Earn Easy Passive Income With These 3 Cryptos

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Staking is an increasingly popular way to earn passive income on your crypto holdings. If you plan to buy and hold crypto for the medium to long term, this could be an easy way to increase your overall portfolio returns. Just keep in mind that crypto staking is not an entirely risk-free process, particularly in volatile market conditions.

For this reason, it is best to focus on high market cap cryptos such as Ethereum (ETH 127.05%), gimbal (ADA -0.66%)and Solana (FLOOR -3.37%). All of these have three things in common: they are widely available on every cryptocurrency exchange, they can be staked using a variety of different methods, and they all offer competitive returns. Let’s take a closer look at what staking these three cryptos entails.

What to know before you start staking

Depending on the level of your crypto trading expertise, staking can be as simple or as complex as you want. For beginners, the easiest way to start staking is to buy crypto on a popular cryptocurrency exchange such as Coinbase (PIECE OF MONEY -8.07%)then using the built-in tools available on that exchange to stake it.

Often this can be as simple as clicking a button next to the name of the crypto in your wallet. It might sound obvious, but you actually need to own the crypto you want to stake, so it’s best to start with cryptos like Ethereum, Cardano, and Solana, which you might already have in your crypto wallet.

Image source: Getty Images.

Before you begin, it is best to understand the exact terms of staking your crypto. The most popular crypto exchanges all provide a detailed explanation of the cryptos available to stake, how much you can expect to earn via staking, and any additional details that might impact your investment decision, such as how long you are supposed stake.

In some cases, you can stake and then withdraw crypto at any time. Other times, you must agree to “lock” your crypto for a specified period of time, such as 30 days or 45 days.

Choose the right piece for staking

The classic mistake that many people make when staking is simply picking the crypto with the highest annual percentage return (APY). The higher the APY, the more money you can expect to make, right? Well, yes and no.

When you stake crypto, you don’t get paid in dollars – you get paid in rewards in the form of the crypto you stake. Again, this is why it is important to focus on high market cap cryptos such as Ethereum, Cardano, and Solana. Nothing is worse than agreeing to lock your crypto for a period of time and then seeing the value of your crypto drop.

Generally, the higher the yield, the riskier the crypto. For example, take a look at the staking options available on Coinbase. You can get returns of up to 5.75% right now. Returns are 2.6% to 4% for popular coins like Ethereum, Solana, and Cardano. They are even higher for relatively unknown altcoins such as Cosmos and Algorand. To put it all into perspective, just before it collapsed earlier this year, moon earth was offering outrageous triple-digit staking returns in excess of 250%.

You may have noticed that Bitcoin (BTC -1.12%) is not part of the mix. It’s not an oversight – Bitcoin uses a proof-of-work blockchain, not a proof-of-stake blockchain, so staking with bitcoin is not possible.

If the only crypto you own is Bitcoin, you will need to purchase crypto that allows staking. That’s why it was a big deal when Ethereum became a proof-of-stake blockchain in September. Now you can now stake it just like Cardano or Solana.

Maximize your wagering rewards

Different crypto exchanges will offer different rewards for staking. If you are an active crypto investor, you may be able to profit even more by doing a little yield shopping.

Currently, Coinbase is offering 4% APY for Solana. But if you look elsewhere, you can find slightly higher returns, such as 4.5% APY, depending on how much you’re willing to stake and for how long. Also, if you use Coinbase, you have two options: stake directly on the exchange (super easy) or stake from your Coinbase wallet (easy).

As stated above, crypto staking can be as simple or as complex as you want it to be. If you just want a simple “set it and forget it” approach to passive income, staking through a cryptocurrency exchange is the easiest solution. You may sacrifice some yield in the process, but you won’t have to worry about moving coins between different crypto wallets or using third-party staking platforms.

As with any crypto investment decision, there are risks to consider. Just make sure you read all the fine print and understand what you’re getting into when you decide to start staking.

Dominique Basulto has positions in Bitcoin, Cardano and Ethereum. The Motley Fool holds and recommends Bitcoin, Cardano, Coinbase Global, Inc., Cosmos, Ethereum, and Solana. The Motley Fool has a disclosure policy.

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