Three Bitcoin Passive Income Stream Ideas – Complete Guide

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  1. I am going to teach you three Bitcoin passive income streams, all in one comprehensive guide
  2. The three methods are related to each other, the profits from one can feed the next income stream
  3. A minimal ongoing time investment per week and a small initial investment are two advantages of these passive income methods
  4. You do not need any special skills to get started
  5. These methods have continued to work for the past three years from 2017-2020. They are likely to continue to work well into the future. Therefore, you can build an evergreen bitcoin passive income method by reading this guide


Note that this is a detailed guide. The good news is that it contains all the information you need, in one place to get started – I will teach you EVERYTHING you need to know about creating various, diversified passive income streams with Bitcoin.

When you get your money generating machine up and running, you can choose whether to:

  • cash out immediately
  • or to reinvest your profits and experience compound interest growth on your investment.

Update, April 3rd, 2020: I originally wrote guide written near the end of 2017. This method on how to earn bitcoin still works in 2020, and will continue to work in 2020, 2021 and beyond.

If anyone else is giving away this information, all in one place – I’m not aware of it!

You might be wondering why you should go to the effort of creating a passive income stream for yourself; Warren Buffett has something to say on the matter:

If you don’t find a way to make money while you sleep, you will work until you die.Warren Buffett, CEO of Berkshire Hathaway

Here’s a summary what we’re going to cover:

Part 1 – Background on Peer-to-Peer Bitcoin Lending

how peer to peer bitcoin lending works

When a person wishes to purchase Bitcoin in exchange for their local currency, for example, purchasing Bitcoin with US Dollars, Euro, Pound Sterling, etc., the typical way this happens is for the user to sign up to a Bitcoin exchange, verify their identity, verify their credit card, and then purchase Bitcoin. One drawback to this process is that the verification can be slow. In extreme cases, delays of weeks on some exchanges are reported during hectic times in the Bitcoin world. This overloads the customer support teams with new user requests.

Enter the concept of ‘secured lending’ with Bitcoin. The name is slightly misleading – it’s more accurate to call this a marketplace for individual buyers and sellers of Bitcoin – a bit like how eBay brings together buyers and sellers.

This guide will focus on being a seller of Bitcoin on a popular Bitcoin peer-to-peer marketplace. As a seller, there are many advantages to using a peer-to-peer market place to sell Bitcoin. This is how you will achieve your first passive income stream with Bitcoin – with minimal time and upfront investment costs. You will see your first sales within 24-48 hours of getting setup.

Advantages for Bitcoin buyer – Speed and simplicity. The buyer gets their Bitcoin more quickly and with less steps than with a traditional exchange.

Advantages for the Bitcoin seller – sell Bitcoin at a markup to the current market price. The selling process is largely automated, according to the rules you put in place – the total amount of Bitcoin that you wish to lend, the minimum and maximum amounts to lend in any one transaction, the amount of times the buyer has used the service before, and more. This is an extremely simple, yet powerful way to make money in your sleep, with no technical knowledge, and a minimal financial investment- you can start lending with as little as $20.


Part 2 – Passive Income Stream #1 – My own experience with actively lending on a Peer-to-Peer, Bitcoin Marketplace

Who is this passive income stream suitable for?

  1. Current Bitcoin holders who wish to sell some or all of their holdings (hodlings!) at a rate 15% above the current market price
  2. Those who have experimented with complicated, risky Bitcoin trading methods (which often require advanced software skills, or lots of time to watch the Bitcoin market all day) and wish to have an easier way to generate an income with Bitcoin
  3. Anyone who wishes to start generating a passive income stream with minimal time and upfront capital investment.

I have been a very satisfied user of a certain P2P Bitcoin Marketplace for over a year now. In this section, I will describe, step by step, the exact process by which I make hundreds of dollars every month, for just a few minutes of my time every week.

