For most individuals, cryptocurrency trading is all about buying it when the price is low and selling it when the price is high. But this is not the case anymore. The times have changed, and so are the trading patterns. Nowadays, traders not only buy and sell crypto, but they also put their holdings to work and get a chance to earn passive income. This way, you can make your crypto work while you are busy with other work.
If you are new to the crypto economy and wish to learn the tactics to earn passive income, this guide will tell you just that. Modern crypto wallets and decentralized finance, i.e., DeFi, have paved the way for us to earn yields, and it has become easier than before to do so. However, it is still associated with risks, and hence, it is important that you understand your options beforehand and then take action.
Hence, in this article, we are going to take a look at different methods that we can take into consideration for earning passive income through crypto wallets.
Method 1- Crypto staking directly through wallets
“Staking”- If you are new to this term, let me explain to you in simple terms that it is a process under which we can lock up our assets on blockchains that support the “Proof-of-Stake (PoS)” mechanism. By locking your crypto on such a platform, you will allow them to earn credibility and secure their network, which, in turn, will reward you. This particular option is directly available with wallets such as:
- Trust Wallet
- MetaMask (via integrations)
- Ledger Live
- Phantom Wallet
Depending on the network you have chosen, you get to earn a yield that ranges from 3% to 15%. However, one thing that you must note here is that it generally involves lock-up periods. In short, once you “Stake” your assets, they won’t be available for immediate access.
Important: Before you finalize the blockchain network on which you are going stake your assets, make sure to research the network, validator reputation, and go through their unstaking rules as well.
Method 2- Earn yields through the DeFi lending
This is yet another renowned method to earn passive income. You can easily lend your crypto through a decentralized finance protocol. To do so, you will need a non-custodial wallet, and then you can connect this wallet to a DeFi platform. This DeFi platform should be able to lend you assets such as ETH, stablecoins, and the wrapped versions of BTC. Once you lend your assets, you become eligible to earn interest that gets accumulated automatically.
In this scenario, stablecoins are quite a popular option for lending. This is because they could reduce exposure to the volatility of the price while offering attractive returns. Comparatively, they are higher than the traditional savings accounts. In the same process, wallets work as a gateway to let you interact with these protocols without losing control over your funds.
Note: It is significant that you spread funds across multiple platforms and choose only well-audited protocols because DeFi lending carries smart contract risk. If you use a poorly designed protocol or if it gets hacked, you may lose access to your funds forever.
Method 3- Liquidity provision and yield farming through a wallet
Another way to earn passive income through a crypto wallet is to provide liquidity to decentralized exchanges (DEXs). You can easily deposit different pairs of tokens into the liquidity pool, and to do the same, you can earn a share of trading fees along with some additional rewards in the form of incentives. There are some wallets that allow you to connect to the decentralized exchanges directly. This way, you will be able to add or remove liquidity anytime you want.
Important: Yield farming through crypto wallets can be attractive in many ways; however, you need to understand the fact that it is not free from risks such as “Impermanent loss.” In this scenario, prices of the paired assets see a drastic change, which in turn reduces the overall returns.
Method 4- Use a wallet with in-built rewards and Integrations
Some crypto wallets are released in the market that come with built-in features letting you earn rewards and take part in the aggregating staking. Some wallets also allow you to enjoy the lending and yield farming opportunities all under one destination. Not just that, there are some wallets that allow you to take part in the airdrop and ecosystem rewards by letting you hold specific tokens or by establishing an interaction with the networks directly through your wallet.
Final Words-
When we look through the lens of the past, we get to know that crypto wallets have seen a significant evolution over the years. From being simple storage tools to becoming financial hubs, these wallets are not being used to earn passive income. There are multiple ways through which you can earn passive income through your wallet, i.e., lending, liquidity provision, staking, and some wallets also come with integrated rewards. However, the presence of convenient features does not mean that you should not conduct your own research, as recommended by experts at Coins Everything. You must never neglect or compromise due diligence, no matter what.
FAQs:
Can I make passive income with crypto?
You can easily generate passive income with crypto by participating in opportunities such as staking, lending, and mining.
Which crypto gives the highest staking rewards?
Currently, crypto assets such as Avalanche, Cosmos, and Near Protocol are known to be the best crypto to stake in.
Can I make $100 a day from crypto?
If you know the correct approach and you are lucky enough, you are eligible to make $100 in a day from crypto.
Which crypto wallet is best for staking?
If you are looking for a wallet with built-in staking options, then you can go ahead with Keplr, Exodus, and Trust Wallet.