Have you ever wondered if it is possible to live on an income with cryptocurrencies?
As we all know, today in the world of cryptocurrencies it is possible to perceive very high revenues, if compared with those of the FIAT world. The main possibilities are present in staking, farming (De-Fi) and lending (Ce-Fi) and in this regard I have written three interesting articles:
- Top 3 Best Ways to Earn Bitcoin Passive Income
- Top 3 Best Ways to Earn Ethereum Passive Income
- Best Ways to Earn Stablecoins Passive Income
In this article we will combine some of the returns already seen with some new ones to understand if it is possible to receive an annuity equal to a base salary (~ $1000/month). The aim is also to define how high the initial investment must be and how to maintain it over time.
The investment that will be needed is not an accessible figure, but it is not exaggeratedly high either. Anyway, to start with, I thought of two different cases, with two investment portfolios, both exposed to 100% cryptocurrencies but different in their composition. One portfolio is low-risk and low-reward, while the other has a higher yield but is also exposed to higher risk. Let's see them in detail:
- PORTFOLIO 1: 100% stablecoin.
- PORTFOLIO 2: 80% stablecoin, 15% Bitcoin and 5% Ethereum.
The first portfolio is made up of stable assets anchored to the dollar, has no volatility and is therefore not exposed to rebalancing. All you need to do is wait for the interest to accrue. The second portfolio, on the other hand, has greater volatility and therefore needs more attention because it needs to be rebalanced often. The volatility of our investment should be kept low because otherwise it forces us to move assets from one side to another in order to maintain the previously established percentage, which leads us to the desired return. On the other hand, however, stable assets such as stablecoins are subject to low returns and it takes more of them to get to have a high yield.
Risk analysis is an important point to always do before investing. Those who decide to invest as in the first case run two types of risk, one linked to the annuity platform they rely on (risk of bankruptcy) and one linked to the stablecoins themselves (risk of losing the dollar anchor). In the second case, however, in addition to the two risks defined above, it should be borne in mind that there are also intrinsic risks borne by other cryptocurrencies. Bitcoin and Ethereum are some of the safest, but the fact remains that there can always be something there, as described in THIS article.
Unfortunately, the risks associated with the fundamentals of a coin cannot be avoided, but they can be successfully reduced by spreading the capital across multiple currencies, so that if one has a problem, one does not incur the loss of the entire amount invested. Similarly, to diversify and also reduce the risk associated with annuity platforms, it is always necessary to use more than one of the most reliable.
Among the annuity services that I have considered there are certainly Celsius Network and Blockfi due to the high APYs they offer on the assets we have in consideration and for the reliability. These are two centralized lending platforms that I have described in these two articles:
As for the De-Fi, I have not foreseen the allocation of any sum in this case as the aim is to receive an income with the least possible effort.
In the first case we have the totality of the investment in stablecoins. To minimize risk, the capital should be split into USDT, BUSD, USDC (on Celsius Network) and DAI (on BlockFi). Taking into account returns on some stablecoins offered by Celsius Network (APY = 8.88%) and BlockFi (8%), to calculate the capital on which to obtain an income of about $1000 per month ($12000 per year), the proportion is the following:
$12000 : 8.88% = x : 100%
From which it derives:
12000 * 100 / 8.88 = $135135
This is a very high sum, but all in all it would allow you to live on an income without the slightest effort. Now that we have an idea of how much to invest, let's move on to the precise calculations, thus theorising an investment of $135,000, using the calculator available directly on the home pages of the respective annuity sites:
- USDT: $3129
- USDC: $3129
- BUSD: $3129
- DAI: $2700
Obtaining a total of $12087 in annuities per year.
Similarly, let us now consider the second case, without the price changes of volatile assets. If we were to keep the same sum, the yield would drop due to the APYs on BTC and ETH which are 2-3 percentage points lower than the stablecoins. For this it is good to consider an investment of around $150,000 divided as explained above ($120000 in stablecoins, $22500 in BTC and $7500 in ETH). Assuming we split the stablecoin percentage between USDT and DAI, the annuities would be:
- DAI: $4197
- USDT: $5563
- BTC: $1439
- ETH: $412
For a total of $11611 per year.
However, if we only considered the investment in Bitcoin ($7500) and its future value predicted by the Stock to Flow model (S2F) in a year (about $100000), we would have a surplus of $8500 which would add to the remaining $11611 earned with the stablecoins.
Living on an income is a goal that many aspire to. Achieving it is not easy, but having a plan on how to do it is already a good start. A constant accumulation of capital, once it is rented, leads to an increasing income. In fact, not everyone can have high figures like those described above, those who (only) have some small savings can receive interesting annuities that go to complete a possible working salary.
In my opinion, it is important to enter the world of cryptocurrencies as soon as possible, as long as the yields are high. The more people who enter, the lower the rents.
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