- The cryptocurrency industry managed to generate billions for its investors in recent years, the possibility of generating passive income is something that is very present.
- We could even say that it is part of the essence of cryptography and in 2022, we have different methods to earn money by investing little time.
We cannot deny that blockchain technology is conquering the world, everyone wants to get involved with it to obtain passive income with cryptocurrencies and 2022 is a great year for this. We are living in a time where buying virtual land is becoming quite common; where companies like Facebook or Twitter desperately want to be a part. Are we going to be left out?
How to generate passive income with cryptocurrencies in 2022
Holding
Yes, earning crypto passive income this way sounds very simple and actually, it is. In essence, a cryptocurrency is simply an asset that we can own and, like other assets, it is possible to increase in value when demand increases. If we have a certain number of tokens in our crypto wallet and the value of the cryptocurrency increases, so will those tokens; in this way we obtain a higher return on cryptocurrencies..
Taking into account the great advantages that blockchain offers, the technology behind cryptocurrencies, the demand will continue to increase. We must consider that the value of Bitcoin in only 5 years increased from $800 to more than $64,000.
However, something that we must take into account is the fluctuation of prices and it is something very important. Although Bitcoin was worth $64,000 and stayed at this price for a while, it then went down and sort of lost. The positive thing about holding cryptocurrencies is that we can afford to wait for it to go up again, then go down, buy again and wait again..
cryptomining
Cryptomining is the process by which more cryptocurrency units are created for circulation. Highly intensive computer setups are used to solve highly complex mathematical calculations and the first team to solve it is rewarded with cryptocurrencies. It is a way for people to earn tokens like BTC without having to buy them. Although considering that it takes quite a bit of brute force to achieve this, it also requires a considerable investment in powerful dedicated GPUs to achieve it.
It may sound relatively attractive, but miners often invest thousands and thousands of dollars in equipment and tools to extract cryptocurrencies; to which we must add the amount of electricity consumed by mining equipment..
affiliate programs
Many may even be surprised to mention an affiliate program and cryptocurrency in the same sentence. However, many platforms reward you for referring other people. Rewards can range from traditional money to platform tokens.
Maybe this is not as passive and requires a little more activity than the previous examples, but it is not complicated at all to refer people to a crypto platform.
decentralized finance
We have all heard about decentralized finance (DeFi) lately and it is not for nothing, they have become extremely popular. It is treated as an alternative to fiat money because it is decentralized, which means that there is no need for intervention by different institutions such as banks, for example.
DeFi is built on this principle, with different platforms giving cryptocurrency holders a place to obtain tokens to lend directly, without the need for intermediaries.
Banks generally ask their clients to deposit their money in a savings account and then manage it on our behalf, granting loans. DeFi gives owners control of their assets. The huge difference is that the interest earned on the loans generally goes to the banks, here it goes directly to the person who is lending it.
However, not all that glitters is gold and many people may not opt for this form of passive income. Many are afraid to enlist their crypto tokens thanks to the risk of something called impermanent loss.
Lenders on a DeFi platform should be aware of the fact that the value of their tokens is locked in when placed in a liquidity pool. If a cryptocurrency's earnings are greater over a period of time than the value of the liquidity pool that users have put their tokens into, they may lose out on making money compared to if they had just held or held their tokens.
Likewise, if we take into account that the value of interest rates is quite high, a person who invests $1,000 in Bitcoin through a DeFi platform, can expect to earn a little more than $200 through interest. It is very possible that our tokens will become more valuable, which means that we will also earn more.
Yield Farming
Better known as Staking, Yield Farming is somewhat complex and is used on DeFi platforms; but in a more technical way, where we simply have to leave our funds in an account to earn interest. In the same way as all financial platforms, DeFi platforms have to make sure that their liquidity ratio is balanced, right now is where we find the yield farmers. These are the ones who provide the platforms with their own crypto to use in the liquidity pools, albeit temporarily.
Yield farmers move their tokens from one platform to another, based on whichever earns them a higher interest rate the fastest. To achieve this requires a technical skill set, but also a large amount of money in different currencies. We must consider that someone who stakes can invest $100,000 and double it in a year without problems.