How to earn with crypto: A few methods of passive income on cryptocurrencies
In order to gain profit on investments in the world of cryptocurrencies, it is not necessary to actively engage in trading. There are several completely passive ways to make money with cryptocurrencies: staking, cryptolending, holding, and ETFs. Here are each of these tools and the information you need for beginners who want to make money with cryptocurrencies with a minimum of effort.
In this article, we will explore the possibilities of passive incpme on the Kucoin exchange:
Staking
Proof-of-Stake (PoS) is rewarded for holding coins — this is an alternative to mining that does not require investments in the purchase of equipment. In order to receive staking rewards, all or part of the assets are blocked in a liquidity pool. You can join such a pool directly on the project, through centralized or decentralized exchanges, as well as through automated market makers.These assets can later be used to confirm (validate) various processes on the blockchain. They can also maintain the liquidity of a particular project in order to ensure a balance of supply and demand for it in the market. The amount of remuneration directly depends on the number of blocked coins in general and on a particular validator — separately, and also on the shelf life of assets. This is also called a strategy for “playing for a long time”.How to choose which cryptocurrency to bet on? The ideal option is to build a diversified cryptocurrency portfolio. To do this, you should pay attention to several types of coins:
1. Top 10 coins — the largest cryptocurrencies by capitalization (can be studied on CoinMarketCap and CoinGecko);
2. Top 50 coins — coins that have existed for more than a year and which, most likely, will not turn out to be a scam.
3. New coins — “beginners”: cryptocurrencies and tokens that have just appeared on the market, they are often characterized by a sharp rise in price (but similarly, a sharp “zeroing”).
* it is worth carefully studying the “road map” and white paper of the project for its usefulness. Try it on Kucoin exchange right now!
Cryptolending
Another and more understandable type of accrual of rewards for storing assets is cryptolending. This is an analogue of a deposit in a bank, in which the owner of the cryptocurrency can lend his funds at interest, through a third party or directly.
You can lend your funds through centralized cryptocurrency exchanges, crypto lending platforms and P2P platforms. The key difference lies in the amount and methods of accruing interest, as well as who acts as a guarantor of the security of such a transaction. This can be either a platform, as is the case with exchanges and crypto lending sites, or the user himself (in the case of P2P). Deposits on a cryptocurrency exchange correlate with margin lending, therefore they are considered safer. A registered user lends his funds to the site. She, in turn, lends them to those users who trade with leverage.Thus, the cryptocurrency works for its owner without the need to trade and take risks in the market, and the exchange guarantees the fulfillment of all conditions and the honesty of the transaction. For which, after a specified time, he receives a specified percentage of the profit.Cryptolending through cryptocurrency exchanges is considered an alternative to bank deposits, mainly because stablecoins can be loaned at competitive rates. Stablecoins are the most stable crypto assets in existence (hence their name), which correlate with the dollar with minimal deviations and are practically not subject to price fluctuations.
You can choose to use either Normal Lend or Auto Lend. With Normal Lend, you can configure your desired daily interest rate.
To use Normal Lend, fill in the amount, choose the term, fill in the daily interest rate, then click Lend USDT to start making passive income. With Auto Lend, available funds will be lent out automatically. Funds that have been returned by borrowers are lent out again to further increase fund utilization. To use Auto Lend, enable the function, then fill in the Reserved Amount and Min. Daily Rate, then click Enable Auto-Lend to start.The minimum amount varies depending on the coin. For instance, the minimum amount for USDT is 10 USDT, while the minimum amount for BTC is 0.0001 BTC.
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Investments in cryptocurrency funds
More recently, investors have been able to buy and hold bitcoin in exchange-traded funds, or ETFs (Exchange-Traded Funds).
this investment instrument is one of the youngest. Bitcoin-ETF works on the principle of a non-cryptocurrency fund — it buys one or more digital assets and sells its shares to investors who receive income from the growth of the cryptocurrency rate depending on the share of shares purchased. The main advantage of ETFs is the lack of direct investor involvement in cryptocurrency trading. But when choosing such a fund, you need to consider several parameters:
reputation and fame of the fund;
openness of documentation;
cost of services and earning strategy;
legality of work.
