Two Ways Investors Can Earn Passive Income with Crypto in 2024

Investors have numerous options for generating passive income through traditional financial products, such as government and corporate bonds or stock dividends. The cryptocurrency market also offers similar opportunities that are often overlooked, potentially yielding better results through strategies like yield farming.

In the crypto space, passive income can be generated by lending assets to institutions for an agreed interest rate (similar to bonds) or by participating in revenue-sharing models (akin to dividends). This can be achieved through staking tokens as a validator or delegator in proof-of-stake (PoS) networks, earning rewards from the protocol’s emissions and user fees, or by supplying tokens in decentralized money markets and liquidity pools, which generate income from borrowers' interest payments.

Staking Crypto for Passive Income in 2024

When investors stake as validators or delegators, they contribute to the decentralization and security of PoS networks while earning passive income. This income typically comes from a combination of token issuance and transaction fees. However, each cryptocurrency has its own model, with unique advantages and disadvantages that investors should consider.

A key factor to evaluate is the "Real Staking Reward Rate," which accounts for inflation in rewards. Popular staking cryptocurrencies like DYDX, Celestia (TIA), and Bittensor (TAO) may not be ideal choices based on this metric. High inflation or token unlocks can dilute the perceived reward rate, similar to how national inflation can erode investment returns.

For instance, cryptocurrencies like Solana (SOL), Sui (SUI), and Aptos (APT) have real reward rates of 1%, -5%, and -4%, respectively. Reports have indicated that Sui’s monthly unlocks could negatively impact investors, suggesting that SUI may be overvalued.

Best Cryptocurrencies for Staking in 2024

On the other hand, well-structured economic models can provide a reliable way to earn passive income through staking. Investors should seek a balance between real reward rates and higher staking capitalization for optimal allocations. Notable options include MultiversX (EGLD), Ethereum (ETH), Algorand (ALGO), and Near (NEAR), with real reward rates of 2%, 2.93%, 3.1%, and 3.93%, respectively.

Lending Cryptocurrencies via DeFi Protocols

In addition to staking, crypto investors can leverage decentralized finance (DeFi) protocols to generate yield from their tokens. These platforms allow users to supply assets for decentralized lending, earning passive income from interest paid by borrowers. The expected yield can fluctuate based on supply and demand dynamics in the money markets.

Examples of DeFi protocols include Hatom (HTM) on MultiversX, Aave (AAVE) on Ethereum, Folks Finance on Algorand, and Burrow Finance (BRRR) on Near. Investors holding Circle’s regulated stablecoin USDC can deposit it in these protocols, earning varying annual percentage yields (APY) based on market conditions.

While there are numerous opportunities for passive income in the crypto space, they come with inherent risks and require a solid understanding to navigate effectively. Investors looking to earn passive income in 2024 should develop a clear strategy to maximize their results.