Bitcoin (BTC), along with other cryptocurrencies, has provided people with a venue to earn passive income, making money without any active involvement. One doesn’t need to take unnecessary trading risks or spend time reading and analyzing reams of information.
While the concept of passive earning isn’t new, cryptocurrency has undoubtedly added new dimensions to it. Concepts like compounding interest or reinvesting dividends are also applied in the cryptocurrency market, creating an ecosystem where one can earn passively.
Let us discuss various ways to earn passive income with Bitcoin. This article includes interest accounts, lending, mining, trading and liquidity pool.
Bitcoin interest accounts
Keeping Bitcoin in a cryptocurrency savings account is similar to having regular savings accounts. These accounts offer fixed interest on the crypto assets deposited. One may choose flexible savings plans, which allow the depositor to withdraw assets whenever they wish or fixed savings plans, where the assets remain deposited for a predetermined period.
Interest rates are usually higher when one deposits funds for a fixed-term than in a regular savings account. The tenure for fixed term deposits is considerably less than that of conventional bank accounts. On some protocols, there is no minimum deposit requirement as well.
One can also rope in a financial adviser to implement investment strategies like dollar-cost averaging (DCA). The strategy involves investing the same amount of BTC in a target security regularly over a definite period, lowering their average cost per share and bringing down the impact of volatility on their cryptocurrency holdings.
Bitcoin lending
Bitcoin lending occurs when anyone holding BTC lends the cryptocurrency to borrowers through a centralized, decentralized or peer-to-peer (P2P) platform. In return, the borrowers pay daily, weekly or monthly interest. The lending platform usually takes a fee for the service.
The three factors influencing the earnings are the total value of Bitcoin being lent, the duration of the loan and the interest rate. Users need to trust a third party for the Bitcoin lending infrastructure and terms on centralized lending platforms. Most platforms require users to deposit their BTC with the lending platform. While this brings expert-level help to users, their Bitcoin lies in the custody of platforms.
On the other hand, no intermediaries are involved in decentralized lending platforms. Smart contracts automate the…
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