Markets
Yield App CEO Reveals Crypto Passive Income Secrets
Seeking passive income through cryptocurrency investments requires a nuanced understanding of the market, personalized strategies, and a cautious approach to high-yield promises.
It is important to understand the importance of aligning investment approaches with individual goals and risk tolerance as we navigate decentralized finance (DeFi) sector.
One DeFi protocol is not one size fits all
In a recent interview with BeInCrypto, Lucas Kielly, CIO at Yield App, shared his insights on effective strategies for earning passive income through cryptocurrency. He emphasized the importance of aligning investment strategies with individual goals and risk tolerance.
“What constitutes an ‘effective strategy’ largely depends on investors’ individual goals and risk tolerance,” noted Kiely.
He highlighted the allure of high short-term interest rates, such as a one-month lock-in promising 20% interest on Bitcoin. However, he warned that the events of 2022 demonstrated the substantial risks associated with such promises of astronomical passive income.
Kiely advised those seeking guaranteed passive income to compare fees, benefits, and security resources on different platforms, avoiding outliers. He suggested that sophisticated investors with moderate to high risk tolerance explore yield-enhancing crypto-structured products.
See more information: Top 4 Crypto Passive Income Ideas That Actually Work in 2024
He also emphasized the importance of evaluating various factors before entrusting funds to any crypto platform. These include security, token economyhistorical performance, personal goals and risk tolerance.
“While crypto is home to many high-risk investors who may be happy to make an all-or-nothing bet, the current environment demands caution and well-informed, balanced strategies that can absorb market fluctuations caused by external factors such as regulatory and geopolitical uncertainty,” explained Kiely.
Lending, Research and Diversification
Lending platforms as Aave It is Compound have become an integral part DeFi. These platforms eliminate intermediaries, such as banks or cryptocurrency custodians, from lending and borrowing transactions, enabling direct and trustless interactions.
Lenders provide liquidity by depositing cryptocurrencies into a pool, which borrowers can access for a fee. Smart contracts automatically execute these transactions based on predefined rules.
The benefits of loans include the absence of a central authority controlling rates, potentially higher profits, immediacy, and privacy. However, Kiely noted that the benefits come with greater risks.
“An estimated $3.7 billion was lost to DeFi hacks in 2022, and while that number decreased to $1.3 billion last year, security remains one of DeFi’s biggest issues. Smart contract failures can also result in loss of funds, as can unsecured loans when markets go south,” Kiley told BeInCrypto.
He advised thorough research before investing in DeFi Lending Protocols, emphasizing the importance of technical and commercial knowledge. “DYOR” (Do Your Own Research) is a critical tenet in the crypto market, reflecting its high-risk nature and susceptibility to hacks and scams.
See more information: 7 Ways to Earn Passive Income with Crypto in 2024
In addition to thorough research, Kiely recommended diversification to minimize risk. Investing in multiple projects or cryptocurrencies can help mitigate the impact of any single underperforming investment. He also emphasized the importance of using reliable and secure exchanges with a proven track record of protecting users’ funds.
Learning from previous mistakes
Understanding one’s limits is crucial in the crypto market. Kiely advised investors to consider their experience level and how much they can afford to lose. Newcomers with moderate risk appetite may find traditional finance-like platforms and earnings strategies more suitable for entering the crypto space.
Kiely concluded with vital advice for newcomers: understand how passive income is generated by the platforms you are exploring.
“Are the returns promised by a platform sustainable, regardless of market conditions? How transparent is the platform about the assets they invest in and the investment strategies they use to deliver returns? Are they investing in particularly volatile assets, tokens with poor foundations, or offering unsecured or under-collateralized loans to generate returns above the market average?” asked Kiely.
The crypto market crash of 2022, which saw billions of dollars wiped from the market, highlighted the importance of informed investing. As the industry recovers, it is the responsibility of all investors – new, old, institutional or retail – to be well informed and avoid repeating past mistakes.
Disclaimer
Following the Confidence Project guidelines, this article presents opinions and perspectives from industry experts or individuals. BeInCrypto is dedicated to transparent reporting, but the views expressed in this article do not necessarily reflect those of BeInCrypto or its team. Readers should independently verify information and consult a professional before making decisions based on this content. Please note that our Terms and conditions, Privacy PolicyIt is Disclaimers have been updated.