With the development of the decentralized finance (DeFi) industry, these opportunities for generating significant profits have become wider and more accessible. The real turning point in the game has come with the rise of cryptocurrency centralized exchanges (CEX) and decentralized exchanges (DEX) that are looking to provide customers with a variety of financial products.
It will not be possible to figure it out and choose a win-win option in a couple of hours. You’ll have to spend time, study various strategies, the work of decentralized finance, read forums, be sure to study the projects themselves, read the main DeFi attack vectors that lead to millions of losses. So on the one hand, this is passive income, and on the other hand, it suits investors with an active position in the market.
Crypto Passive Income Strategies
Staking and saving are the two main ways to earn interest on cryptocurrency. Let’s take a look at them.
Earn Interest On Stablecoins
Stablecoins are a class of cryptocurrencies whose price is more stable than non-fiat crypto, such as Bitcoin. The market value of stablecoins is pegged to the value of a “stable” reserve asset, such as the US dollar or gold.
Traders and investors can earn interest with stablecoins by staking. Its essence lies in the fact that the user acquires crypto and simply keeps them in his account, getting a reward.
Blockchains based on the Proof-of-Stake algorithm allow you to earn income by storing existing coins. To do this, you need to keep your computer turned on and your wallet activated. When a new block is created, a wallet is randomly selected to test this action. In other words, the more funds in the wallet, the more likely it is to be selected, and therefore to receive a reward.
Saving – in simple words, when you open a bank deposit in dollars, you receive interest in dollars. Here you open a deposit in cryptocurrency and receive interest in this cryptocurrency.
What are the advantages of saving:
- We keep money in a coin, so in addition to the interest that we will be charged, we have the opportunity to earn on the very course of the crypto. Of course, you can lose on the course with the same success, but for those people who initially set themselves the goal of holding, for example, BTC with the expectation that the price will be higher, this is an ideal option.
- You can withdraw your money with the profit you earned at any time.
Portfolio Management Crypto
It’s important to know that there are various ways to participate in the cryptocurrency markets, as well as ways to accumulate and profit from them.
- HODLer: when you invest and accumulate assets with no intention of selling them right away.
- Trader: when you speculate on the prices of cryptocurrencies in the short and medium term: you open positions with the intention of making a certain amount of profit, and then sell them back, receiving an asset that you want to accumulate.
- Validator: when you are a member of a cryptocurrency network (for example, a miner or a staker) and receive a reward for both confirming a transaction and increasing the network’s stability.
You must first decide how much you are willing to invest before exposing your hard-earned money to the volatility of the cryptocurrency markets. It’s recommended to invest only 10% to 20% of your capital. However, it’s up to you to decide. The less you invest, the less attached you will be to any possible outcome.
How to create a portfolio:
- Determine the initial investment size based on your total capital;
- Make an investment strategy: passive, active, or both.
- Develop a detailed plan, both passive and active.
Before you begin building your cryptocurrency portfolio, you must first understand the cryptocurrency market. More information about you can find in our article “Building your first crypto porfolio
Build Wealth With Crypto
The type of interest rate applied to the rate or loan product is an important factor in maximizing yield. Some of them pay interest based on APY, while others use the APR calculation method.
APR is a simple interest rate calculation that does not take into account complex accruals. APY is based on interest addition. An APY-based investment will give you a higher total return compared to an APR product with exactly the same numeric interest rate.
If You still have an issues look our guide Earning Passive Income with Crypto
Earn APY On Crypto
Cryptocurrency investors can earn APY by staking, storing them in savings accounts, or providing liquidity to liquidity pools via yield farming. You can start earning APY on your crypto fast with crypto exchanges, wallets and DeFi.
The 7-day APY rate is the annual rate of return using 7-day returns. It’s calculated by dividing the net price difference between 7 days ago and today by the annual percentage.
The following is the formula for calculating the 7-day APY rate:
APY = (X − Y − Z) ÷ Y × 365/7
X = price at the end of the 7-day period
Y = price at the beginning of the 7-day period
Z = any commission per week
This calculation aids investors in understanding weekly yields or return on yields.