Once you complete the initial setup steps (getting your accounts setup), this is the process you follow to continuously make profits from selling Bitcoin:

  1. Purchase Bitcoin on a Bitcoin exchange (takes 1 minute or less).
  2. Deposit your newly-purchased Bitcoin into a Bitcoin wallet in the peer-to-peer marketplace (1 minute or less).
  3. Wait for your Bitcoin to be fully lent out (this is 100% passive, and is handled by the marketplace).
  4. Re-invest your initial investment, plus the fees you’ve earned, into buying more Bitcoin, so your investment grows steadily.…

Note: you can start with a small amount, e.g. $20-$200, and use this to become familiar with the service. As you grow more familiar with the service, you can increase the loan amounts as you see fit. You can also cash out at any time (stopping at step 3 in the list above), which is another big advantage.

Bitcoin is Highly Volatile – How Does this Qualify as an ‘Investment’?

Good question! The beauty of buying, then immediately selling Bitcoin at a markup is that you are exposed to very little price volatility because you only own Bitcoins for a short period of time – the time between the purchase and the time it takes someone to buy them from you on the marketplace. The price paid by the buyer is the current market value of the Bitcoin, e.g. $100 worth of Bitcoin, plus some fees on top (15% over the market price), which is what makes it very attractive for you as an investor.

Usually, large Bitcoin price movements take several days or weeks to play out, so you are exposed only to smaller price movements. If you buy $100 worth of Bitcoin on Monday, usually you’d expect to have most/all of it lent sold by Wednesday – with the cash on in your PayPal account, ready to be reinvested back into buying more Bitcoin with the intention of selling it again.

How Much Could I Make with this Passive Income Stream?

I will use an actual $50 sale to use as an estimate of how much you can make in fees, then run that number though a hypothetical example to demonstrate how you can make.

Here is an actual, real-life example from my account:

bitcoin passive income $50 lending example

Explanation (“loan interest” is the key number):

  • Loan collateral = the amount of Bitcoin, in US dollars, requested by the buyer
  • Loan interest = the amount you, the seller, makes from this transaction – 15%
  • Loan origination fee = the amount paid to the operator of the marketplace
  • Payment processing fee = this fee goes to PayPal, so it doesn’t cost you, the seller, any money to receive the US dollar transaction via PayPal

Using these numbers, I plug some hypothetical loans into a spreadsheet to see what I could make from a $1000 initial investment, which I then loan and reinvest out ten times. In this example, I assume that you reinvest 100% of the initial amount plus the fees, so that the investment compounds quickly. I ignore the PayPal transaction fee that’s paid by the buyer, as well as the loan origination fee, which goes to the marketplace.

Note: expect most loans to be in the $20-$200 range, you are not going to lend out the entire $1000 at once!

bitcoin passive income how much roi you could make with ten loans

If you start with $1000 in initial capital, invest it 100%, plus all earned fees, after ten loans you will end up with $4045! Not bad! Especially when you consider how little of your time such an investment takes.

The amount of time lending $1000 or more is difficult to say, as it depends how many buyers there are at any given moment. When Bitcoin is in the news, or the price is rising, demand is usually higher and you can expect to make money more quickly.

What are the Risks with Bitcoin Lending?

There are some risks involved with making these Bitcoin loans, as you might image. The two main risk are the Bitcoin price, which I’ve already touched on, and fraud.

Bitcoin price risk – in theory, the price could dramatically shift at very short notice, meaning you buy Bitcoin at a price much higher than you lend out. How to mitigate against this risk – don’t put more than $200 in your marketplace account at any one time, and don’t lend if you feel the Bitcoin price is too volatile at that moment – wait for the market to calm somewhat. Even if there are not many buyers in the marketplace, $200 or so should be lent out within a few days. Normally very large price shifts take several days or weeks to emerge, but if you are looking at a particularly choppy market, wait until things calm down before purchasing and sell more.

Scams – the other obvious risk is the fact that you are using PayPal- which in recent years has become riddled with scammers due to their crazy policies that favour buyers over sellers. In the event of a credit card chargeback, PayPal will be forced to favour the buyer over the seller (even where blatant fraud has taken place). PayPal will refund the buyer, and also charge you a fee.

You can see some of the results of buyer disputes in this example (PayPal reversals and fees):


The good news is that:

  • Disputes are relatively rare
  • If the buyer sends a refund request to PayPal, but not a credit card chargeback, PayPal will side with you. You simply need to follow the instructions that the marketplace provides you with – which involves messaging PayPal support and send them proof of the transaction
  • It’s easy to change the settings in your account to prevent new buyers from being offered your Bitcoin – virtually all of the problems come from first timer buyers

You have to carefully consider these risks before getting involved with Bitcoin lending. Personally, I think the risk is worth it, even if I have to occasionally deal with some annoying borrower who tries to defraud me.

