You’ve probably heard the term “passive income” before, mainly from those shady MLM people who slide into your Facebook DMs and pitch to you how you can live your dream life.
Well, we’re going to talk to you about earning a passive income, but we’re going to tell you how to do it the cool way. And by the “cool way” we mean the crypto way.
Earning a passive income in crypto predominantly means engaging in certain activities that will net you a little extra crypto gravy on the side.
There are a few strategies you could use to establish a flowing stream of crypto gravy and today we’ll deal with two: staking capital and having an algo bot trade your capital.
Let’s analyze the pros and cons of these two methods and how steady they are during both bear and bull markets.
In this article we’ll cover…
What is staking?
Staking crypto does not include a big thick juicy hunk of meat, or stabbing a vampire through the heart with a piece of wood. In crypto, staking is the process of depositing a specific crypto coin into a wallet and then “locking” it up.
When a holder locks up his/her tokens on this platform’s wallet, they accrue additional crypto payments while they keep their coins on the platform. These payments are referred to as “staking rewards” and certain projects may offer additional perks along with these payouts.
What are algo trading bots?
Algo trading bots live to serve all your crypto trading needs. They typically are available for purchase or rent on a trading platform. The bots will conduct trades of a specific crypto pair, such as BTC/USDT, ETH/USDC, LINK/DAI, and others.
What is so great about them? We’ll first off they trade non-stop around the clock so you’ll never have to worry about missing a great opportunity in the market. Simply put, you can go about living your life and not glue your eyeballs to crypto charts all day. Match sticks to keep your eyes open can be avoided and sleep can be had!
Users typically have the ability to customize the bots how they wish. Some bots offer more customization options for trading parameters for their users than others.
Pros of staking
No trading experience or mining gear required
You’ll often hear about how people earned large amounts of crypto in trading or mining it themselves. The barrier to entry with both of these methods tends to be rather high.
Mining requires you to shell out large sums of money for hardware in order for you to even get started. Trading usually requires years of experience until you can become profitable. When it comes to staking, all you need to do is lock up your tokens, sit back, and let the crypto flow to you.
No expensive gear to buy and you can get started right away. Now that sounds very nice.
Many opportunities for rewards
You’ll continue to earn a steady rate of crypto rewards while you keep your stash locked up. In fact, if the price of the coin increases you’ll earn even more revenue.
Not only will you have the chance to earn a higher rate of income when the coin’s price increases, but there might be other rewards in store too. Some projects may offer exclusive deals when you stake a certain amount of their coin or token. Such as voting rights (for DAOs), exclusive access to platform features, or even a higher rate of returns!
Proof-of-stake blockchain networks
Staking on a proof-of-stake blockchain network will provide you with the ability to earn more rewards each time a new block has been confirmed. Blockchain networks scale quickly, so not only will stakers receive interest per year, they’ll also receive a bonus from transaction confirmations.
Since every staker is a node, once you stake a higher amount of the cryptocurrency, you’ll get a better chance to participate in the transaction confirmation process.
Cons of staking
Whales and centralization
When a staking program catches the eye of a whale it may spell out trouble for other stakers. This is where the issue of centralization comes into play.
If a whale enters and buys up a large amount of the crypto, they essentially will control a large portion of the network or liquidity pool. The average stakers will no longer have much influence with their stakes of the currency, or in the case of liquidity pools the levels of reward can drop to the point of being unprofitable.
Volatility and strict periods
Certain cryptocurrencies will require a strict staking period. The staker will be unable to claim rewards if they take out their crypto earlier than the stated period.
Considering the volatile prices of cryptocurrencies, the converted price of the crypto and earned rewards may dip. Seeing this occur may deter a staker from keeping their position and eventually unstaking their crypto.
APY may change depending on participation
If you’re staking on a DeFi platform you may come across some rather generous APYs. Some of which are also paid out hourly.
Such rates usually do not last forever and can change if loads of people flock to provide liquidity. For example, you may witness your hourly APY of 700% quickly drop to 40% within a few days.
Pros of renting algo bots
No emotions are involved and rules are always followed
A bot will always follow the set rules of it’s algo and never think twice of going against them. They are prime crypto trading soldiers that will act in a split second to make sure they fulfill your trading instructions.
A typical human trader may let emotions get in their way and quickly cash out when a dip occurs. Trading bots assess the market based on the rules of their algorithm and make calculated decisions regarding market trends.
There is no need for letting emotions get in their way…because a bot has a lower emotional range than Arnold Schwarzenegger when he played in The Terminator.
Quick, efficient, and consistent
No opportunity will go missed when using trading bots. As soon as the correct market conditions occur, they’ll conduct the best trade possible for your portfolio.
Their quick decision making and execution of submitting trades make it more likely for the trader to earn a profit. When a market downturn occurs, they’ll do what is necessary to prevent any major losses.
More time for yourself
Perhaps the best part of using algo bots? Completely passive so you’ll have a lot more time for your friends, family, hobbies, and just enjoying life. Many traders of all skill levels spend ridiculous amounts of time in front of their computer screen just watching market trends go up and down.
With bots, all you need to do is set the parameters and let them do the work for you. Go grab a margarita at the beach while you’re at it, the bot has your portfolio covered.
Cons of renting algo bots
Perfection is never possible
But really, what is perfect? Well ok…Blake Lively and Ryan Renolds….but except for them there’s not much perfect in this world.
Since the crypto market is so volatile, it’s possible for market conditions to change so quickly and so dramatically that any bot’s algorithm may handle that in unexpected ways. It’s important to understand that just because you’re using a bot it doesn’t guarantee that every trade will be a winning one. It’s still going to be a roller coaster ride and the more volatile the market conditions the more so this will be true
If you fire up a bot to manage your capital, you need to be prepared for the highs and the lows and trust that over the longer term it will substantially outperform you.
They cannot think on their own
This sort of ties back to the first reason, but the bots really are unable to think for themselves. Certain out-of-the-box thinking methods may lead to high gains in the crypto market.
Trading bots will always do what they’re told and not think any other way. While following strict guidelines can be beneficial, in some market conditions it isn’t.
Understanding what conditions your bot will perform in beast mode is key.
So what do you think is the best method, staking or renting trading bots? Regardless of what side you take, UpBots has both sides covered.
Right now you can start earning a passive income in crypto when you stake our UBXT token on FTX.
As part of our UBXT staker rewards, you’ll also gain access to testing out our algo trading bots right on our demo platform!
Now there is no reason to pick a side because you can get the best of both worlds at UpBots.
And now a meme from our community…