptocurrency. For example, the reward for mining one Bitcoin after 2020 is 6.25 BTC, halving after every four years. In 2009 when Bitcoin was first mined, the reward on mining one Bitcoin was 50 BTC.

In the early days, CPUs (Central Processing Units) were used for mining. Now, most miners have switched to GPUs (Graphics Processing Units), and ASICs (Application Specific Integrated Circuits) as the hash rate has grown.


Staking is another method of earning passive income with cryptocurrency. In staking, an individual locks his funds in a particular blockchain platform for a specified time. He gains a percentage of interest on the same assets.

He also receives voting rights for the governance of the platform. The stake is then used as an incentive to run the blockchain network. For example, if you stake your Polymesh tokens, you become a Polymesh crypto node operators capable of validating other transactions for which you receive rewards.

Affiliate ProgramsGenerate Passive Income with Cryptocurrencies

An affiliate program is another option to earn passive income with cryptos. Some crypto-based companies may provide you some compensation in the form of discounts etc., on bringing new people to their network with your referral.

If you have a significant social media audience, affiliate programs can be a good source of passive income. But you will need to be careful while promoting any platform. First, do your research about the company.

The bottom line

You can also choose cloud mining and gaming to make passive cryptocurrency income. Cloud mining is an eco-friendly alternative to physical mining. If you like to play games, then why not earn some money.

Making money in the cryptocurrency industry is risky, so you need to be more active and choose the technique which works for you. Always do your research and do not invest more than you can afford to lose.

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