1. Buy and hold
Buy and hold is a form of passive income where you purchase cryptocurrency and store it in a wallet, profiting when the asset's price rises above your purchase price.
How it works: You select a cryptocurrency based on its fundamentals (use case, network activity, development roadmap), buy it through an exchange, and transfer it to a secure wallet. Your return is determined by the price difference between your purchase and eventual sale. Many buy-and-hold investors time their entries around market cycles, such as Bitcoin's four-year halving cycle, which has historically preceded sustained price increases.
Pro: Buy and hold requires minimal time commitment and no technical analysis skills, making it the most accessible entry point into cryptocurrency.
Con: Crypto markets experience drawdowns of 70–80% during bear cycles, and without an exit plan your capital remains fully exposed for months or years.
Suited for: Beginners with a long time horizon who are willing to hold through significant volatility.
2. Trading
Trading is a form of active income where you buy and sell cryptocurrency over short timeframes (minutes to weeks) to profit from price fluctuations.
How it works: You analyse price charts, market sentiment, or on-chain data to identify entry and exit points, then execute trades on an exchange or through a broker. Trading styles range from scalping (seconds to minutes) and day trading (intraday) to swing trading (days to weeks). Each style demands a different time commitment, but all rely on reading short-term price movements rather than long-term appreciation. Strategies like arbitrage, where you exploit price differences for the same token across two or more exchanges, also fall under active trading.
Pro: Trading generates returns in both rising and falling crypto markets, since you can profit from downward price movements by opening short positions.
Con: Active trading requires consistent screen time, emotional discipline, and a working knowledge of technical analysis, and the majority of short-term traders lose money over time.
Suited for: Intermediate-to-advanced participants with dedicated trading hours and a defined risk management plan.
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3. Staking
Staking is a form of passive income where you lock up cryptocurrency in a blockchain network to support its operations and earn rewards in return.
How it works: You deposit tokens into a proof-of-stake network (or delegate them to a validator) to help verify transactions and secure the chain. In return, the network distributes new tokens to stakers as rewards, typically expressed as an annual percentage yield (APY). Reward rates vary by network: Ethereum currently yields approximately 3–4% APY, while smaller networks like Polkadot and Cosmos offer higher rates with correspondingly higher risk. Some platforms offer liquid staking, where you receive a derivative token (e.g. stETH for staked Ethereum) that remains tradeable while your original tokens stay locked.
Pro: Staking generates recurring yield on tokens you already hold, compounding your position without requiring active management.
Con: Staked tokens are subject to lock-up periods (days to weeks depending on the network), leaving you unable to sell during sudden price drops, and validator slashing penalties can reduce your holdings if the validator you delegate to misbehaves.
Suited for: Holders who want their idle tokens to generate yield and are comfortable with lock-up constraints.
4. Lending
Lending is a form of passive income where you supply cryptocurrency to borrowers through a platform and earn interest on the loan.
How it works: You deposit tokens into a lending platform (decentralised protocols like Aave or Compound, or centralised platforms that offer interest accounts), which pools your funds and lends them to borrowers. Borrowers pay interest on the loan, and the platform distributes a portion of that interest to you as the lender. Interest rates fluctuate based on supply and demand for each token. Stablecoins like USDT and USDC typically offer higher and more stable rates than volatile assets, because borrower demand for stablecoins is consistently high.
Pro: Lending generates yield without exposing you to the price volatility of the underlying asset, particularly when lending stablecoins pegged to the US dollar.
Con: Decentralised lending carries smart contract risk (a bug or exploit in the protocol's code can drain deposited funds), and centralised platforms carry counterparty risk, as demonstrated by the collapse of Celsius and BlockFi in 2022.
Suited for: Holders looking for steady yield with lower volatility exposure, who are comfortable evaluating platform risk before depositing.
5. Mining
Mining is a form of active income where you use computing power to validate transactions on a proof-of-work blockchain and earn newly minted tokens as a reward.
How it works: You run specialised hardware (ASIC miners for Bitcoin, GPUs for certain altcoins) that competes to solve cryptographic puzzles. The first miner to solve the puzzle adds the next block to the chain and receives the block reward plus transaction fees. Bitcoin's current block reward is 3.125 BTC (halved from 6.25 BTC in April 2024), and it halves again approximately every four years. Most individual miners join mining pools, which combine computing power across participants and split rewards proportionally. Cloud mining is an alternative where you rent hash power from a remote data centre instead of operating your own hardware, though profit margins are thinner after rental fees.
