Sirwin
Sirwin
Fiat vs Crypto

Traditional Investing Beats Crypto All Day Long

By lafredet | Passive Income Junkie | 18 Sep 2023


The Plan, The Dream - Crypto

If your plan with cryptocurrencies is to convert some fiat (UDS, CAD, or whatever) into crypto like ETH or BTC and invest that in such a way that you earn a regular return of some kind, then that is great.  That's exactly the plan I had when I started investing in crypto back in 2020 or was it 20spent 19.   I'm not even sure anymore.  It was like the gold rush or the dot-com bubble back then.  It seemed like you could invest in pretty much anything, and you would end up making an awesome return.  At the height of things, a return of 1% APR per day was not crazy for me by any means.  In fact, that was the minimum I aimed for with certain types of crypto investments.  That was definitely crazy when you think about it.  It's like your bank giving you 365% APY in your savings account.

There were just so many ways to invest and make a profit.  There were things like staking, lending, yield farming, master nodes, DAOs, ICOs, etc, etc.  Wherever you looked someone was coming up with different ways to make money.  

The Reality - Ouch

With all the profit to be made, there were also a lot of risks involved along the way, like rug pulls, hacks, bank runs, and failed ideas where you ended up losing everything on that particular venture.  It was the wild west of investing.  There was no way to insure your investment against failures.  Near the end there were some "insurance" mechanisms, but when the bubble burst, so did those insurance plans.  Then, just as things seemed to be screaming along at an unstoppable pace, everything came crashing down.  This became the period of HODL till the end, or get out while you still can. 

After it was all said and done, and as I learned a little later, there was still the tax nightmare to deal with.  It was notoriously difficult to get right because of the complexity, especially if you weren't keeping the proper records.  I spent weeks with specialized software that was supposed to make my taxes easy.   In my case it was Koinly.  It definitely helped, but it wasn't perfect, especially with all thee different blockchains, wallets, exchanges and investment sites, some of which no longer existed.  Anyway, I'm glad that's done now, and I honestly don't ever see myself doing that again.

After the bubble burst, many investments and tokens dropped by 95% to even 99%.   I lost most of the juicy profit I had accumulated, but I did at least manage to come out with my initial principle in tact, along with a very tiny profit.  Very tiny.  As it is now, the crypto market has recovered a bit, but those amazing returns no longer exist.  Now, it's more like what you can get from your bank.  Instead of 1% per day, week, or month, you're now getting more like 1% or 5% per year.  You may still see sites that promote 7% to 20% APY.  But, it's super common for those underlying token values to be decreasing at a similar rate.  Sure, it is still possible to make profit in crypto.  It's just nowhere near as lucrative as it once was.  My personal opinion is that it's no longer worth the effort or risk.

How It Can Actually Be

Since crypto no longer has a huge advantage over traditional fiat investing.  I'd argue that it's just simpler, safer and easily just as lucrative to stick with traditional investing.  How does something like this sound?

  • make a steady 5% - 8% APY
  • compound your interest monthly
  • never pay any taxes on your gains, ever
  • it's even possible to have all or a portion of your investment insured against failure

If you're like me, then that probably sounds pretty good.  Sure, it isn't the crazy profit of the wild west, but it's consistent and safe.   Plus, it's easy, and it's what I am doing now.  This is how I do it.

I opened a Weatlhsimple account.  I think this may just be for Canadians, but I'm sure there are similar companies in the states that offer self-managed investing and banking.  From there I created a Tax Free Savings Account (TFSA) for tax free gains.  Again, this is for Canadians, but there must be something like that in the states as well.  I took whatever money I had left out of crypto currencies and put it into my TFSA as cash.  Then I researched some ETFs in the following markets: REITs, Banking, Energy and Infrastructure.  It turns out to be a great time to invest, because COVID caused a pretty serious dip in most industries.  The items I invested in all provide monthly dividends of 5% to 10%.  A couple are even higher, but those are a little riskier.  Wealthsimple allows you to automatically re-invest those monthly dividends, to help compound your investment.  

Since I'm new to ETFs and the stock market in general, I didn't end up investing all my money, so still had cash sitting in my TFSA that wasn't earning anything.  Recently, I discovered that there are also HISF ETFs where HISF means High Interest Savings Account.  There a couple different types of these, but the just of it is that you can invest in them and get a steady return like a 4% or 5% savings account. 

I actually use Wealthsimple for all my regular banking as well now.  I used to be with RBC which, until recently was providing less than 1% on my savings account.  It now offers 1.7%, but that still falls short of the 4% I get at Weatlhsimple.  For money that I don't have invested in my TFSA, or when I've filled used up all my TFSA room (as per the Canadian government allotments), then I can keep my money in my savings account and still earn interest.  This money is also insured up to $100k, but I'm not there yet, so I don't have to worry :)

If you are interested in Wealthsimple you can join here: https://www.wealthsimple.com/invite, my referral code: TZ4J9W

This link also gives you the opportunity to earn a sign-up/deposit bonus of between $5 and $3000, (not valid for Quebec).  It's a small chance to get the big price, but you never know :)

Feel free to comment if you have any questions or comments.

Thanks for reading, and good luck with your investing!

Lyle

 

How do you rate this article?

34


lafredet
lafredet

I was moderately successful during the crypto bull cycle, but when things crashed I lost most of my profit. I was lucky to come out ahead, but it wasn't by much. After a nightmare getting my taxes done, I've since switched to traditional investing.


Passive Income Junkie
Passive Income Junkie

I changed my blog name from Dividend Junkie to Passive Income Junkie. That seems to be a little more accurate. I definitely love making a good tax free dividend every month, and that is my main investment strategy. But, I also love making "free", safe, consistent passive income on the side. I don't always succeed, but when I do, I usually invest that "free" money into crypto, specifically Bitcoin, in the hopes that it will take off one day, because, you just never know :-)

Send a $0.01 microtip in crypto to the author, and earn yourself as you read!

20% to author / 80% to me.
We pay the tips from our rewards pool.