Passive income from cryptocurrencies

Passive income from cryptocurrencies

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Jonathan
Jonathan

An editor at Coincrop


12 Mar 2022 | 7 min read
34,197 views

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enerating an income from your crypto is becoming more accepted, if you have a crypto coin just sat there and you have no plans to do anything other than HODL it, it makes sense to do this?

In this guide:

Disclaimer: All of the information written on Coin Crop is without influence and based on our analysis. No guarantee is offered concerning the accuracy of this information and therefore, any individual following up on it does as such completely at their own risk. Rates are correct at time of publication.

Introduction

Passive income is when you can earn money on your assets without an involvement on your part.

There are now many companies offering incredible returns from passive income, far greater than you would ever receive from a high street bank for traditional Fiat currencies.

2021 was the year that passive income really took hold, many HODL’ers are starting to take notice and realise that this is a fantastic way to gain income/interest on their crypto. Where else can you get 20% - 30% returns from your money?

A train of thought if you're holding crypto for the long term, then it probably makes sense to consider a passive income and earn a return on it?

The risks

There are several risks to consider, as in the platform that you stake your tokens on could potentially lose your token/s from hacking or from an outage. The other stand out risk is Volatility, this is probably the number one consideration, this could also depend on the platform you use but what if you are locked in for a specific period and cannot sell, then your token drops 90% in value.

Another consideration is to not just to look at the headline high percentage claims, as these can be artificially inflated or misleading return rates, as in deposit your coin for the next 5 years and gain 40%, where in effect do you want your coin tied up for the next 5 years? Be careful not to be lured into purchasing an asset that otherwise holds very little value. Other consideration are some networks have adopted to a multi-token system where the rewards are paid in a second token, this can create sell pressure for the reward token. 

With the multi-token system, you must be aware that you may be buying into a low-quality asset, the price of this asset could be misleading or artificially inflated, meaning you think that you are getting an asset worth X but in reality, it’s worth Y and ultimately holds very little value. Some staking networks have adopted a multi-token system where the rewards are paid in a second token, this in turn creates constant sell pressure for the reward token.

Rewards

The rewards are high, potentially very high for doing nothing, and people are really starting to use it, just taking a swift look at one company, Pancake Swap, according to its website and the time of writing in the last 30 days it has had 3.3 million users, 49 million trades and has a $12 billion staked! These are serious numbers and just go to show how popular passive income is becoming, as well as the lucrative upside to passive income.

Most importantly is do your due diligence, carefully read through the service requirements and understand how long you are going to be tied into the network for X return, equally make sure that you fully understand the risks, in the event that coin price falls and what safeguards the network has put in place to limit your risk. 

More information

If you use www.seedling.fi you will easily be able to highlight a potential passive income supplier by using their online tools that enable you to see your rewards from the drop down menu, you simply choose what you want to stake and toggle through the option, it’s a very simple way to navigate yourself to passive income. Why not have a look and start your journey to passive income.


Jonathan

Jonathan

An editor at Coincrop
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