Crypto Passive Income: 8 Ways to Earn (2023)

Looking for an easy way to earn passive income from cryptocurrency? In this article, we’ll break down 8 methods for investors like you — ranging from easy to hard!

Cryptocurrency interest rewards 

Difficulty: Easy 

Many cryptocurrency exchanges offer interest rewards on cryptocurrency. For example, Coinbase offers rewards upwards of 4% for users who hold USDC. 

Pros 

Easy to get started: Earning interest rewards is low effort! All you need to do to get started is to open up an account with an exchange and deposit the relevant cryptocurrency. You’ll get started earning rewards automatically! 

Low technical barrier: Unlike some of the other items in this article, earning cryptocurrency interest requires a very low technical barrier to entry! 

Easy liquidity: Most exchanges allow you to easily withdraw your cryptocurrency — meaning that you’ll have access to your crypto when you need it! 

Cons 

High investment for reliable income: To earn a reliable monthly income from interest rewards, you’ll need to have a large amount of cryptocurrency deposited in your exchange. Remember, your interest rewards are calculated based on how much crypto you deposit. 

Bankruptcy risk: Before you choose a cryptocurrency platform, you should do your research. In the past, cryptocurrency exchanges like BlockFi and Celsius that offered high interest rewards went bankrupt. 

Crypto lending 

Difficulty: Easy 

By lending your crypto to borrowers like traders and businesses, you can earn interest! Lending platforms and DeFi protocols manage the process, allowing you to easily earn rewards!

Pros 

Low barrier to entry: Getting started with lending out your cryptocurrency through a platform is relatively easy and low effort. 

Compound interest: DeFi protocols like Compound offer the ability to earn compound interest on DeFi lending! 

Cons 

Platform risk: It’s important to do research on your cryptocurrency loan platform before getting started. In the past, cryptocurrency loan platforms like Celsius and BlockFi have gone bankrupt — which means customers lost access to holdings. 

Low protections: Most crypto lending platforms are unregulated and offer limited protections to borrowers and lenders.

Illiquid: It’s often difficult to withdraw your holdings from a crypto lending platform. It’s likely that you’ll need to go through a long waiting period to get access to your funds. 

Staking 

Difficulty: Easy 

Cryptocurrency staking involves locking up a certain amount of a particular cryptocurrency to support the underlying blockchain network's operations. In return for staking their coins and helping to maintain the blockchain's security and consensus, participants receive staking rewards! 

Pros 

Easy to get started: Compared to mining, staking is generally less resource-intensive and requires minimal technical expertise. Many platforms and wallets support staking services! 

Stable earnings: Staking earnings are typically more stable and reliable than other forms of passive income! 

Compound interest: Staking rewards automatically compound — which can lead to a large growth in your assets over time! 

Cons

Percentage of investment: Your staking rewards are typically a percentage of the cryptocurrency you staked. This means that you’ll need a large stake to earn a reliable passive income. 

Regulatory risk: In recent years, the SEC has claimed that exchanges offering staking as a service should be considered an ‘unregistered security’. As a result, exchanges are not able to provide cryptocurrency staking services in some jurisdictions. 

Liquidity: Cryptocurrency staking sometimes requires you to ‘lock up’ your holdings for a set period of time, which means that you may run into issues if you need access to your holdings immediately! 

Dividend earning tokens 

Difficulty: Easy 

Dividend-earning tokens are a type of cryptocurrency that provides holders with a share of the project's earnings or profits. Unlike traditional stocks, where dividends are paid out in fiat currency, dividend-earning tokens give holders additional units of the same cryptocurrency. 

Pros 

Low effort: Since dividend earning tokens pay out dividends automatically, earning passive income is relatively low effort! 

Compound interest: Typically, dividend earning tokens offer compound interest — which could lead to large rewards! 

Cons 

Limited adoption: Dividend earning tokens are relatively uncommon. It’s much easier to find cryptocurrencies that offer staking rewards. 

High risk: Many dividend earning tokens are not as established as cryptocurrencies like Bitcoin and Ethereum. As a result, dividend earning tokens may have a higher risk of failure or scams. Do research before you invest! 

Play-to-earn games 

Difficulty: Easy 

Play-to-earn games like Axie Infinity allows users to earn cryptocurrency rewards while playing games! 

Pros 

Fun: Play-to-earn games combine the potential for passive income with entertainment. You’ll have the opportunity to earn rewards while playing engaging video games! 

Inclusive: Play-to-earn games are inclusive! Earning money through play-to-earn can be a great option for investors who don’t have the technical skills necessary for methods like cryptocurrency mining. 

