Blog | Cryptocurrency

The Roadmap to Passive Crypto Income

There is no singular path to financial freedom that will work for everyone, not even with cryptocurrencies.

(Disclaimer: The Rich Dad Crypto Team has included links in this blog to help with your research. The links are not endorsements. This blog is not financial advice, the information in this newsletter is for educational purposes only. This article is not sponsored or affiliated with the tokens, teams, and protocols mentioned. It is important to do your own research and never invest what you can’t afford to lose.)

A roadmap for adulthood

Recently, we have been thinking about adulthood. When we are children, generally, there is a loose roadmap in place. Most parents want their child to be properly educated with the hopes that they will develop a sense of themself through that education. Once educated, they will then plot a course toward a promising career which will set them for their lifetime. In a sense, things prior to the typical college-age follow a path and plan.

When we become adults, however, we must find our own way through the world. Suddenly, the path becomes less clear. We know that we were trained and taught to become good, hard workers (or dedicated students) but we weren’t properly given the tools and guidelines to navigate towards the things that would give us freedom and financial independence. We were never taught to invest toward our golden years, placing ourselves in a position to weather economic turmoil. And so, without a road map, we are more likely to learn through trial and error.

The pursuit of passive income is a difficult road, but also a path that we’re never taught is an option when we go through school traditionally.

We’re taught to seek out high-paying jobs and opportunities but never to consider the possibility of the days or situations where we cannot work that job anymore.

We have seen many people go from a high-earning lifestyle to one filled with financial uncertainty due to uncontrollable circumstances.

While a job can help build a life and provide financial security, it is not enough to achieve true financial independence. Without the ability to make your own financial decisions and become your own boss, you are still tied to someone else's expectations. Achieving financial independence means taking control of your own future and having the freedom to pursue your own dreams. Building wealth requires investing.

In this article, we will explore a potential roadmap to incorporate plans and strategies to create passive income using cryptocurrencies.

Remember that cryptocurrencies are volatile

Cryptocurrencies are known for their fluctuations in price. This is a risk factor that has become a part of the natural cycle of the crypto market. Other factors, such as the limited availability of some coins, speculation, and regulation, all contribute to the volatility. As with any investment, it’s important to research, budget, and account for these risks before jumping in.

However, these same fluctuations can present opportunities for traders to turn profits if they invest strategically.

Nothing in this article is financial advice and is for educational purposes only.

A question we are often asked is, if cryptocurrencies are volatile, why invest in them?

Despite the volatility of cryptocurrencies, many investors can still find them attractive due to their potential for high returns. Additionally, investing in cryptocurrencies can provide diversification benefits, since they are not correlated with traditional assets like stocks and bonds.

Cryptocurrencies offer the potential for high liquidity because they can be quickly and easily converted into cash. Finally, many investors are drawn to the technology behind cryptocurrencies, such as blockchain technology, which has the potential to revolutionize many industries.

Now that we have covered the risks and volatility, let's get into the roadmap!

The Crypto Passive Income Roadmap

1. Gain a thorough understanding of the crypto market, the different types of investments available, and the best strategies for each type of investment.

   This is the first step which involves researching documentation and any relevant or vital information regarding the token, blockchain, or business you intend to invest in.

2. Develop an understanding of the risks associated with crypto investing and create an appropriate risk management strategy.

   I encourage everyone to take risk management extremely seriously. This means involving partners or anyone who could be deeply impacted by an investment decision into the conversation.

   The following references will provide a better understanding of risk management factors.

   • Fasset’s Article on Crypto Risk Mangement:

     https://blog.fasset.com/crypto-risk-management/

   • Coin Bureau on Storing Crypto:

     https://www.coinbureau.com/videos/safest-way-to-store-your-crypto-dont-risk-it/

   • Coin Market Cap’s How-To Guides:

     https://coinmarketcap.com/alexandria/categories/how-to-guides

   • Money Made’s 5 Ways to Reduce Risk:

     https://moneymade.io/learn/article/crypto-risk-management

3. Become familiar with the tax implications of your investments and develop a tax strategy accordingly.

   Navigating cryptocurrency taxation rules can be tricky and it is essential to stay on top of changes in regulations.

   Generally, any profits you make from investing in digital assets are subject to capital gains taxes.

   The amount to be paid depends on your personal tax bracket and the length of time you held the asset. Crypto-to-crypto trades are also taxable, so it’s important to research what your country’s laws require and consult a professional if necessary.