An exchange-traded fund, or ETF, allows investors to buy many stocks or bonds at once. Investors buy shares of ETFs, and the money is used to invest according to a certain objective. For example, if you buy an S&P 500 ETF, your money will be invested in the 500 companies in that index.ETFs trade just like stocks on major exchanges such as theNYSE and Nasdaq. Instead of investing a set dollar amount, you choose how many shares you want to purchase. Because they trade like stocks, ETF prices continuously fluctuate throughout the trading day, and you can buy shares of ETFs whenever the stock market is open.
Understanding ETF basics
Passive vs. active ETFs: There are two basic types of ETFs. Passive ETFs (also known as index funds) simply track astock index, such as the S&P 500. Active ETFs hire portfolio managers to invest their money. The key takeaway: Passive ETFs want to match an index’s performance. Active ETFs want to beat an index’s performance.
Expense ratios: ETFs charge fees, known as the expense ratio. You’ll see the expense ratio listed as an annual percentage. For instance, a 1% expense ratio means that you’ll pay $10 in fees for every $1,000 you invest. All things being equal, a lower expense ratio will save you money.
Dividends and DRIPs: Most ETFs pay dividends. You can choose to have your ETF dividends paid to you as cash, or you can choose to have them automatically reinvested through adividend reinvestment plan, or DRIP.
Advantages to investing in ETFs:
ETFs provide exposure to a variety of stocks, bonds, and other assets, typically at a minimal expense.
ETFs take the guesswork out of stock investing. They allow investors to match the market’s performance over time, which has historically been quite strong.
ETFs are more liquid (easy to buy and sell) than mutual funds. Online brokers make it easy to buy or sell ETFs with a simple click of the mouse.
It can be extremely complicated to invest in individual bonds, but a bond ETF can make the fixed-income portion of your portfolio very easy.
How to start investing in ETFs
Open a brokerage account.
Choose your first ETFs.
Let your ETFs do the hard work for you.
Step 1: Open a brokerage account.
You’ll need a brokerage account before you can buy or sell ETFs. The majority of online brokers now offer commission-free stock and ETF trades, so cost isn’t a major consideration. The best course of action is to compare each broker’s features and platform. If you’re a new investor, it might be a good idea to choose a broker that offers an extensive range of educational features, such as TD Ameritrade (NASDAQ:AMTD), E*Trade (NASDAQ:ETFC), or Schwab (NYSE:SCHW), but there are several other excellent brokers to choose from.
Step 2: Choose your first ETFs.
For beginners, passive index funds are generally the best way to go. Index funds are cheaper than their actively managed counterparts, and the reality is that most actively managed funds don’t beat their benchmark index over time.
With that in mind, here’s a list of ETFs, and a brief description of what each invests in, for beginners who are just starting to build their portfolios:
ETF Examples: 10 of the Best ETFs for Beginners
Vanguard S&P 500 ETF (NYSEMKT:VOO) — Large U.S. companies
Schwab U.S. Mid-Cap ETF (NYSEMKT:SCHM) — Midsize U.S. companies
Vanguard Russell 2000 ETF (NYSEMKT:VTWO) — Smaller U.S. companies
It’s important to keep in mind that ETFs are generally designed to be maintenance-free investments.
Newer investors tend to have a bad habit of checking their portfolios far too often, and making emotional, knee-jerk reactions to major market moves. In fact, the average fund investor significantly underperforms the market over time, and over-trading is the main reason. So, once you buy shares of some great ETFs, the best advice is to leave them alone and let them do what they’re intended to do: produce excellent investment growth over long periods of time.
- It should be remembered that cryptocurrencies are an extremely volatile asset. Therefore, all investments in this sector should be made as carefully as possible and solely at your own peril and risk.
- Risk Warning: Investing in cryptocurrency is akin to being a venture capital investor. The cryptocurrency market is available worldwide 24 x 7 for trading with no market close or open times. Please do your own risk assessment when deciding how to invest in cryptocurrency and blockchain technology. KuCoin attempts to screen all tokens before they come to market, however, even with the best due diligence, there are still risks when investing. KuCoin is not liable for investment gains or losses.
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