Today, I’ve compiled a guide to making passive income from your crypto holdings across both DeFi and CeFi.
All of the guides I’ve come across are missing one of two things: (1) lower rates after the promotional amount and/or (2) do not adjust the recommendations by the level of risk.
Example of #1: BlockFi offers 4.5% on your Bitcoin – but only for the first .1 Bitcoin. After that, it drops to 1% and then .1% for > .35 BTC. (Many of the “how much you can earn at X service” calculators simply assume you will earn the maximum rate no matter how much you deposit.)
Example of #2: Anchor Protocol offers 19.47% on UST stablecoins. UST is a synthetic stablecoin: it has no USD currency reserves and maintains its dollar peg using a dynamic algorithm. That means that if UST’s USD peg breaks, your savings could drop to zero. This has happened to other stablecoins and could easily happen to UST if certain market conditions are met. That’s why I do not recommend any yields on synthetic stablecoins, even though they are much higher.
With that in mind, here is a realistic, risk-adjusted reference of crypto yields, focused on Bitcoin, Ethereum, and USD stablecoins.
For a comparison of CeFi vs DeFi, see this video. In short: CeFI: trust the custodian; DeFi: trust the smart contract.
CeFi Bitcoin Yields
- Celsius: 6.2% for the first .25BTC, then 3.05 BTC.
- Nexo: 5% for the first $50K then 1%, if locked-in for 1 month.
- Voyager Digital: 4.75%, unlimited, .01 BTC minimum to earn
- Crypto.com: 1.5% to 6.5% depending on the staked CRO amount and lock-in duration.
Note re: Crypto.com: These rates are good up to $500,000; higher if you stake $40,000+ in CRO. (CRO is the platform token of Crypto.com) If you don’t mind the lock-in period, a $4,000 CRO stake (which itself pays 10% APY) is not a bad idea. A $400 stake gives you 4.5%. It’s complicated but worth looking into if you’re willing to lock up your assets for several months. (More on Crypto.com tiers.)
(Here is a detailed breakdown of BTC CeFi rates.)
DeFi Bitcoin Yields
There are no safe and high-paying BTC DeFi yield options. For example, Sovryn’s APY is .33%.
CeFi Ethereum Yields
- Celsius: 5.24% on first 30 ETH, 3.52% over 30.
- Nexo: 4%, It’s 5% if locked in for 1 month.
- Voyager Digital: 4.25%, unlimited
- Crypto.com: 3.5%-6.5% depending on the staked amount and lock-in duration.
DeFi Ethereum Yields
DeFi yield on Ethereum is usually found through liquidity mining – see next section. This means pairing your ETH with another token – usually 50%/50% of each token. Projects that offer pure ETH rates are not worthwhile, but there is a list here.
- Uniswap: WBTC-ETH: 11.79%
- Quickswap: wBTC-ETH: 5.74%
USD Stablecoin Yields
Note: This isn’t a comprehensive list of platforms. There are many platforms that offer higher yields, but I do not consider them safe enough to trust with my money.
CeFi USDC Stablecoin Yields:
- Celsius: 8.5%
- Nexo: 8%
- BlockFi: 8.75% for the first $20K, 7.75% over 20K
- Voyager Digital: 9%
- Crypto.com: 6% base rate, up to 12% if staking and locking up for 3 months.
Note: Platforms other than Celsius have withdrawal fees of $25-$50. Celsius withdrawals are free.
DeFi USDC/USDT Stablecoin Yields
The safest yield is from stablecoin pairs like USDT/USDC. However, those yields are either low or one of the tokens is less safe (synthetic stablecoins like UST or DAI). That’s why I recommend pairing a stablecoin with either ETH or BTC – assuming that you already plan to hold either. I’ve sampled relatively safe pairs from Dex’s on 4 major chains below:
Uniswap (Ethereum Dex):
- USDC-WETH: 22.36%
- USDT-WETH: 55.22%
- USDC-WBTC: 22.70%
PancakeSwap (Binance Smart Chain Dex):
- ETH-USDC: 16.48%
- BUSD-BNB: 21.36%
- CAKE-BUSD: 49.6%
TraderJoes XYZ (Avalanche Dex):
- USDT.e-AVAX: 36.39%
- USDC.e-AVAX: 36.43%
- USDC-USDC.e: 26.41%
- AVAX-UST: 94.05% – UST is not recommended, but for reference, this is much higher than the 20% offered by Anchor Protocol.
Note: the .e versions are a newer method of wrapping the native tokens on the Avalanche chain. (See Avax Bridge to convert between Ethereum/Avalanche chains)
QuickSwap (Polygon Dex)
- wBTC-USDC: 19.61%
- USDC-QUICK: 105.91%
- ETH-USDC: 38.75%
- ETH-USDT: 44.95%
(Polygon Bridge to convert Ethereum/Polygon chains)
As you can see, yields from DeFi pairs can be much higher than CeFi platforms. But you are responsible for sweeping (reinvesting) your earnings and face the risk of the platform being hacked, as well as impermanent loss.
In my prior letter, I shared a strategy for balancing risk and reward in your crypto portfolio. This letter gives you some specifics on CeFi and DeFi yield numbers. I do not recommend buying the crypto assets above for the yields alone, but if you already plan to own BTC, ETH, or stablecoins, they are a relatively low-risk way to obtain additional passive income on tokens you already hold.
Do you agree with my suggestions? Disagree? Please respond with questions or corrections by hitting reply!