Three ways to earn cryptocurrency, that aren’t DeFi
Bear markets are a unique opportunity to grow your portfolio and build a solid foundation for the next bull cycle.
Crypto winter was great for me.
As Bitcoin slid from $20,000 in early 2018 all the way back down to $4,000 by the end of the year, I was able to slow down, take a step back and reevaluate.
The bear market forced me to focus on the fundamentals, and identify serious projects with long-term potential. I was able to carefully build my portfolio based on sustainable strategies.
When the bull market arrived at the start of 2021 I was in the perfect position and able to comfortably take profits on the way up.
As another bear market looms, I am ready to switch gears again.
There are now more ways than ever to earn money with cryptocurrency – and I'm not just talking about DeFi.
Here are the three main ways I will be making money while the market cools.
Staking is first on my list because it can actually benefit from a bear market.
Remember, staking is the process of locking up coins as collateral in order to help secure a blockchain.
That works out to around 5-10% interest per year for major coins such as Ethereum, Cardano, Polkadot and Solana.
It's relatively low risk and provides a passive income once set up.
The easiest way to stake is as a delegator or part of a pool and only takes a few minutes, tops. Doing it this way means someone else (known as a validator) does the hard work for you, in return for a little bit of your profits.
The big advantage of staking over other ways of earning interest is that it's not dependent on market conditions. This means the interest rate is fairly stable, and only affected by the number of people staking, rather than the price of the coin or its trading volume.
Compare that to being a liquidity provider in DeFi, where interest rates swing wildly based on how many people are trading in and out of a pool. DeFi also exposes you to the risk of impermanent loss, which is aggravated by volatility.
Staking is resilient to a bear market, and may even benefit from one. This is due to people exiting the market, leaving you with a bigger share of the staking reward pool.
Only proof-of-stake (PoS) coins support staking, which means you aren't able to do this with Bitcoin. Fortunately most coins launched in the past 4 years are PoS and include popular coins such as ETH, ADA, DOT, SOL, VET and BNB.
If you want to get started, check out our guide on staking for more.
I've left DeFi out of this list because it's not really clear how yield farming strategies will perform in a bear market – plus it has been written about ad nauseum.
Right now I prefer CeFi (centralised finance) instead. It leverages the same technology as DeFi, but offers it through a traditional business model, making it more akin to earning interest through a bank.
The advantage here, as anyone who read my last newsletter will know, is that right now the rates are often higher than what leading DeFi platforms offer.
This is because CeFi platforms can prop up interest rates by spending some of their own capital to acquire and keep customers. So even if there's a dip in borrowers due to bearish conditions, the rates for lenders (that's us) stay competitive.
Getting started is easy, just pick a CeFi platform or an exchange with lending products from the table below. The exchanges in the table also support staking.
This is a more time consuming way of earning money, but definitely a lot more fun and engaging than other methods here. It has shown a lot of growth in recent months.
It's rather similar to Pokemon. Players send teams of NFT-derived creatures (Axies) into battle. The Axies breed with each other, generating newer and more powerful Axies. These can then be bought and sold, with a minimum of three Axies required to start playing the game.
This is where the marketplace comes in, which is currently the biggest source of revenue in DeFi right now. Just take a look at this chart from Token Terminal which shows the monthly revenue of the Axies market compared to the biggest DeFi protocols. It's mind-boggling stuff.
Considering that the global gaming market pulls in around $150 billion per year, and that the Axies discord is now the second largest in the world, only just behind Fortnite, you can start to see where all this revenue comes from.
The popularity is linked to its innovative "Pay-to-Earn" model, which takes a portion of the ecosystem's profits and distributes them to players.
Thanks to this, players in developing nations are able to earn a living wage just by playing, as anyone with a smartphone can join.
Given that most free-to-play games use a "pay-to-play" model, where users have to pay to access premium content, the innovation shown by Axie and games like it has big potential to disrupt the industry.
Thanks to their proximity to gaming, instead of just cryptocurrency, they are positioned to resist much of the bearish pressure currently clouding the rest of the market.
Like any game, Axie Infinity involves a bit of a learning curve, so you might want to check out our Axies guide to help you get started. For anyone back in the office, this could be a great way to help you earn a bit of spending money on your morning commute.
Some other blockchain games you may want to check out include
- Gods Unchained. A card game similar to Hearthstone or Gwent)
- F1 Delta Time. An collectibles game officially supported by F1.
- CryptoKitties. The NFT collectibles game that started it all and inspired Axies.
True to my word, these are all strategies I am currently using. While they have performed well for me in the past, nothing in life is guaranteed, especially in cryptocurrency.
As I said at the beginning of this article, the most beneficial thing I gained from the last bear market was slowing down and taking my time to learn about the industry without the influence of price-driven euphoria.
Make sure to take your time and do your own research, learn to evaluate projects on their long-term potential, and as always never risk more than you can afford to lose.
This article originally appeared in our cryptocurrency newsletter. Sign up below for weekly insights teaching you how to get the most out of your investment.
Disclosure: The author owns a range of cryptocurrencies at the time of writing