The phrase crypto winter was first used in 2018, when other cryptocurrencies, including Litecoin, Ethereum and Bitcoin, saw significant price drops. The crypto winter existed from January 2018 through December 2018. Despite posing a challenge to liquidity, long crypto winters provide leading enterprises a chance to develop, refine, and validate their offerings. Similarly, it offers various opportunities to crypto traders and investors to earn passive income during a bear market.
In this context, this article will discuss the ideal ways of earning passive income during a crypto recession or a bear market.
What is a bear market in crypto?
Markets with cumulative returns of less than -20% are considered to be bearish in conventional markets. In the cryptocurrency market, when asset prices drastically falland investors lose confidence holding such volatile assets, it is referred to as a bear market. On the contrary, prices of assets rise during bull markets such as during the crypto bull run of 2021.
While there is no definite time for the existence of a bear market, from late 2017 to late 2020, the most recent crypto bear market lasted more than two years and could be in for a long winter if the present bear market moves at a similar pace. Investor pessimism is relatively high during bear markets than bull markets, so investors even ignore the positive news. So, how do you survive a bear market?
As Warren Buffet said, "Be fearful when others are greedy, and be greedy only when others are fearful." Going by this adage, one can make the most of bear markets by finding opportunities to earn passive income. History demonstrates that the crypto market always bounces back after a slump, and those with the foresight to make wise investments when digital assets slump typically do very well.
Ways to earn passive income during a crypto bear market
For Bitcoin and the cryptocurrency markets in general, the past 14 months have been tumultuous. Investors who have held through the market meltdown are beginning to question when and if their crypto investments will ever rise to all-time highs. Almost all assets suffer massive price decline during a bear market, making it difficult to find those that are 100% profitable.
Despite the market uncertainty, one can look for alternative ways to generate passive income during market lows, such as cryptocurrency mining, staking, creating NFTs, performing simple tasks at crypto faucets, and more.
The process of adding new coins to the existing circulating supply and securing proof-of-work networks is known as cryptocurrency mining. With the advent of pool mining,in some mainstream networks like BTC/LTC, for instance, cryptocurrency mining—once a niche hobby of crypto enthusiasts—quickly evolved into a for-profit enterprise.
Most miners use renewable energy resources like hydropower and geothermal to continue mining during a bear market
Staking is a simple approach to increasing your assets if you already own specific crypto assets and don't intend to sell them. Platforms using Proof-of-stake (and its variables) often allow fixed (locking assets for a particular period) and variable stakes (withdrawals at any time). You can stake your crypto assets on decentralized platforms such as PancakeSwap or centralized exchanges such as Binance. If it is the non-custodial staking of ADA on Cardano, it means delegating your coins to a Stake Pool Operator (SPO) to help secure the blockchain. You will be rewarded with ADA at an APY of around 4 to 5%
Staking rewards often depend on the lock up period and the stake amount. For instance, more than 100% (annual percentage rate) APRs is possible if you hold certain liquid or more volatile tokens (as opposed to stablecoins) and stake them for a few months.
By enabling people to develop and rely on new kinds of ownership, Non-fungible tokens (NFTs) enable new marketplaces. These initiatives are successful because they use a dynamic characteristic of cryptocurrency: Because users' collective agreement determines a token's value, the community built around it defines the fundamental value of those NFTs.
Creating your own NFTs is one way to produce passive revenue by minting NFTs on platforms like Rarible, NMKR.io, JPG.store, or OpenSea. Following value appreciation, one can sell them at a substantial profit.
Earn rewards at crypto faucets
A faucet is a website that gradually builds up Bitcoin or other altcoins until users withdraw them. Users must complete simple tasks like clicking on their advertising, completing a captcha to identify (and exclude) any bots, or streaming videos. Nothing needs to be purchased or set up; a computer and an email address are all you need. However, be mindful that freebies aren't always honest; some of them are used to trick users. Never reveal your confidential information, such as your private keys.
A new fundraising method called an ISPO enables POS (Proof-of-Stake) network delegators to direct staking rewards to a project of their choice in exchange for project tokens. Only the Cardano blockchain's distinct stake pool delegation mechanism makes ISPOs feasible.
One option for project teams and organizations to distribute a newly generated crypto coin is through genesis pools. Genesis pools are a cutting-edge cryptocurrency revenue stream. You must deposit the coin required for a genesis pool to receive your free tokens. For example, you deposit DAI in the DAI pool. However, a nominal deposit fee, usually less than 2%, may be associated with particular projects.
Provide Liquidity to Pools
Liquidity mining is a passive method of making money by adding to liquidity pools. Those who contribute to the liquidity receive tokens or fees in exchange for locking up your cryptocurrency.
Like staking, yield farming is more appealing to those who currently own cryptocurrency and do not want to sell it. A smart long-term approach is to purchase tokens during a bear market, increase them through yield farming, and sell them during the next bull run.
Crypto lending is giving Bitcoin or altcoins as a loan to someone else for a predetermined time in exchange for an agreed-upon interest rate for the loan period. On several popular centralized exchanges and specific decentralized sites, lending is possible. You can obtain instantaneous loans of cryptocurrency using other cryptocurrencies you own as collateral on decentralized platforms like Aave. Additionally, it enables users to profit by lending out their cryptocurrency. However, the strategy makes more sense for those who already own crypto assets.
Find a job in the cryptocurrency market
Tough times don't last long, but your knowledge does. So, rather than sitting idle, upskill yourself and learn cryptocurrency, blockchain, and the metaverse. Platforms like Coursera offer various free courses on these topics, and universities like the University of Nicosia offer MOOCs like "Introduction to Digital Currencies" to help people prepare for the digital world of finance. Additionally, start learning basics of blockchain and cryptocurrency from sources like Genius Academy.
The need for workers with blockchain and cryptocurrency skills such as social media marketing, content writing, product development, and web development, is growing along with the popularity of cryptocurrencies, which offer an opportunity to earn a salary in cryptocurrencies (which will rise in value when the bear market ends).
Don't forget to practice caution
All dislike Bear markets as they have a depressive quality similar to the dreadful darkness. In this article, we tried to dispel the darkness by discussing possible opportunities during market lows. However, in volatile cryptocurrency markets , nothing is 100% sure. Therefore, one needs to exercise caution before making any investment decisions. One way to protect yourself against heavy financial losses is to conduct due diligence on the projects you want to invest in.
The article should not be construed as a financial recommendation for any particular cryptocurrency. The cryptocurrency market is full of unexpected twists and overvalued assets. So before you buy something, do your own research.