I’m in a magical mood today. My wife and I are brainstorming how to buy our fourth house and life is just altogether good. Let’s make it even better by talking about the magic of cryptocurrencies.
My “The Magic of” series keeps expanding seemingly every other day. But I love that we can appreciate these passive income sources for what they are. Let’s look at the earlier articles in the series.
- The Magic of Dividends: Guilt-Free Money
- The Magic of Royalties: Random Riches
- The Magic of Rents: Consistent Wealth
- The Magic of a Roth IRA: Tax-Free Dividends
- The Magic of a Military Retirement: Active Service, Passive Income (free pdf)
- The Magic of Passive Income: Your Money Works for You
Now we need to welcome cryptocurrencies to the fold. Crypto is fairly new to the world (roughly ten years) and most people invest in crypto for the chance to earn capital gains. I invest in crypto for passive income.
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For me, the magic in cryptocurrencies lays in its options, or choices, for passive income. When we find a source of income, we want to exploit it for everything it is worth. In crypto, once your money is on the blockchain, your options expand exponentially.
In my first series on cryptocurrencies, the Cryptocurrency 101 series (101, 102, 103, 104, 105, 106, 107, 108, 109), I got familiar with some of the terms and functions of crypto. One of the main takeaways was knowing the difference between centralized and decentralized (DeFi) crypto investing.
Having the option to dive deeper into the world of crypto by going the DeFi route can work wonders for your passive income. That’s why I started my next series, the Passive Income in DeFi 101 series (101, 102, 103), to highlight the possibilities in Decentralized Finance.
Right now, in my opinion, the best passive income you can make in crypto is with interest from Stablecoins. I invest in USDC, which is a stablecoin pegged to the US Dollar, and I receive 9% interest on my holdings.
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This is amazing, and a return you cannot find anywhere else in the world of investing. Think about it, if you trust stablecoin, then you are almost 100% risk-free. To me, stablecoins are like the high-yield savings accounts of the crypto-verse.
When I first started investing, back in June 2019, I opened a high-yield savings account with Discover bank. I still use this account, as I have roughly $4,300 in there. In 2019, the interest rate was 2%, but today it is 0.4%. For the year, I have earned $9.60 interest on my cash.
I started investing in USDC in April, and I currently have $850 in my position. I have earned $16 from my $850 since April. Do you see the ridiculous difference? My money is doing the same in both, but I am earning 22X more interest in USDC, freaking crazy, right?
Again, that is the magic of cryptocurrencies for me currently. I started a series on Living Overseas Passively (101, 102), where I will look at the possibility of living off of $2,000/month from crypto.
Why Do I Need to Invest in the Stock Market?
To earn $2,000/month from interest on USDC at 9%, I would need to have $264,000 in my position. That is not bad at all and very achievable in 4-5 years of hard work. Of course, the interest rate on USDC may fall by then, but it could also rise. Either way, having a relatively safe way to earn a 9% return is unheard of today.
Of course, you also have capital gains from investing in Bitcoin or Altcoins (coins not Bitcoin). I am not a massive fan of capital gains (maybe in real estate) because they are fleeting. Here one day and gone the next. But, there are pleasant opportunities to grow your net worth, especially if you get into a coin community early in its’ cycle.
That covers the centralized finance route—meaning “over-the-counter” crypto. What about passive income in DeFi? I am glad you asked. DeFi is set to explode over the next few years, so we will need to learn everything we can about the future of DeFi.
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Luckily, there is a book I highly recommend titled “How to DeFi -Beginner.” Yes, there is also an advanced edition that I haven’t had the chance to dig into thus far. Passive income in DeFi includes peer-to-peer lending (via the blockchain), staking, farming, yield-chasing coins, and stablecoins.
What’s crazy is that there are always new ways to earn yield in DeFi, which is the true magic of DeFi. We have no idea what the new big thing will be in DeFi passive income. People are already working on yield-chasing coins and coins that act like banks.
Teams are also working on coin ETFs on DeFi that will gather the best of the coins and diversify your crypto exposure. So indeed, we need to keep up-to-date with the world of crypto by reading the news and books.
Dividends vs. Royalties part II
Crypto is moving so fast that you can get left behind if you aren’t keeping up with the latest information. That may be a hindrance, but for us, that is what makes us the best of the best—our devotion to passive income and the world of investing.
Conclusion. The magic of crypto lies in its split personality. In the centralized world, we have stablecoins that yield 9% and are relatively safe. In the DeFi space, we have staking, farming, and lending, plus whatever is the new hotness.
The world of crypto is just so vast one can get lost. Don’t get overwhelmed. Focus on what you need from crypto and try to extract that first. Then, when looking around, if you see something you like, explore some more—no need to get frustrated.
Please read the article “My First Book on Cryptocurrencies” for more from a beginner’s point of view on crypto. I love the world of crypto and wish I had more time to dedicate to educating myself more. It’s okay; for me, becoming a Well-rounded Millionaire is my path to wealth and happiness. Enjoy and Happy investing.
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- Investing: How We Plan to Retire on Dividends (book)
- Cryptocurrencies: My First Book on Cryptocurrencies (book)
- Real Estate: Financial Independence through Real Estate (book)
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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