Ok – How do I get setup with Bitcoin lending?

Initial Setup

xcoins loans initial setup

Step 1. Signup to a Bitcoin exchange. An exchange is where you buy Bitcoins. I highly recommend Coinbase* as they’re really easy to use and come highly recommended. You’ll pay a transaction fee for using a credit card to buy Bitcoin, however if you live in a SEPA (Single European Payment Area) country, you can actually deposit your initial investment in Euro to Coinbase’s bank account without fees. Note that you need a passport, driver’s licence or other form of photo ID to open an account with all reputable Bitcoin exchanges.

$10 Coinbase Signup Bonus
*Note: Sign up to Coinbase with this button above and you will get $10 in free Bitcoin when you buy your first $100+ of Bitcoin, as a nice welcome bonus!

Step 2. Sign up for PayPal, if you don’t already have an account.

Paypal Signup

Step 3. Sign up to the Bitcoin lending website, this is the marketplace that matches lenders and borrowers of Bitcoin. The service I use is xCoins. You can view their FAQ, if you have further questions.

Once your xCoins account is setup, you need to send your recently purchased Bitcoins from the exchange (e.g. Coinbase) to your xCoins wallet. You can do this in the “deposit” page in your account.


Step 4. Change your risk settings according to your risk profile. Go to “Lend Bitcoin > Lending Offers”. This part of the interface is not explained very well. The “Rating” column refers to the amount of times a buyer has used the site:

  • 1 = a first time buyer – the highest risk of fraud
  • 2 = second timer, and so on.

It’s easiest to explain via a screenshot. You can use this as a starting point when deciding which settings to choose:

xcoins filtering out first time buyers

Ongoing Activities

As mentioned above, the ongoing activities are really simple and only involve a few minutes of your time each week:

  1. Buy Bitcoin from an exchange – 1 minute
  2. Deposit it in the Bitcoin lending service – 1 minute
  3. Wait for your funds to be lent out – 100% automated. It can take several hours to several days, depending on the amount you are lending, and the demand at the time. Personally I like to log in once every few days to check my balance and to check for messages (in case of problems), but how often is completely up to you. You will also receive email notifications regarding your transactions, so you don’t even have to login to keep an eye on your lending activity.
  4. Take your initial investment amount, plus fees – which is deposited automatically in your PayPal account, and use that to buy more Bitcoin…. return to step 1!
Pros The marketplace has good customer support, clear dispute resolution with detailed instructions to send to PayPal, lending is completely automated, you choose what type of borrowers you wish to lend to, which controls your risk of being
Cons Scams, potential Bitcoin price risk
Initial investment $20 and upwards
Risks Risk of fraud, price risk
Time to start earning Within 1-2 days, often less

Part 3 – Xcoins Review

xcoins review for investors

Xcoins is the service I’ve used to create a passive income with Bitcoin secured lending.

The problem they solve is buying Bitcoin with a credit card or though PayPal, quickly and easily for buyers. Lenders “loan” (in reality: sell) Bitcoin to buyers, at the current market price, plus a fee on top. Xcoins provide a very easy to use marketplace that brings together the buyers and sellers. They provide tools to automate the sale of Bitcoin, so it makes life very easy for buyers and sellers.


  • Easy to sign up and get started, as a buyer or seller.
  • Flexible loan amounts, starting from $10-$100s+ (it’s also possible to split a large purchase into multiple, smaller purchases).
  • Automated handling of sales, once the seller is registers and makes the Bitcoin deposit, meaning minimal weekly time commitment.
  • In case of a PayPal dispute, detailed instructions are provided on what exactly to send to PayPal support staff, and evidence is provided in the form of a PDF to send to PayPal also.


  • Withdrawal fees for Bitcoin are very high currently due to congestion on the Bitcoin blockchain – although this is not something that Xcoins has much control over.
  • Support can be quite slow to respond to support tickets.
  • More work could be done to filter out fraudulent buyers.
  • No way to easily view overall sales activity. A CSV download would be a welcome addition for sellers.
  • PayPal fees for cashing out from US dollars to other currencies are extortionate. However, this is something that Xcoins cannot directly control.