4. Research the different types of investments available and determine which ones are the best fit for your goals.

   This is an important step in earning passive income via the crypto market. For some, this might include using:

   • Crypto-based bot strategies which can help take the guesswork out of figuring out when to buy and sell, but it is important to have realistic expectations about earning with crypto-bots. The returns are small but can be consistent depending on the market.

     Bots that I currently like are the BreadBytes Bots:

     https://www.breadbytes.com/breadbots/cinnamon-toast (trades in USDT/ETH)

     https://www.breadbytes.com/breadbots/french-toast (trades in USDT\BTC)

     Explanation of the BreadBots:

     https://www.breadbytes.com/blog/crypto-trading-bots

   • Another option is staking cryptocurrencies for passive rewards.

     Stablecoins that can be staked include USDC, DAI, Tether (USDT), PAX, and BUSD. Popular cryptocurrencies to stake are Ethereum (ETH), Polygon Matic (MATIC), Tezos (XTZ), Cardano (ADA), Cosmos (ATOM), Polkadot (DOT), and Tron (TRX).

     These coins can be staked on a variety of platforms, including Coinbase, Curve, Compound, Aave, and staking pools. Each platform has its own set of requirements and rewards. Each of these cryptocurrencies has its own unique features and offers different levels of staking rewards. It is important to research the different options and determine which one is right for you before investing.

      

     Compound (Earn for Supplying USDC): https://v2-app.compound.finance/

     Curve (Earn for Supplying USDC, DAI, USDT LP): https://curve.fi/#/ethereum/pools/3pool/deposit

     Aave (Earn for Supplying BUSD, DAI, USDC): https://app.aave.com/markets/

5. Utilize the appropriate tools and resources to maximize your returns.

   Tools that we find useful are:

   • DeFi llama for researching purposes: https://defillama.com/

   • Twitter (despite how one might feel about Twitter, it is the best way to keep up to date with crypto sentiment and protocols):https://twitter.com/home

   • Fear & Greed Index: https://alternative.me/crypto/fear-and-greed-index/

   • Staking Rewards (to find and monitor staking opportunities): https://www.stakingrewards.com/

6. Monitor your investments regularly and make adjustments as needed.

   We monitor our investments using Crypto Panic and Trading View

   News Aggregator: https://cryptopanic.com/

   Chart Analysis: https://www.tradingview.com/chart/

7. Diversify your investments to reduce risk.

   Diversifying crypto investments can also help to mitigate the risk. We find it helpful to form a personal pie chart for a generalized idea of how to diversify assets.

   For example, you may choose to have more Bitcoin and stablecoin percentage-wise and keep them in a self-custody wallet .

   The following pie chart gives a rough guideline to follow and use as a reminder with budgeting and figuring out token allocation.

   (This pie chart is an example, it is best to form your own)

   

8. Invest in technology and trends to stay ahead of the competition.

9. Review your progress regularly and adjust your goals accordingly.

10. Utilize the expertise of professionals to stay informed on the latest developments in the crypto world.

    Leveraging the expertise of specialists is not just about keeping up with the 'influencers' – it is also about tracking the activity of developers and staying up to date on the news and updates produced by protocols and teams.

Final Thoughts

In our cryptocurrency articles, we often write about cryptocurrency investing, but it is important to remember that strengthening your portfolio requires more than just crypto. Creating multiple sources of residual or passive income can open possibilities for lasting wealth and a higher quality of life.

For example, many investors invest in land, high-resale value assets, precious metals, crypto, dividend stocks to gain new skills and knowledge. It can be a great way to increase your quality of life without relying solely on a job for income.

We are not given roadmaps for adulthood, because it is up to us to create them. We must forge our own paths, challenge ourselves for the things we want all while doing so knowing we might make mistakes. No one will hand us the life we desire; we need to build it ourselves.

There is no singular path that will fit or work for every individual. It is important for everyone to form a path for themselves based on their income and risk levels.

Learn new things, expand your knowledge, and discover your true worth. Age, occupation, and education do not matter – the real value is in the skills and attitudes that we choose to cultivate. It is a part of our human nature to endure and find ways to adapt no matter what difficulties come our way. And the more you know, the better prepared you will be to make it through anything.

You are your biggest asset, and your mind is your greatest tool.