Author: Jelle Huisman
More and more people buy cryptocurrencies and see an opportunity to make interesting profits. The prices of cryptocurrencies can develop strongly in a short period of time. By far the majority of people who buy cryptocurrencies do this through an online cryptocurrency exchange. In reality the cryptocurrencies often remain on the account, without being actively traded. People assume that active trading requires specific knowledge, which of course is true.
Fortunately there are several possibilities nowadays to earn money with cryptocurrencies, without having to actively trade them. There are possibilities to earn returns in ways, which are many times higher than the interest on, for instance, a savings account. At this moment the interest rate is almost zero, which means that the money you have on your savings account will only become worth less.
The market for cryptocurrencies and blockchain technology is currently in full development. Below I describe 3 ways to use your cryptocurrencies as an asset that generates income or cash flow.
Lending
What is lending?
Lending is the lending of money or cryptocurrencies to borrowers in exchange for interest payments. Instead of the bank, you are the one lending money or cryptocurrencies and getting paid interest for it. The interest you receive depends on which type of cryptocurrency you make available for lending. The interest you can receive can be anywhere between 8 and 12 percent. This is therefore enormously higher than the returns that you can receive elsewhere.
Decentralized protocols are very popular at the moment. You can use these to lend money without the need for an intermediary. By means of smart contracts the loan is handled. You do not need to know anything about this. The exchanges and platforms that offer lending offer ready-made solutions.
Exchanges and platforms
With this form of lending, you send your cryptocurrencies to an exchange or a DeFi (decentralized finance) platform. The exchange or platform functions as a central party. Make sure you use a good exchange or platform, so that in the worst case you will always receive your crypto’s back. A long-term view is important here.
How to start lending
There are now many exchanges and platforms that facilitate lending. To start lending, all you need, besides your available cryptocurrencies, is an account at one of these parties. Always choose for one of the larger parties who have proven their reliability. Some good providers you can take a look at for more information are Binance and Nexo.
Tip: Choose to lend out so-called stablecoins. The returns on these are high and stablecoins are designed to remain stable in relation to certain fiat coins (usually the dollar).
Staking
When you are staking, you are helping to verify transactions on a so-called Proof-of-Stake (PoS) blockchain. For validating the transactions on the blockchain, you receive so-called staking rewards. There are different kinds of cryptocurrencies which each have their own conditions, for example the minimum number of coins to stake, the minimum period for which you stake and the percentage of rewards you receive for doing so.
In any case, staking is a good way to maximize the income of your cryptocurrency holdings. Staking is possible through exchanges, but normally also through so-called wallets that are offered by cryptocurrency projects themselves. If you want to keep staking easy, take a look at the options Binance offers for this.
Tip: Once you have staked your coins, you can also stake the rewards you receive for this again. This creates a compounding effect and your cryptocurrency holdings will grow even faster.
Buy & hold
The easiest way to make money with cryptocurrencies is by means of a buy & hold strategy. For example, many investors own Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP). Everyone knows a few stories of people who have made a lot of money by buying crypto’s.
Just like with selecting stocks, you will need to do research on cryptocurrencies that are worth buying and holding. By the way, in crypto terms it is referred to as HODL instead of hold. The price of cryptocurrencies can fluctuate a lot.
Always make sure you buy your cryptocurrencies at one of the bigger exchanges, like Binance for example.
My tip: Look especially for crypto projects that currently still have a relatively small market capitalization but can grow strongly in the coming years.
Conclusion
As you can see, it is not difficult to generate extra income with your crypto-holdings, which also offer a good alternative for the low savings rates of today. However, you should take into account some important aspects.
Firstly, pay attention to the reliability of the exchange or platform that you are going to use for your crypto investments. Secondly you should take into account that the value of cryptocurrencies can fluctuate a lot. Take this into account when you are going to lock up your money or crypto’s for a longer period of time.
Always do your own research for good cryptocurrencies, exchanges and platforms. This will also help you learn more about developments in the crypto market. Lending and staking are forms of passive income.
In this article you can read what cryptocurrency exactly is.
You can also combine staking with a buy & hold strategy. A good example of this is Cardano. When you stake Cardano’s coin ADA, your coins are not locked for a certain period. Therefore, you can access them again at any time.
By using the Binance link in this article, you will receive a 10 percent discount on all transaction fees when making purchases through this exchange.
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