Is Xcoins a scam? No, absolutely not. However you do have to be aware of the risks of using the service – namely that some new buyers are not honest, and may try to deceive sellers by purchasing Bitcoin and initiating a credit card chargeback.

Would I recommend using Xcoins to generate a side income? Yes, absolutely. I’ve been using them for a while now, and while the service is not perfect, the low time investment, and high ROI make using the service a great way to generate a side income from the service.

Make sure you read the Xcoins FAQ if you have further questions.


Part 4 – Passive Income Stream #2 – Affiliate Income

In order to generate this second passive income stream, it’s necessary to have completed part 2 above – sign up with Xcoins, become comfortable with how it works and make some profit from your initial loans. You can then boost your passive income by referring others to join the service.

With affiliate marketing, it’s very important to be honest and upfront about the potential negatives about the service you are recommending. If you use Xcoins as a seller, you will definitely experience attempted fraud at some point – you need to make that clear if you decide to recommend the service to others. Additionally, the world of Bitcoin and cryptocurrencies in general is very volatile, so this is not something to put your retirement nest egg into! Depending on your age, risk appetite, etc. investing around 10% maximum of your investment portfolio in cryptocurrency-related investments is a decent rule of thumb. Don’t invest an amount money that would cause you to lose any sleep.

Lastly, take into account the context in which you share the information and your referral link. Don’t bombard your friends Facebook profiles or work colleagues LinkedIn profiles with get rich quick bullshit. If someone is not looking to make investments, or is not in a good place financially, this is not a good option for them.

Taking into account the above considerations, here are some ways you can boost your Xcoins passive income via referring others:

  • Offline – tell interested friends or colleagues, and offer to share the link with them
  • Share your experiences on social media – don’t spam!
  • Email interested people in your network
  • If you have a blog, write about your experience and share the link to your blog post on relevant cryptocurrency forums or websites


  1. Sign into your xCoins account
  2. Go to the “Referrals > Referral codes” page
  3. Create an affiliate code, give it a relevant name, such as “Facebook link”. This allows you to accurately track where signups and transactions are coming from.
  4. Share the link(s) in non-spammy ways, as mentioned above.

That’s it! If you share the link with people who are interested, you will slowly start to see transactions in your account.

You can then use the extra, passively-earned Bitcoin earned to:

  1. Sell funds on xCoins
  2. Grow more slowly with Poloniex lending – see passive income stream #3 below!

Part 5 – Passive Income Stream #3 – Lending out Bitcoin Profits on Poloniex

Now that you’ve got some Bitcoin earnings from passive income streams #1 and #2 above, it’s time to consider how else to put your funds to work. Lending to Bitcoin speculators on Poloniex is probably the least time consuming form of passive income that I’ve ever come across.

Poloniex is a very popular cryptocurrency exchange. One of the features of this exchange is that speculators can borrow Bitcoin (and many other cryptocurrencies) on margin, in order to increase the size of their bets on whether that cryptocurrency’s price will rise or fall in the short term. The source of these funds is investors who loan them Bitcoin – a need that you can fulfill. You get paid a daily interest rate in exchange for supplying Bitcoin to short-term speculators. Loan offers range in duration from two to sixty days, with most loans ending before their maximum duration.

The good news is that Poloniex manages most of the complicated parts of matching borrowers and lenders, so you don’t need to concern yourself with the nitty gritty details of how the loans work. Additionally, I will discuss how you can setup a software bot that handles the issuing of loans for you – automatically!

passive income loan earn

If supplying short-term liquidity to speculators sounds very risky, don’t worry – Poloniex has very strict rules in place to keep your funds safe. Those taking loans cannot move the funds off the Poloniex platform, and Poloniex will force speculator’s loans into liquidation when their position becomes too risky. You can read the full details of margin trading and issuing loans to speculators on Poloniex’s support article on this topic.

