This article is going to focus on the multiple ways to earn money off of your crypto investment while you HODL it for the long term. Crypto passive investments are very important to maximize your ROI while you wait for that next bull market to kick in. Therefore, make sure to read the entire article and learn which passive investment strategy is my current favorite!
Nothing should be considered as investment or financial advice. Enjoy the ride.
Crypto Passive Investments
It is always best to maximize your returns whenever you are investing. If you have not looked into one of the options to passively grow your crypto, you probably should. There are clearly a lot of options to make money off of crypto, but you have to be careful when trusting people with your decentralized coins. Here are some ways I have found to make passive money off of my investments.
Crypto Savings Accounts
My new favorite way to make money off of my digital investments is from the crypto saving accounts. Specifically, I chose Blockfi for my passive investment needs.
Blockfi is a fairly new crypto saving and lending platform. Although, it is not structured like the ICO rush lending platforms that all failed in 2018. Blockfi is a legit business that is backed by Gemini, Coinbase, ConsenSys, and Many other reputable venture crypto funds.
While most people have a bad taste for lending platforms, you can have more security in blockfi given they have over 50 million Assets under management (AUM) as of April 2019, and have partnered with some of the largest brands in the space. To tack on more trust, I personally have started using this platform, and so far, I am very pleased with the results.
Blockfi offers around 5-6% annual interest for Bitcoin deposits that is acquired from monthly compounded rates. For Ethereum, those rates are slightly lower around 3-4% annual interest based on monthly compounded rates.
While these are not the highest rates in the world, they are fairly consistent for the past 2 years. In addition, they have monthly payouts, 24/7 access to funds, one free monthly withdraw, and no fees for deposits or setup.
Is Blockfi Legit?
To quickly answer and sum up this part of the post, yes. They even removed the minimum investment recently that was required to open an account, and they have become more transparent on their back-end business structure. Blockfi is a great choice for anyone looking to passive make money off their crypto.
What’s the catch?
Well, the only down side is. like any exchange or wallet provider, blockfi reserves the right to freeze your funds at anytime and is not held legally liable for hacks. While these are precautions to protect the company, it does not strengthen account holder confidence.
Staking Pools and Masternodes
Another way to increase your passive income in this space is by investing in assets that have a consensus model of proof of stake.
If you are unfamiliar with proof of stake, it is basically a model where instead of computer power that is used in Bitcoin’s proof of work consensus model, miners stake coins to become awarded blocks to confirm for the network. It works by awarding holders of the token or coin with more digital assets for “staking” their share of the network.
This does several things, but a few in particular is inflate prices. As more people stake coins and pull them out of the immediate circulating supply, the supply of coins being sold on market decreases. Likewise, as staking rewards increase, the demand for the digital asset also increases. Clearly, this can impact the price of a crypto asset and make holding and staking particular coins quite profitable.
What Cryptocurrencies Use Proof of Stake
Currently, there are a handful of crypto assets on the market utilizing the proof of stake model. Specifically, some of the top assets like Tron and EOS use a type of proof of stake model. In addition, Ethereum, Cardano, and many other digital assets will soon offer the same proof of stake model.
You can usually participate and receive rewards by simply using their coin’s native wallets and staking through them. Another option is joining a stake pool which is basically a pool of hundreds of stakes splitting the profits and rewards from the network. Stake pools are a great idea for people who are not developers or tech savvy and simply want to get some free money with limited work effort.
Likewise, masternodes are similar to stake pools and staking in general. Although, masternodes refer to privacy based crypto assets that utilize a protocol to protect the sender and receiver of crypto transactions. The masternode is basically a large wallet of one particular asset hosted on the network in which the protocol can utilize in sending and receiving anonymous transactions by working through the wallets to separate transactions from just the sender and receiver side.
What is Better Staking Pools or Masternodes?
That really depends on the return and liquidity. The problem with most masternodes is that in order to get a huge return, you need to be fairly early to a network. By the time most people join a masternode with huge returns, the network has already become saturated with wallets hosting their coins.
Staking pools offer much more consistent returns and typically are more liquid in terms of the assets being staking. For instance, Monero is the largest coin on the market that you can host a masternode on, and there are not many others near the same market cap or liquidity basis. On the other hand, you can soon stake 4 of the top 12 assets on the market which each have higher volumes and more consistent returns then most reasonable masternodes.
Another uncommon option is researching and finding a trading bot you like. I have discussed this with many people who set up trading bots on their Binance or Bitfinex accounts through the native API.
There are a few things to note about this option. You need to be sure that you only allow these bots API access to create and execute trades and not withdraws. In addition, you might want to make sure you have full control over the frequency of trades, setting stop losses, and avoid margin accounts at all cost.
These are all typical things to be weary of. Most importantly, never give away the credentials to your accounts. If you really want to use trading bots, preferably find a software that you can control yourself. This will prevent malicious people from controlling your bot and ultimately manipulating the market.
Lending Your Crypto Through Platforms
While we briefly touched on this topic above, lending is a decent way to secure passive growth. The main problem I have with lending is locking up your assets. This makes lenders fully vulnerable to the platform with which you lend.
I would say avoid this option out of all the ones above. Although, it is a decent way to get a small passive return if you find a platform you trust. I personally have not used any lending platforms, but know a few people who do successfully. Due to my lack of familiarity, I will not comment on a top platform or brand. There should be plenty of information out there though for those that want to do this.
Earn Money Off Crypto
While there are multiple ways to earn passive money off your crypto, always be cautious. Out of all the choices, Blockfi currently seems like the most secure. It is the most transparent on the market as well besides staking through native wallets.