How crypto can generate passive income
Crypto is no longer just about trading or speculation. Today, more investors are discovering how to use crypto to generate passive income.
While real estate and dividends are popular passive strategies, crypto offers newer, digital alternatives with potentially higher returns.
From staking to yield farming, here are four proven ways to create recurring income using crypto.
Mining crypto: the original passive strategy
Mining remains one of the most established passive income strategies in crypto. It involves verifying transactions on a blockchain network using mining hardware.
Ashley Tison, founder of OZPros, calls it “the ultimate passive investment.” While it requires upfront capital, crypto mining runs continuously, generating income day and night.
Mining suits long-term investors willing to handle technical setup and energy costs in exchange for steady crypto earnings.
HODLing: the simplest long-term crypto strategy
HODLing means buying crypto and holding it through market cycles. It’s a passive strategy for those who believe in crypto’s long-term growth.
This approach requires minimal involvement. Simply purchase coins like Bitcoin, store them securely, and wait for them to appreciate.
Pros include simplicity and potential high returns. However, HODLing comes with long-term risk exposure and no income until assets are sold.
Still, for those with patience, it’s a powerful way to profit from crypto without day trading.
Staking crypto for low-effort rewards
Staking is one of the most accessible forms of passive income in crypto. It involves locking up tokens in a proof-of-stake network to support blockchain operations.
In return, you receive staking rewards—often paid in the same token. According to CoinLedger’s David Kemmerer, “It takes very little effort on your end.”
With popular blockchains like Ethereum now using proof-of-stake, more crypto investors are earning rewards simply by holding and delegating their tokens.
Yield farming: high risk, high crypto returns
Yield farming allows users to earn income by depositing crypto into liquidity pools on DeFi platforms such as Uniswap.
You typically deposit two types of crypto into a pool and earn rewards from trading fees and platform incentives.
Jeff Owens of Haven1 notes that “returns can be hundreds of percent,” but warns of risks. Crypto asset volatility and liquidity issues can lead to losses if not managed carefully.
Yield farming requires more knowledge and risk tolerance, but can be extremely lucrative for experienced DeFi users.
Which crypto strategy is right for you?
Choosing the best passive income method depends on your risk tolerance, capital, and technical know-how.
Mining and yield farming require more setup and risk. Staking and HODLing are easier and suitable for beginners.
What’s clear is that crypto now offers more than just trading opportunities. With the right approach, it can become a reliable stream of passive income.