Passive income is a trending topic amongst millennials, who are more exposed to investment opportunities than any generation before them. Creating additional income sources is nearly essential today, as economic uncertainty continues to increase.

Thankfully, the introduction of cryptocurrencies has opened the door to many new passive income opportunities, most of which have a low-barrier entry, meaning that participants don’t need a large capital to get started.

Based on this information and the “infancy” of the industry, learning how to make passive income with cryptocurrency is not only easy but much more rewarding than traditional investment options. In the following sections, we will show you how to get started.

How to make passive income with cryptocurrency

In no particular order, here are the most common options to help you generate additional sources of income.

1. Mining altcoins

Every PoW-based cryptocurrency can be mined by using specialized hardware. You can choose from different types of miners, ranging from second-hand cheap options to powerful and expensive devices. There are even coins that don’t require mining equipment at all and can be mined with a smartphone (e.g. Electroneum).

How to choose your altcoin miner

First off, you will need to decide on your goal. Cryptocurrency mining can become your main source of income or just a hobby, depending on several factors (budget, technical knowledge, mining conditions, industry growth, risk tolerance, etc.).

The coin you choose to mine will determine the upfront investment you need, to acquire the right mining hardware. 

  • If you want to mine more popular cryptocurrencies with large network participation will most likely need to invest in an ASIC miner
  • If the coin a less popular or has ASIC restrictions, you may want to opt for a GPU or CPU, which are cheaper but less powerful.
  • You can also mine crypto without investing in mining hardware, by simply using the power of your gaming pc. This is less profitably but still a good way to earn some extra money. The following video lays out the step you need to follow to get started.

Is altcoin mining profitable?

Like most sources of passive income, you will most likely need to make a (sizeable) investment before you can start earning passive income. In the case of mining altcoins, the initial amount you need to invest can fluctuate a lot, as mining equipment prices tend to change depending on market cycles.

As soon as you break even (which usually takes between 4 and 8 months in positive market conditions) altcoin mining can be a great way to earn crypto on autopilot. You can estimate the expected returns by using crypto mining ROI calculators.

2. Staking cryptocurrency

Staking is one of the most popular and easiest ways to earn passive income from cryptocurrency. In short, you “lock” your coins on an exchange or wallet temporarily, and earn interest as a result. This option is great for investors and traders that store a mid to large amount of crypto on exchanges for trading purposes.

How to make passive income from staking

First off, you will need to research which coins offer staging rewards. 

  • Certain cryptocurrencies, like NEO and VET, pay staking rewards in a different token (GAS & VTHO respectively). All you need to do is store your coins in a wallet or exchange that supports staking rewards. This option is considered safer, as the coins remain in your possession and thus in your control.
  • Alternatively, you can choose popular trading platforms (Binance, Crypto.com, etc.) to participate in exchange-based staking opportunities. This process entails that the platform you use will be able to temporarily access and use your funds to fuel its activities (e.g. margin trading, crypto loans, etc.).

If you choose an exchange-based staking option, you will be able to choose between different staking models:

  • Flexible staking is the least rewarding option but allows you to redeem your coins at any moment.
  • Locked staking is more rewarding but you need to lock your coins for a specific period of time (7, 14, or 30 days).
  • DeFi staking is the most rewarding model but also somewhat risky since your coins will be locked in a smart contract that could, potentially, contain a bug.

Once you choose the staking model, you will start getting rewards immediately. Most exchange platforms distribute rewards in the same cryptocurrency, meaning that you receive a certain percentage on top of the staked coins, with an interest rate that is far higher than the amount offered by the traditional banking system. If you have a Binance account and wish to learn more about this process, make sure you watch the following video:

Is cryptocurrency staking profitable?

In short, it depends. Cryptocurrency staking has many subsectors, each of which has a different reward model. 

  • Flexible staking usually offers rewards between 1% and 6%.
  • Locked staking offers slightly higher rewards, ranging from 2,6% to 46%
  • DeFi staking offers similar rewards to locked staking but has more options for popular cryptocurrencies (BNB, BTC, Stablecoins).

3. High-yield savings account

Another common way to earn passive income is through high-yield savings accounts. This option is probably easy to understand, even for total beginners, as it is widely used in traditional banking already.

Many cryptocurrency exchanges and wealth management platforms offer savings accounts for a large selection of coins. This option is great for individuals that want to generate cash flow from a large portfolio that they are currently not trading with.

How to earn passive income from a high-yield savings account

To start earning passive income with this particular method you will need to subscribe your coins to a savings account. This can be done on several different platforms, the most popular of which are:

  • Binance – Large selection of coins but low-interest rates on popular coins.
  • Crypto.com – Lower selection of coins but overall higher interest rates.
  • Coinbase – Stablecoin (USDC) rewards for US residents only.
  • BlockFi – Up to 8% interest but very limited options (BTC, ETH, Stablecoins)*
  • Celcius Network – Many options and high rewards (up to 22.4% APY)*
  • Nexo – Earn up to 5% interest on crypto and 10% on Stablecoins*

*Note: BlockFi, Celsius Network, and Nexo require users to send their cryptocurrency to an external platform (wallet). This can be very risky since you will no longer be in control of your funds.

Are savings accounts profitable?

Savings accounts can be a great source of passive income during bear markets and accumulation periods. It is during these times that you will be using your trading portfolio less, making it an excellent opportunity to put your coins to work.

Actual annual returns can vary between 0.06-22.4% per annum, depending on the cryptocurrency and platform you choose. Generally speaking, riskier options (BlockFi, Nexo, Celsius Network) offer higher returns as compared to exchange-based savings accounts.