Globally accessible: Play-to-earn games are accessible all over the world! Some investors even choose to set up ‘scholarship programs’. In these programs, gamers give funds to investors in low cost-of-living countries to help them get started with the game, and in exchange, receive a portion of rewards! 

Cons 

Upfront investment required: Games like Axie Infinity require you to buy 3 ‘Axies’ to get started with the game. 

Time commitment: Earning a reliable income from play-to-earn games typically requires a significant time commitment. You’ll likely need to play the game for multiple hours a day to earn a reliable income! 

Dependent on game success:  Your earnings from play-to-earn games are dependent on the game’s success. Often, the tokens you earn from playing a play-to-earn game increase or decrease in value based on the game’s popularity. 

Crypto affiliate programs 

Difficulty: Medium 

Crypto affiliate programs allow you to earn passive income by promoting cryptocurrency-related products or services. You can sign up for an affiliate program, receive unique referral links, and share them with their audience. When someone uses the affiliate link to make a purchase or sign up, you’ll earn a commission! 

Low barrier to entry: Getting started with an affiliate program is usually quick and easy and requires no upfront investment — which makes it a low-risk way to get started earning passive income. 

Recurring income: Some crypto affiliate programs offer recurring rewards! For example, CoinLedger’s affiliate program offers a 25% recurring commission every time a customer buys a tax report! 

Diverse offerings: Crypto affiliate programs cover a wide range of products and services, including exchanges, wallets, trading tools, and educational resources, enabling affiliates to choose programs that align with their audience's interests.

Cons 

Designed for large audiences: Cryptocurrency affiliate programs are typically designed for investors who have a large audience through mediums like YouTube, podcasting, or a blog! If you don’t have a large following, affiliate programs may not be a reliable source of passive income. 

Variable: Affiliate income can vary significantly based on factors like market sentiment. 

Competitive: Getting your audience to sign up for affiliate programs can be difficult. Many popular crypto influencers promote affiliate links — which means that competition is high! 

Yield farming 

Difficulty: Hard

Yield farming is the practice of using DeFi to earn high rewards! In contrast to staking and lending, the term ‘yield farming’ refers to a wide range of DeFi strategies — and often involves leveraging multiple DeFi protocols at a time. 

Pros

High rewards: Yield farming can offer very high returns. Many DeFi protocols offer lucrative rewards to new users to incentivize usage! 

Customization: Yield farmers can use various strategies and platforms to optimize their risk and reward preferences! You can tailor your approach to suit your unique financial goals. 

Cons

Protocol risks: Unfortunately, the cryptocurrency space is filled with scams and fraud. It’s important to do due diligence on a protocol before you commit to locking up your funds! 

Impermanent Loss: Yield farming can lead to impermanent loss — which happens when the value of your crypto declines while being locked in a DeFi protocol! 

Technical Expertise: To get started with yield farming, you’ll need a solid understanding of DeFi protocols, smart contracts, and market dynamics. As a result, yield farming may not be the best option for beginner investors! 

Cryptocurrency mining 

Difficulty: Hard 

Cryptocurrency mining is the process of validating transactions on a blockchain network using specialized hardware. In exchange for contributing processing power, you’ll earn cryptocurrency rewards. 

Pros 

Reliable income stream: Successful cryptocurrency miners receive a steady stream of passive income! 

Technical learning: If you’re interested in diving into the ins and outs of the blockchain, mining cryptocurrency can be a valuable learning experience. 

Cons 

High set up costs: Setting up a cryptocurrency mining operation can be expensive and time-consuming. 

High energy consumption: Cryptocurrency mining requires significant amounts of electricity. Typically, miners will set up operations in regions where electricity is cheap. 

High competition: Blockchains like Bitcoin have high competition when it comes to mining — which means it can be very difficult for at-home miners to successfully validate transactions and earn rewards. 

Can I realistically make a monthly income from cryptocurrency? 

While it’s certainly possible to make income from cryptocurrency alone, it can be difficult and unreliable. The cryptocurrency market is volatile, and a market downturn can lead to a significant loss of income. 

For most investors, it’s recommended that cryptocurrency should be treated as supplemental income rather than a main source of income. 

Is crypto passive income taxable? 

Cryptocurrency is subject to tax. 

When you earn cryptocurrency, you’ll recognize ordinary income based on the fair market value of your crypto at the time of receipt. 

When you dispose of your cryptocurrency, you’ll incur a capital gain or loss depending on how its price has changed since you originally received it.