By Ben Marks, CEO and Founder, Blocktrade Capital
Make a single bet, see an instant 100x return, cash out your millions and retire. That is the crypto dream we all share, but unfortunately, the volatility of the crypto market has proven that easy profits are hard to come by. At a bare minimum, investors need to be studying the markets for hours each day to get a competitive edge. But what if you don’t have time to conduct so much research? Is there some way to passively hold onto your cryptocurrency and receive dividends or interest-like payments for doing so?
In this article, I will explore four different ways investors can passively earn income by holding cryptocurrency.
- Run a Masternode
Masternodes are servers that run 24/7 and keep a local copy of the blockchain and your stake in that masternode’s token. Users who hold a certain amount of that token can “stake” their token on a masternode they choose to run, and in return they earn residual income in the form of dividend payments in that token. Dash has a very attractive masternode incentive structure, though it is a bit pricey. For staking 1000 Dash, users can run a Dash masternode and earn 6 Dash per month in residual income. In today’s prices, that equates to $240,000 to run the node, which nets $1,400 in monthly residual income, or $36,000 annually. Attractive profits for sure, but very cost-intensive.
Other coins are more reasonably priced. PIVX, for example, requires only 10,000 PIVX to run the masternode, with an expected ROI of 5.7% annually. In today’s numbers, that equates to $18,000 in startup costs, with $87 per month in expected revenues, or $1,050 annually.
- Invest in an Exchange Token that Pays Dividends
A second way to earn dividends is to invest in an Exchange Token that pays variations of dividends to investors. Huobi Token (HT), Binance Token (BNB), and Kucoin Shares (KCS) are all examples of exchange-owned utility tokens. The value of an Exchange Token is that trading fees are reduced if the trader uses the exchange token to pay the fee. Let’s take Binance as an example. If I make a trade there that incurs $30 in fees, I can pay 0.00387 BTC, which equates to $30. But if I pay with the BNB coin, I would only need to pay 1.248 BNB, which equates to $15, since Binance reduces fees 50% for traders who pay the fee in the exchange token. To make the deal even sweeter, Binance burns excess tokens and buys back 20% of the circulating supply to keep the price from deflating if too many people HODL their BNB. This token burn and subsequent buy back acts as a dividend for BNB holders.
3.Invest in a Tokenized Crypto Fund that Pays Dividends
Unbeknownst to most people in crypto is the fact that tokenized crypto funds exist which pay dividends to investors for merely holding the fund’s native token. The Taas Fund is an example. It has been trading on exchanges since March 2017, and it’s currently priced at $1.92 per Taas token. Whether the Taas token goes up or down in price depends on performance of the Taas portfolio. If the Taas fund starts beating the market consistently, investors will take notice and the price will skyrocket. But if the fund starts losing money for investors, the price of token will fall.
Where does the dividend come into play? The Taas Fund pays a quarterly dividend to investors that is based on the fund’s performance over the past 90 days. If the fund loses money, you won’t receive any dividend. But if it posts positive returns for the quarter, the Taas Fund pays out 25% of those profits on a pro-rata basis to token holders.
This is the least exciting way to earn money in the crypto markets, but probably the smartest. HODL’ing – or “holding on for dear life” – refers to traders’ staying in long-term trading positions and not caving into temptation and entering into a riskier altcoin position instead. Fortunately for HODL’ers, Bitcoin’s historical price movements tell a highly profitable story. Since inception in 2008, Bitcoin has endured nine large-scale price corrections, with each correction averaging a 64% decline. With the exception of the 2018 crash we’re still climbing out of, Bitcoin has been able to rebound from each of the eight previous crashes to attain a new all-time high in price. The lesson here is that patience pays off. Even though it’s not as exciting as other investment strategies, historical numbers show that HODL’ing is the single most effective way to consistently gain money in the cryptocurrency market.
As the crypto markets continue to go up and down, it’s important to research every available option for investors. I encourage each person to be thoroughly versed in investment strategy before taking the plunge into the digital markets. I hope these four strategies helped you understand a few of the best ways to make money using your existing crypto assets.