4. Affiliate programs

When looking at how to make passive income with cryptocurrency, you don’t necessarily need a large upfront investment. Sometimes all you need is the ability to influence people. Most cryptocurrency projects are built on hype and community interest. And one of the best ways to build engaging communities fast is through affiliate programs (a.k.a. referral programs).

The concept is simple – community leaders pursue community members to join a cryptocurrency platform or make a particular purchase and receive a reward depending on their success rate. This earning model is great for influencers but is also great for those who enjoy educating their peers on crypto-related topics.

How to make passive income with cryptocurrency affiliate programs

The easiest way to find a rewarding affiliate program in the crypto niche is by checking platforms you are already familiar with. For example, if you are primarily trading on Binance, you can use your invite code to help other members join the platform.

affiliate-program

Once you find a product or service that you feel comfortable promoting, there are several ways to proceed:

  • If you are an influencer or industry leader, take it to social media to promote the product by educating other users about it. For example, if you want users to create a Binance Futures account, consider educating them on the steps they need to follow to trade successfully.
  • If you don’t have a personal brand, you can always start with your friends and family. In this case, the returns will probably be lower than some of the methods we discussed previously, but you won’t need to invest any money.

Are crypto affiliate programs profitable?

Affiliate programs in the crypto niche do not only offer higher incentives than other industries, but they do so on a recurring basis. For example, most trading platforms offer a commission-per-trade model. This means that the referrer (you) earns 20% of the platform’s commission on each trade your invitee makes.

While this may seem like a small amount of money, it can quickly turn into a steady stream of income if the people you invite spend significant amounts of money and the industry as a whole continues to grow.

5. Cryptocurrency debit cards

Since early last year, several exchanges have introduced their very own debit cards. By allowing their users to convert their digital coins at the point of purchase, exchanges make the process of spending crypto easier. The best part? Cardholders receive numerous perks for doing so (hence the passive income opportunity). Among the most popular exchanges that offer this option are MCO Visa card, Coinbase card, and Binance Crypto card (in partnership with Swipe).

How to earn passive income from cryptocurrency debit cards

Head over to the exchange you use most regularly and check the qualification requirements. In most cases, you will need to hold certain amounts of a particular cryptocurrency to be able to order a card. For example, if you want to enjoy the perks of MCO’s Visa card, you will need to have at least 1000 CRO in your wallet.

If you qualify for the crypto card, you will be able to order it online. Once you receive it, you can start using it similarly to all the rest of your bank cards.

Are crypto debit cards profitable?

This depends on the amounts you choose to spend. The more you use the card, the more you earn in passive income. And considering that cashback can rank up to 8%, it’s safe to say that this option could lead to significant returns in the long run.

Cryptocurrency debit cards also offer a free subscription to popular services like Netflix, Spotify, and Amazon Prime, while you may also benefit from generous discounts on services like Airbnb, Uber, and Expedia.

Closing word

Thanks to their financial literacy, younger generations are now actively seeking passive income opportunities through their investments. And while most traditional opportunities require a significant upfront investment, cryptocurrency has made it easy for everyone to make their money work for them.

In this article we explored how cryptocurrency can help you generate new income sources through the following methods:

  • Mining altcoins
  • Staking cryptocurrency
  • High-yield savings accounts
  • Affiliate programs
  • Cryptocurrency debit cards

We expect to see a lot more financial services getting introduced to the crypto space over the next few years, as mainstream adoption continues to unfold. Until then, remember that you are still early in the growth curve of the industry, and will most likely benefit most from the abovementioned options.

Keep in mind that investing in cryptocurrencies is risky, especially when you need to invest a large amount of money to start earning passive income. The contents of this article do not constitute financial advice and should not be seen as such. If you are genuinely interested in any of the options discussed above, it is best to perform further research to gain a better understanding of the service

Frequently Asked Questions

If you wish to learn a bit more about the processes you need to go through in order to start generating recurring cash flow using your crypto, make sure you check the Q&A section below as well.

What kind of capital do you need to start generating cryptocurrency passive income?

This is a very common question without a concrete answer. The crypto industry is still at a stage of evolution, which means that new financial products are constantly coming to the mainstream. A few years back, for example, there was only the option of staking when it comes to passive income with crypto. Nowadays there are more options, but not all offer equal rewards – it all depends on your risk profile. If you have a high tolerance to stress and small capital to start (the majority among us), you might want to explore Yield Farming, a somewhat risky process that generates lots of passive income. In short, you add liquidity to the pool by offering your crypto in a staking-like process, earning anywhere from 80%-200% of APY. Of course, this can often boomerang in a bad way, as some of these projects end up “pulling the rug” on decentralized exchange platforms.

On the contrary, if you are looking for a safe way to generate passive income without exposing your keys to shady third parties look no further than savings accounts and staking. Sure, they will not offer the same rate of returns, but your coins remain safe, and payouts are certain over longer periods of time.

Is crypto passive income taxable?

This depends on your country of residence and the platform you are using to generate passive income. If you are using a decentralized exchange like Uniswap to farm tokens using ETH liquidity and then send the tokens to a private wallet, your funds will not need to be taxed (at least under current regulatory frameworks). On the contrary, if the passive income occurs on a centralized exchange and exceeds the untaxed annual threshold, you will need to pay a certain tax, which depends on your location.

Cashback crypto – Is it considered passive income?

Many crypto debit cards incentivize their holders by offering luring cashback. These are usually much higher than traditional debit cards, and can often rank up a lot of money, which covers not only the exchange fees at the point of purchase but even storing additional funds for future usage.

In short, yes, they should be seen as passive income, especially if you use your crypto debit card to pay for your regular expenses, like groceries, gasoline, and rent. That said, the ability to earn cashback from your purchases will require a significant amount of crypto holdings, which you will need to take into consideration.