How to Earn Passive Income With Crypto

By Arthur Dubois | Published on 26 Jul 2023

bitcoin money

Crypto can be used as a tool to help you achieve your financial goals. Whether you want to establish financial security in your household, contribute to your retirement fund, or simply want to create a different source of passive income, you can do all of that with crypto.  It isn’t uncommon to have double-digit gains through crypto investments but understand that not all strategies are created equal.  Let’s take a look at a few ways where you can put your crypto to work.

Crypto Interest Accounts

Crypto interest accounts work similarly to traditional savings accounts in that you deposit your cryptocurrency after which interest will begin to accrue.  Plenty of crypto interest accounts exist and they all have attractive APYs.  Though the differences in interest rates, fees, security, and features set each company apart, there is one commonality between all of them:  their interest rates beat high-interest savings account.  It’s common to see interest rates in the double digits with crypto interest accounts whereas you would be lucky to see a high-interest savings account offer anything beyond 1%.

Interest Rates

BlockFi is a well-rounded crypto interest account that offers interest rates anywhere from 0.1% to 8.25%.  On the upper end of the spectrum, you can find rates as high as 17% APY with Celsius. On the lower end, you’ll see in the 1% to 1.25% APY range from companies like Voyager and Coinbase.  This range is considered the bottom and you won’t find many crypto interest accounts dip below this.  With high-interest savings accounts, on the other hand, an APY of 0.50% on average is the industry standard.  The best we found was from SmartyPig by Sallie Mae at a 0.70% APY.

Fees And Account Minimums

Fees and account minimums are becoming rare to see on high-interest savings accounts and crypto interest accounts are no different.  If you do see fees charged in crypto interest accounts, you’ll typically find them when withdrawing.  Some high-interest savings accounts will charge fees when withdrawing but it is typically found as a monthly service fee or various handling fees such as with paper statements.


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Crypto Investments to make passive income with crypto

Findings from Gemini show that over 14% of Americans own cryptocurrency and a survey from Hardbacon shows that 28% Canadian retail investors own cryptocurrency. Every year the number of cryptocurrency investors increases and for good reason:  cryptocurrencies have had an amazing bull run in the last few years.

High-Risk High Reward

Getting a 500% return or losing as much isn’t uncommon when it comes to crypto investing, but understand that these gains are due to their highly volatile nature. Trading and investing in crypto through a Canadian crypto exchange is purely based on speculation and fundamental analysis simply doesn’t apply here so keep that in mind.

Betting On The Future

Corporate, institutional and governmental adoption of cryptocurrencies is becoming the norm.  China rolled out their state-issued digital RMB to select cities while the U.S. is playing catchup and are currently researching the viability of a digital dollar.  Visa announced that USDC transactions will be supported on their payments network.  Countless companies are adopting or accepting cryptos such as PayPal, Walmart, and Tesla.  It’s clear that cryptos are here to stay so buying and holding some would be the smart play here.  Research the top five or ten cryptocurrencies by market cap to get you started.

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Crypto Staking

If you have a decent amount of crypto saved up, you can put it to work and earn interest on them. In order to create this passive income stream, you’ll need to lock up your assets for a set period and depending on where you park your crypto, you can earn anywhere from 5% to 25% APY.  These are a no-brainer especially if you have some crypto and you’re on the fence on whether you want to deposit your money in a high-interest savings account.

On the surface, staking may seem similar to investing in crypto interest accounts but the difference lies in what happens with your crypto after you deposit it.  With crypto interest accounts, you are lending crypto to the company in exchange for a fixed or varying interest rate.  Staking works with crypto deposits as well, but in this case, the crypto is used to validate transactions on the blockchain.

Requirements and Expectations

Not all cryptocurrencies can be staked because not all are based on proof of stake consensus mechanisms. For example, Bitcoin is based on a proof of work consensus mechanism, and therefore it isn’t possible to be staked.  Ethereum can be staked but the requirements are steep:  you’ll need 32 ETH to be able to stake on their blockchain and with current market prices hovering around $4100, this would cost you around $131,200 to get started.  Staking pools and centralized exchanges offer a more cost-effective solution where minimums aren’t required so it would be your best to look into these such as Coinbase, Binance and NDAX.

Passive Income: Cryptocurrencies Can Help You Diversify

Crypto can work for you just how money can.  It isn’t hard to find strategies that will yield you high rates of return but be careful. Cryptocurrencies are inherently volatile and currently, the best strategies all require some level of speculation.  Professionals agree that allocating only a small portion of your portfolio that you can afford to lose would be the best bet.

Arthur Dubois is a personal finance writer at Hardbacon. Since relocating to Canada, he has successfully built his credit score from scratch and begun investing in the stock market. In addition to his work at Hardbacon, Arthur has contributed to Metro newspaper and several other publications