Pro: Mining generates new tokens directly from the network rather than requiring you to buy them at market price, and mined tokens carry a known cost basis (hardware plus electricity) that simplifies profit calculation.
Con: Mining is capital-intensive upfront (a competitive ASIC rig costs thousands of dollars), consumes significant electricity, and profitability erodes each halving cycle as the block reward shrinks while difficulty increases.
Suited for: Participants with access to low-cost electricity and the technical ability to operate and maintain mining hardware, or those willing to accept thinner margins through cloud mining.
6. Yield farming
Yield farming is a form of active income where you deposit cryptocurrency into decentralised finance (DeFi) protocols to earn rewards from trading fees, interest, or token incentives.
How it works: You provide liquidity to a decentralised exchange (DEX) like Uniswap or PancakeSwap by depositing a pair of tokens (e.g. ETH/USDC) into a liquidity pool. Traders who swap between those two tokens pay a fee, and the pool distributes that fee proportionally to liquidity providers. Many protocols layer additional rewards on top, paying their own governance token to attract liquidity. Yield farmers maximise returns by rotating capital across protocols chasing the highest APY, and some use auto-compounding vaults (e.g. Yearn Finance) that automatically reinvest earned rewards back into the pool.
Pro: Yield farming offers some of the highest returns available in crypto, with APYs on incentivised pools reaching double or triple digits during periods of high protocol demand.
Con: Impermanent loss erodes your returns when the price ratio of your deposited token pair shifts significantly. The greater the divergence, the more value you lose compared to simply holding the tokens. High-APY pools also carry elevated smart contract risk.
Suited for: Experienced DeFi users who understand liquidity pool mechanics, impermanent loss, and smart contract risk, and who can actively monitor protocol incentives.
7. Airdrops
Airdrops are a form of passive income where you receive free tokens from a blockchain project, typically as a reward for early adoption or network participation.
How it works: Blockchain projects distribute tokens to wallet addresses that meet specific eligibility criteria, such as holding a particular token, using a protocol before a set date, or completing on-chain tasks like swapping, bridging, or providing liquidity. Uniswap's 2020 airdrop awarded 400 UNI tokens to every wallet that had used the protocol, worth approximately $1,400 at the time of distribution. Some projects announce criteria in advance, but the most valuable airdrops are retroactive, rewarding past activity that users performed without knowing an airdrop was coming.
Pro: Airdrops require no capital outlay, making them a zero-cost entry point into new tokens with potential upside if the project gains traction.
Con: The airdrop space is saturated with scams designed to steal wallet credentials or trick users into approving malicious smart contracts, and legitimate airdrops carry no guarantee of token value post-distribution.
Suited for: Active on-chain users who already interact with multiple protocols and can distinguish legitimate projects from scams.
How do I choose the best way to make money with crypto?
You choose the best way to make money with crypto by evaluating four criteria:
Time commitment
Capital requirements
Technical knowledge
Risk tolerance
Time commitment is the number of hours per day or week you dedicate to managing your crypto activity.
Passive methods (buy and hold, staking, lending, airdrops) require minimal ongoing involvement after the initial setup.
Active methods (trading, mining, yield farming) demand regular attention, from daily screen time for trading to hardware maintenance for mining.
Capital is the amount of money you allocate upfront to a crypto method. Capital requirements vary significantly across methods.
Buy and hold and airdrops have the lowest barrier to entry.
Staking and lending require enough tokens to generate meaningful yield.
Mining demands upfront hardware investment.
Yield farming requires capital across multiple token pairs and gas fees for frequent transactions.
Technical knowledge is your familiarity with tools like exchanges, wallets, smart contracts, and chart analysis. It determines which methods you can execute safely.
Buy and hold requires only basic exchange navigation.
Staking and lending introduce smart contract interaction and platform evaluation.
Trading requires chart reading and risk management.
Yield farming and mining sit at the advanced end, requiring understanding of DeFi mechanics or hardware operations respectively.
Risk tolerance is the level of potential loss you accept in exchange for potential gain. This shapes your final choice.
Stablecoin lending carries the least price exposure.
Buy and hold exposes you to full market cycles.
Trading amplifies risk through short timeframes and potential leverage.
Yield farming layers smart contract risk and impermanent loss on top of market risk.
Mining ties profitability to electricity costs and network difficulty, both of which move against you over time.
Start with one method that matches your current profile. Add complexity as your knowledge and capital grow.
