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There are plenty of ways to invest in cryptocurrency, from trading to using a crypto savings account to looking for cryptos with dividends. If you are thinking of investing in crypto dividends, this guide will give you more information on doing so, including some alternatives.
Do Cryptocurrencies Pay Dividends?
As a refresher, crypto dividends are when the company behind the crypto distributes its profit to its cryptocurrency holders. In the process, they give you a small amount of cryptocurrency.
Some people include staking as a type of cryptocurrency dividend, while others do not. The difference is that staking is a reward for maintaining the crypto’s network. They are typically the fees that the network earned from transactions. By contrast, dividends come from the general profits.
Most cryptocurrencies do not pay dividends. However, there are still many dividend-earning crypto options.
Best Cryptocurrency Stocks for Dividend Investment
The idea of dividends comes from stock investing. As such, dividends are still much more popular in cryptocurrency stocks than the coins themselves. This makes looking for a crypto stock that pays dividends a good alternative to a crypto with dividends.
If you decide to go this route, the following are some of the crypto-related stocks that let you earn dividends:
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- CME Group (NASDA: CME) – This is among the largest financial instrument exchanges. Since 2017, it has supported Bitcoin trading. As of 2020, it started offering Bitcoin futures. Ether Futures were added more recently.
- IBM (NYSE: IBM) – IBM’s investment in blockchain is more recent, but it has launched Anchor, a crypto. It also has a business division dedicated to helping companies use blockchain.
- Mastercard (NYSE: MA) – You may not think of Mastercard as crypto-related, but this has changed in recent years. Since 2019, the company has been partnered with R3, a blockchain software company, to create a cross-border transaction system. It has also partnered with various crypto firms to make it easier to convert crypto into fiat.
You will notice that most of the above stocks are only loosely related to cryptocurrency. That may affect your decision as to whether to invest in them or choose another method of getting crypto dividends.
Best Crypto Dividend Coins
If you prefer to stay away from stocks and directly invest in coins, the following will pay you dividends. Each of the following crypto dividend coins will have a different dividend rate and schedule, so do your research before choosing which one to use. Those that technically have staking rewards instead of dividends are labeled; you will notice that this is most of the coins.
- Compound Finance (Interest from lending in a pool)
- Cosmos (Staking)
- Dash (Running a node)
- Decred
- Komodo (Staking)
- NAV Coin (Staking)
- Neblio (Staking)
- NEO (Staking)
- Ontology
- PIVX (Staking)
- Reddcoin (Staking)
- Tezos (Staking)
- Tron (Staking)
- VeChain (Staking)
On a related note, the following are exchanges that will pay you dividends if you hold their native tokens. These offer an alternative.
- Ascendex – This is an upcoming exchange where you can earn the native ASD token for locking it up.
- BTMX – Holding BTMX tokens entitles you to crypto dividends from transaction fees.
- FTX – You can stake on the FTX crypto derivative exchange.
- Kucoin (KCS) – If you hold 6 KCS or more on the exchange, you can earn staking rewards as dividends.
Yearly Interest Rates From Asset Management Platforms
Using an asset management platform is an alternative to earning dividends. As with dividends, you get the chance to earn based on your existing cryptocurrencies. However, using an asset management platform lets you invest in Bitcoin, Ethereum, or USDT instead of just the few high-risk coins that offer dividends. The following are the maximum earn rates from some of the top asset management platforms.
- Haru Invest – Up to 35% APR
- Binance Earn – Up to 35% APY
- Nexo – Up to 7% APR
- AAVE – Up to 7.5% APY
- Blockfi – Up to 11% APY
Other Ways to Earn Passive Income From Crypto
Earning crypto dividends is one way to get passive income from your cryptocurrency. Another option already mentioned is via an asset management platform or a cryptocurrency savings account. The following list summarizes some of the most common options for earning passive income from crypto:
- Crypto dividends
- Crypto staking
- Crypto savings account
- Crypto asset management platform
- Crypto lending
- Cloud mining
- Yield farming
- Running lightning nodes
- Running master nodes
- Airdrops
- Forks
- Joining an affiliate program
Crypto Dividends Taxes
The crypto dividends tax that you have to pay will depend on your country. That being said, you will likely have to pay for the earned dividends, as you would with any other increase to your cryptocurrency, such as interest earned. In the United States, this means you pay taxes on it as an asset based on your tax bracket.
To calculate how much you owe in taxes, you have to convert your profit to your local currency. As mentioned, crypto tax regulations vary by country. In the United States and many others, you only pay taxes if you no longer hold the cryptocurrency. So, if you just buy cryptocurrency A and do nothing else, you may not have to pay taxes on it that year. However, depending on the country, you may still have to pay taxes on your dividends earned on A.
If the next year, you sell cryptocurrency A for fiat or convert it to cryptocurrency B, then you would have to pay taxes on the gains. To do so, you would convert the value of your crypto at the time of investment and the time of sale, then subtract the two.
Read: Day trading crypto
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