How to Make Passive Income with Cryptocurrency

What Is Passive Income?

Passive income is the opposite of active income. When you earn active income, you're doing work in order to earn that income. When you earn passive income, your time and energy aren't required to earn that income. For example, when you write a blog for a company and you get paid a couple of dollars per click, that's an active income stream because you have to write the blog posts in order to get the clicks and earn the money. Passive income, on the other hand, is income that continues to earn you money while you're doing something else. It doesn't matter how much time you spend (or don't spend) doing the work that creates the income stream. You could spend one hour a week, and as long as you continue to get new customers, your income will continue to grow.

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How to Make Passive Income with Cryptocurrency

We’d recommend starting with one or two of the “easier” forms of cryptocurrency passive income and then slowly transitioning into the more advanced and complicated ones. Let’s start with the easier and more common ways of earning passive income with cryptocurrency. Firstly, and perhaps most obviously, is holding. You might have heard of people who have earned thousands of dollars from “hodling” the cryptocurrency they purchase when it’s cheap. Holding cryptocurrency is a lot like holding stocks or bonds. You don’t earn any income from it (though you might get a capital gain if the price goes up), but you do earn a profit when you cash out to another currency. Cryptocurrencies also have price fluctuations, just like stocks, which means as someone who is holding onto them for a long time, you’re likely to earn a profit when you finally cash out and convert them to USD. Holding is the easiest way to earn passive income from cryptocurrency.

Real-Life Examples of Passive Income With Cryptocurrency

- Mining: Mining is the process of adding new transactions to a blockchain. That blockchain is a decentralized network of computers that contains a record of all confirmed transactions and is updated by the computers in the network (miners) whenever a new transaction is added. Miners are paid a small fee as compensation for their work. - Hodling: HODLing is a playful misspelling of holding. It refers to the practice of holding onto cryptocurrency despite its volatility. Cryptocurrency investors who are confident in their investment sometimes write “HODL” in their comments and posts to indicate their belief in their investment. - Staking: Staking is a bit different than mining. You don’t earn a fee for adding a new transaction to the blockchain like a miner would. Instead, your reward is the transaction fee that someone else pays per new transaction.

Pros and Cons of Cryptocurrency as a Path to Passive Income

- Pros: Cryptocurrency is a more liquid asset than real estate. This means that, unlike in real estate where you’d have to sell your home to cash out your investment, you can exchange cryptocurrencies for cash whenever you want. This means that you can earn passive income from cryptocurrency even with very small investments. - Cons: Cryptocurrency is volatile which means that your investment could plummet in value over short periods of time. This risk is likely smaller for those looking to earn passive income from cryptocurrency because they’d likely be investing in long-term holdings such as Bitcoin. - Cons: In order to earn passive income from cryptocurrency, you have to be careful to invest in cryptocurrencies that are intended as stores of value, like Bitcoin, and not as decentralized networks that use crypto tokens as a medium of exchange, like Ethereum.

Final Words: Should You Invest in Cryptocurrency as a Path to Passivity?

Now, before you go out and buy a bunch of cryptocurrency, you should make sure that you’re investing in companies and industries that you believe in. Cryptocurrency is a great way to earn passive income but it’s important to only invest in companies that you believe are going to be around for the long term. If you have any experience with making passive income with cryptocurrency, we’d love to hear about it!