Cryptocurrencies have been gaining popularity recently, and it’s not surprising. According to CoinMarketCap, the capitalization of cryptocurrencies in 2023 is over $1.33 trillion, with a projected increase to $1.9 trillion by 2026.
Despite the growth, the digital asset market often brings unpleasant surprises to investors, such as sudden collapses of exchange rates, token speculation, and scammers. However, this doesn’t mean you can’t earn in cryptocurrencies without taking risks. In this article, we will discuss the top three ways to earn passive income on Bitcoin, Ethereum, and USDT that are suitable for both beginners and those who are already familiar with the industry.
1. Liquidity Mining
Liquidity mining is when cryptocurrency holders temporarily transfer their assets to decentralized exchanges (DEX) in exchange for rewards. These rewards are generated from fees charged to traders who exchange cryptocurrency on the exchanges. Users’ assets are stored in encrypted and secure liquidity pools.
How can you earn?
To avoid risks, beginners usually choose liquidity mining with a stable interest rate. This is an improved version of classic liquidity mining, where the profitability of pools always remains the same. Although this means that stable liquidity mining doesn’t provide supernormal profits, it also never reduces yields to zero.
One of the most popular platforms for stable liquidity mining is Wixpool. This is an open liquidity mining protocol that combines private cryptocurrency users into pools, providing liquidity to 300 leading DEXs, including Uniswap, Curve Finance, PancakeSwap, DODO, Jupiter, and others.
Wixpool is popular due to its fully automated investment: using a smart contract, the platform distributes cryptocurrencies to liquidity pools, stabilizes yields, collects rewards from exchanges, and directs them to user balances.
How much can you earn?
The average annual percentage yield (APY) for liquidity mining depends on the platform. On average, platforms offer 30%-200% APY for providing liquidity to a collateral pool. However, it’s worth noting that not all platforms offer services with a stable interest rate, so it’s important to carefully study all conditions before choosing.
2. Staking
Staking is a way to earn passive income from cryptocurrencies that use Proof-of-Stake (PoS) consensus. The essence of staking is to lock a certain amount of tokens in a wallet to maintain the operability of the PoS blockchain of the given asset and receive a reward for it. This method is primarily suitable for Ethereum.
How to earn?
There are several ways to earn on Ethereum staking. The first and most expensive way is to launch your own validator node on the Ethereum network. To do this, you can use the Staking Launchpad website. You must have at least 32 ETH on your balance, which is approximately over $50,000. This method is only suitable for investors with large wallets, but the profit is the highest.
The second option is to use the services of providers. One of the most popular providers for staking is Coinbase. Users can choose from different tariff plans, which provide different interest rates depending on the length of time they want to lock their funds. For example, a user can stake their ETH for 1 month, 3 months, or 12 months. Each tariff plan provides its own level of profitability.
It’s important to note that the staking service is only available for certain cryptocurrencies that use the Proof-of-Stake consensus, such as Ethereum. Also, Coinbase doesn’t guarantee the stability of the interest rate, so rewards may change over time.
How much can you earn?
When launching your own node, you can earn up to 250% APY, but only with new, sufficiently risky tokens. When working with providers, you can earn up to 170% APY.
Important: by law, US users who receive more than $600 as a reward for staking must fill out Form 1099-MISC and are required to report their income from staking rewards to the tax authorities.
3. Algorithmic Trading
Algorithmic trading is when bots trade cryptocurrencies for you. Trading bots are programs that buy and sell cryptocurrency on exchanges 24/7 using pre-set algorithms. Thanks to this, trading bots are able to quickly react to changes in market conditions and instantly make decisions about buying or selling cryptocurrency.
How to earn money?
To earn money, you need to install one of these bots and set up trading conditions. For example, set up automatic placement of trades to buy ETH when the price drops by 10%. To begin with, you need to have a good understanding of crypto trading theory and have minimal experience in successful independent trading.
One of the most popular brokers for automated trading is IG Group. It is a platform for testing and automating algorithmic trading strategies with a full range of advanced trading technologies, online brokerage services, and education.
Using IG Group, traders can customize their bots, search for trading opportunities, place orders, and manage their accounts. Trading conditions may vary depending on the specific securities and futures being traded and the broker-dealer used.
How much can you earn?
Profit depends on two things: a) how lucky you are in the market; b) how well you programmed the bot. In the case of success, automated trading can provide stable profits of up to 300% APY. In case of failure, you can earn 0% or even go negative.
Conclusion
Cryptocurrencies provide many opportunities for earning, and we have looked at the three most popular ways. However, each of them has its advantages and disadvantages, as well as its level of risk. For example, liquidity mining allows you to earn stably, but the rates are not as high as in other options. Staking Ethereum can bring high profits, but only for investors with large wallets. Trading cryptocurrency automatically is a fast way to earn big money, but it comes with great risks.
We hope that this article has helped you better understand how to earn money with cryptocurrencies. Investing in cryptocurrencies is a complex and risky way to make money, but it can also bring significant profits. We wish you luck in investing and hope that you will make a thoughtful choice that meets your needs and capabilities.