How Poloniex Lending Works

  1. Share your Xcoins referral links as described in part 4 above, and people will sign up with your links.
  2. You will receive affiliate income on Xcoins when the people you referred make transactions. At this point, you can decide to cash out immediately – in other words, sell the Bitcoin on Xcoins (just like the funds you deposited yourself) or to try to compound the funds further. If you want to compound your Bitcoin holdings, you can move to the next step.
  3. Transfer your Bitcoin affiliate income from your Xcoins wallet to your Poloniex lending wallet.
  4. Choose the loan terms according to your preference – loan interest rate and duration. The optimal way to do this is by using software that continually scans the market for the best opportunities. You can customise the loan settings according to your preferences by setting parameters in the software.
  5. Cash out your Bitcoin funds to your local, fiat currency. When you do this is completely up to you – if could be after a week, month or year. You can partially or fully cash out your holdings. Another option is to wait until the Bitcoin price is at an all time high. Therefore, you have total control on when and how to cash out.


How much can I expect to make issuing loans on Poloniex?

You can view the current and historical Poloniex interest rates on CryptoLend. Typically, your daily interest rate compounds to 19-20% annually, which is an amazing return compared to most other forms of investment. Note that at times the rate is so low that it may not be worth issuing loans.


Ok– How do I start issuing Bitcoin loans on Poloniex?

  1. Sign up to Poloniex. You will have to verify a photo ID, this may take some time. It’s best to sign up and verify your account long before you think you’ll need it.
  2. Transfer funds from Xcoins to your Poloniex lending wallet. Login to Poloniex, and go to the deposits and withdrawals page, and select “BTC” to see the Bitcoin address that you need to send the Bitcoin to.
  3. Issue and manage loans – you can do this manually, but it’s best to use software. This is discussed below.
  4. Cash out your funds, when and how you want.

This is what the Poloniex lending interface looks like. Loan offers refers to the current rate at which loans are being accepted by traders. My open loan offers refers to loans you’ve offered to traders, but haven’t been accepted yet. My active loans are loans that have been accepted and are currently accumulating interest for you. You can ignore loan demands.

passive income poloniex loan interface


Three Options to Manage your Poloniex Lending Activity

  1. Manually. This is not recommended, as it’s obviously not passive! It involves logging into Poloniex, scanning the loan offers, and deciding if they’re attractive enough or not. You need to do this 24/7 in order to capture the absolute best loan offers.
  2. Coinlend bot. A lending bot product, connected to multiple cryptocurrency exchanges. It handles all the technical setup for you, allowing you to choose your settings, and let the software run automatically. The downside is that the free version of this software only runs once every four hours. This means that you could potentially miss some good, high interest loans, which reduces your return on investment. There is also a premium option which updates quite frequently.
  3. Poloniex lending bot- Github code (most recommended). This allows you total control over your lending activity. It’s also the most technically challenging to setup, but it’s a one-time activity that frees up your time.


How to Setup the Poloniex Lending Bot

You need to host your lending on a 24/7, always-on computer in order to capture the best loan rates. To minimise your costs, I suggest using either a cheap VPS, such as Scaleway (which I use), or a cheap computer like the Raspberry Pi (annual electricity costs are about the same as an expensive coffee) which is very efficient with electricity consumption. As a result, using your main computer is not recommended as it’s unlikely you will leave it running 24/7 – and it would be very expensive to do so.

Install Ubuntu server and follow the instructions in the documentation. You need to make sure you enable the option to run the software at startup, otherwise you will need to manually restart the bot every single time that you turn on and off the hardware, or after a power failure or other unforeseen event.

You can follow this video for instructions on how to configure your bot settings:


Further reading

Lending strategies

Poloniex lending bot full documentation, including full set up instructions.

Get support from the Poloniex lending bot subreddit.


Pros One-time setup, very low ongoing time investment

Zero risk of fraud from borrowers

Advanced software is available to handle the loan management

Cons Poloniex takes a 15% fee from the daily interest you earn.

Some technical activities on your part are required in order to maximise long-term profits and reduce your time investment.

Initial investment 0.01BTC minimum
Risks The potential risk of Poloniex getting hacked or going out of business, meaning you could lose your funds. In theory, this risk is low, but it’s worth considering. You are exposed to the long-term price risk of Bitcoin (or other cryptocurrencies) that you hold.
Time to start earning Immediately

I hope you enjoyed this guide! You now have enough information to set up your very own passive income streams with Bitcoin for 2020 and beyond.

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