If you’re thinking about expanding your investment portfolio with the addition of cryptoassets, NFTs or other related blockchain assets, you’re not alone – investor enthusiasm in the digital space just seems to keep on growing.
Whether you’re purchasing shares, property, or crypto, the aim of the game for all investors is to make a return. For many, generating a passive income stream will be a key goal in their investment strategy. But is that possible with cryptoassets? The answer is a resounding yes.
What is crypto, and why should you invest in it?
Before we dive into passive income options, it’s worth taking a step back in order to address a simple question: why should you invest in cryptoassets in the first place?
At their core, cryptoassets offer the promise of an entirely new, decentralised payment system made possible in many cases by blockchain technology – the digital ledgers used to record transactions. And for many investors, an interest in technology and the philosophy which underpins cryptoassets is one of the major reasons they choose to support and invest in it.
The other main motivator for buying the likes of Bitcoin, Ethereum and XRP is their value. Of course, while the current value of any particular cryptoasset is no indicator of what it’s going to be worth in the future, some of the eye-watering increases that many assets have recorded in recent years can’t be ignored.
For example, between November 1, 2020 and November 1, 2021 the price of Bitcoin soared from around AU$19,000 to roughly AU$81,000.
What should you look for when investing in crypto?
Understanding the uses of each cryptoasset and the applications of their related platforms may also be valuable. While coins and tokens fall into a larger basket of ‘cryptoassets’, there are substantial differences in the business cases of the platforms behind them – i.e. the intended applications of Ethereum aren’t the same as Cardano. Ultimately, these distinctions could impact the value of the native currency.
At the end of the day, finding the ‘right’ cryptoassets to invest in should be a personal decision, based on both the research you’ve done and your risk appetite as an investor.
How can you earn a passive income with crypto?
Generating a passive income is simply a way to earn a revenue stream without putting in the ‘active’ effort you do for your day job. For instance, investing in dividend-paying shares or purchasing an investment property that generates a rental income are common ways people generate a passive income.
Believe it or not, it’s also possible to earn a passive income via cryptoassets. There are a couple of methods to do this, including earning ‘dividends’ with certain coins or earning interest by lending specific coins. And then there’s staking.
Simply put, staking is a way for owners of specific cryptoassets to increase their total holdings just by owning the asset ! Owners can ‘stake’ their cryptoassets for a fixed period of time, with the staked assets used to help maintain the integrity of the blockchain. In return, participating holders are able to earn rewards (typically, more of the cryptoasset).
So how can you stake? Well, if you’ve got the time and the know-how it’s possible to stake by yourself, but everyday investors may find it easier to make use of a multi-asset investment platform that offers cryptoassets like eToro, which offers staking and will do the leg work for you.
Purchasing cryptoassets on eToro
If you’ve done your research and decided that it’s time to add some cryptoassets to your portfolio, your next step will be finding an exchange to trade on.
Using eToro’s online platform, investors can trade a range of cryptoassets, including popular assets like Bitcoin, Ethereum, Litecoin, Cardano, XRP, and Dogecoin. Plus, holders of Cardano or Tron may be able to start their own passive income stream by using eToro’s dedicated staking service.
Just remember that, like most platforms, there are costs involved with buying and selling cryptoassets on the eToro platform. There are also separate costs for staking, as eToro retains a small percentage of your staking yield for facilitating the process – you can find more about the fees involved with staking here.
Ready to start investing? Get access to eToro’s investment platform by signing up for a free account today.
