How to build a passive income crypto investing portfolio

29th Oct 2018

Crypto passive income is passive income which is earned by owning crypto tokens.

The cryptoverse is evolving rapidly. There are several projects which provide passive income. There is a chance that some of them will grow 100x in the next decade.

Dash,  a masternode project, has already experienced this explosive growth. the thing is no one knows which ones will be the winners. Hitching your cart to one of these crypto passive income investments is a radically life-changing.

In this article, I will provide you with some ideas on how to deal with this dilemma. There is nothing new here. Diversification in investing has been preached since the times of Babylon.

There are three types of cryptocurrency passive income:

  • Masternodes and Staking: This income is generated from inflation or the creation of tokens out of thin air. Example: Dash and Pivx
  • Revenue Generating coins: The sharing of revenue from a project. Example: Revenue Generating Coins
  • Airdrops: Getting tokens on the basis of holding other tokens, a good example of this is EOS.
  • If you want to learn more about other types of passive income check How to create passive income?

How to build a crypto passive income portfolio

  1. First decide on how much you want to invest in this portfolio, then how you will manage it.
  2. Then what kind of projects are you willing to invest in.
  3. Then identifying the bare minimum aspects needed in a project.
  4. The projects having the bare minimum of your requirements are the highest risk
  5. Set two other sets of criteria which are more stringent
  6. Now you should have three sets of criteria: Speculative, Very Speculative, Extremely Speculative
  7. Decide how you want to allocate your investment between the three buckets.
  8. Compare
  9. Rebalance
  10. Enjoy the crypto passive income!

Important decisions on your crypto passive income portfolio.

  • The amount you are planning to invest it to start and on an ongoing basis
  • The amount you are willing to reinvest or take out.
  • How and when to rebalance.
  • How to hold the tokens. On exchanges, in native wallets, in multi-coin wallets or via trusted custodians?

What are the risks when investing in crypto passive income?

Investing in crypto is not a walk in the park. It is risky. Very risky. It is very easy to make a mistake, get scammed and cave into FOMO (Fear of missing out).

  • Maintenance of the tokens, wallet, smart contract, staking or masternode.
  • Technical knowledge. In understanding the value proposition and the security aspect.
  • Tax issues
    • Keeping clear records for tax purposes
    • Keeping abreast with tax legislation on crypto
  • Risks from the platform the project is implemented on
  • Not enough time to follow the investment. Researching one project takes at the very least 3 x 3-hour sessions!

The second is the risk from the passive income project.

A crypto passive income project is composed of the following. Anyone of these aspects can be a risk to the investor. Consider, that there are no disclosure requirements, risks can be invisible for a long time. The precautionary principles rules in these cases.

  • A Product. This could be a process or a website which addresses a specific problem
  • Pace of progress
  • Communication with investors
  • The Team
  • The current users
  • Business Model
  • Marketing
  • Company structure. Registration. Financial Disclosure. Age of company.
  • The balance between token holders and shareholders of the company
  • Minimum investment needed
  • Tokenomics
  • The Moat: The likelihood of all of the above being copied by others.

See Also:

Projects differ, some will have a ready and functioning product others will not even have an MVP (Minimum viable product). Some will have everything except for a good marketing strategy others will have nothing but a hyped up marketing campaign. The risk of the project increases the more elements are missing, hidden or have a weak implementation.

The four buckets of your Crypto Passive Income portfolio:

  • No Deal
  • Speculative
  • Very Speculative
  • Extremely Speculative

Why are these four buckets important:

  • Balance your portfolio between the types of investments
  • Expose yourself to risk in a calculated manner for the investments in each bucket
  • Dedicate a specific amount of time to each bucket.
  • To monitor your investments faster
  • What method will you use to calibrate if selling assets or doing it through the income
  • Awareness of rebalancing

Set the minimum criteria for your investments. No Deal

According to all the variables described above define what are the deal killers, what are you not willing to tolerate. Some examples could include:

  • Anonymous team
  • Too Hyped up marketing (Example: Announcements about announcements, Misleading headlines)
  • Messy Tokenomics. Example: Founders Reward too high. No Lockup period
  • Founders not holding tokens
  • No Developers on the team
  • No Social media following
  • Too many missed promises from the current roadmap

These criteria will act as a quick filter. A project having one deal killer is dropped or marked for review in 3 months time.

These are some example criteria, for educational purposes only of course. To help you create your own. Analysing a crypto project is different from analysing a public company. The resources are different, thinner, vaguer and spread over many articles and posts. The project generally cannot be sued for giving out misleading info. There are no regulations against pump and dump schemes so their agents actively trying to alter your opinion one way or another in their favour. What I mean is, do this at your own risk. You have been warned!

Extremely Speculative Bucket

The minimum you expect is the highest risk tolerated. This is the bare minimum which a project needs to be considered further.

  • Minimal MVP
  • Real use case
  • Healthy tokenomics
  • Undiscovered project
  • Very time consuming as they need to be monitored

See Also : Low Cap Masternodes

Very Speculative Bucket

  • A usable product, even though it could have room for improvement
  • Real use case
  • Important edge
  • Healthy tokenomics
  • Well known in its niche
  • One or more partnerships

See Also: Upcoming masternodes

Speculative bucket

  • Usable competitive product providing a service beyond just being a cryptocurrency
  • Real use case
  • Substantial user base, Web Traffic
  • Well known in the space, Mentions in both crypto and traditional media
  • Several Conference appearances
  • Several Partnerships

Comparing projects.

There are a host of passive income tokens emerging in the same sectors. For example, there are many passive income exchange tokens and a gazillion masternode projects that just want to become the next Dash. Depending on the amount being invested, one approach could be to invest in the top three players in a particular niche another is to pick just one and leave other funds to invest in other niches. See also: Latest Crypto Passive Income News


Financial independence is the goal and passive income is one way of making sure you get it and keep it. Crypto passive income, is a radical tool because of the extreme risk that your hard earned money is exposed to. It should be considered as the wild card in your portfolio, be careful many people who step in end up “going down the rabbit hole!”

Not investment advice. Not financial advice. Consult your financial advisor. Not a recommendation to buy, sell or hold. The staff of this site may own these digital asset/s mentioned on this page. Investing is risky and you may lose all your capital. See full disclaimer.

Keep in mind that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. We try our best to keep things fair and balanced, in order to help you make the best choice for you.

Author: Jim Reynolds
Jim Reynolds. Is passionate about finance, passive income and cryptocurrencies. He writes about his passions on He has worked in the tech and financial industry for a few decades. He holds a masters in business admin and a bachelors in IT. All his writings are not investment advice.

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