Today I want to touch base on the elusive passive income financial freedom that most people chase after and few ever achieve. I'm going to break down traditional passive income streams including generating wealth but also dive into the crypto side of things.
Traditional Passive Income Ideas
With any passive income there's always a element of some work that's involved. Often times less work means more capital is needed to generate that wealth.
Dividends
One of the most common ones you hear about is building up a dividend portfolio and I have be honest with you I dove into this one at first when I started to get into investing. The issue? Either the stocks that pay decent dividends lose all or most of their value leaving you with less or just about as much money as you had before or your gains are simply not as much as you thought they would be.
Now if you're playing the long game this can work in your favor if the company does decently over years and years. Those dividends then become known as qualified dividends (in most cases) which are taxed at 0%, 15% or 20% depending on the taxable income and filing status. Which means if you're in a higher tax bracket you could essentially be making more money because you're paying less taxes on that income.
Savings
Savings is one of the first methods people try and build passive income and honestly it's one of the worst. Not only do you get a low percent most of the time on your savings but you also pay FULL taxes on anything you make from it. This is why dividend style investments were always gone after when banks were paying no interest at all for years or hardly any interest on the savings. a 3% dividend rate looked mind blowing at that point. However today with rates around 5% for savings accounts it actully makes dividend stocks less attractive as you're at a much higher risk.
The others
They you have the others in which most people are simply never going to get involved with. You have Affiliate marketing, Real estate, rental property, online courses, blogger, starting a business etc etc. all of which are pretty wild out there which normal ever day people simply wouldn't get involved with.
What I've come to realize over the years in all of these cases is you'll need capital first before you get into the passive income streams. Those passive income streams will normally be of lower presents but you do it in a way in which you minimize your taxes thus getting to keep more of your money.
Crypto Passive Income
One thing I've come to realize about crypto is there's only one real passive income source that matches the traditional sense and that would be earning interest on your stablecoins.
Stablecoins
Yes, stablecoins are you best bet if you want to build passive income that you know that value is never going to change. These often pay decent rates of 5% or comparable to that of savings accounts in the traditional finance space.
Nodes, Staking
I'm grouping nodes in with staking as often times you have to run a node anyways in order to stake. However there are places that will do this for you but you will pay for it as the skim a bit of the earn crypto off the top for themselves for managing the nodes for you.
Nodes and staking I would say are one of the most passive ways to really build crypto. For example here on the hive blockchain you currently earn roughly 3% APR simply by having your hive powered up. Nodes and staking work much in this same way where you lock up crypto funds in order to take part in voting or running a node yourself. This allows you to earn a interest on those tokens which can range from as little as 0.01% to upwards of 10% or more depending on the way that blockchain is coded for emissions of their token.
DeFi
IDK about you but any time I've gotten involved with defi I've made less money then what I've put in over the years. It just feels like the native token prices dump and the fees earned never really bring anything of real value that you can write home about. It's extremely high risk and I think the only way you would actully make any passive income from this is if you paired up two stablecoins.
What methods do you like using in crypto to generate passive income?
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Honestly passive income is a complete farce IMO.
If BTC is going up 50% or more a year... isn't that exactly the same as passive income?
But because it isn't a yield people are like "no that's not passive income".
Even though it's completely indistinguishable from passive income...
In fact it's superior because it's not taxable like dividends are.
I'd totally agree with this over the years no passive income stream has done well. Unless you have massive capital already it does nothing for you. But what if BTC doesn't go up 50% and instead falls 50%. Sure it's "passive" if the token price goes up lol
The entire reason Bitcoin tends to outperform everything is that it's not diluting itself with these yields.
Or at least that's the theory.
Why create a tax event when the gain can just be hidden as unrealized value increase?
When looking at how liquidity works it gets even more confusing.
The market cap of a token can go x100 farther in a direction than the amount of money pumped or dumped into it.
So a token that provides 10% yield per year can stop itself from going x10.
What's better? 10% yield or the opportunity to take gains at 10x?
Obviously it's way more complicated than all this and I like me some yield farming but there are quite a few variables to consider. Bitcoin has been outperforming pretty much everything for 3 out of 4 years in the cycle in an impressively consistent manner. Holding Bitcoin is almost certainly the best way to to get a ton of the coins that you actually want during the 4th year of the cycle (2025/2029).
Of course we have 20% HBD savings which is great. As far as DEFI is concerned, the only thing I use anymore is collateralized lending with AAVE.
Staking and nodes are by far the best passive income in crypto, but can be expensive to get going.
Unfortunately, a 3% return on hive is of no use if those responsible or whales cause the price of hive to crash by over 95%.
If this continues, even steem will soon be worth more than hivecoin again.
The makers of splinterlands and the like should think about that.
I currently have the feeling that hive is being massively milked.
You've been here since 2017 and still don't know how this works?
It's a 4 year cycle.
What was the price of Hive 4 years ago?
Who are these whales that are selling?
How is it they never seem to run out of stake (or even lose any stake at all)?
I grow wary of these delusions of persecution that never ever have any evidence to back them up.
But of course I am aware of the 4-year cycle and I often write about it on my blog.
Bitcoin is currently experiencing its crypto summer. Altcoins should be in crypto spring.
Hive is worth just as much as it was 4 years ago. So anyone who has invested money in Hive in the last 3 years has mainly lost money.
Luckily I was able to attend two Hive Meetup this year and meet some top whitness.
I think I know what I'm talking about. If you know other whitnesses, feel free to forward my review 😉
Translated with DeepL.com (free version)
If Hive would be worth 2 USD or more, it sure would be a great place for passive income. But sadly we’re losing track…
I like your article friend but I have to disagree with you on some of your ideologies on traditional Finance, although it's not the best and need enhancement from Cryptos which we are witnessing and will witness more in the near future, dividends are also gotten from REITS which one in my country Nigeria known as SFS gave a return of 14.3% per shares owned which is very good for traditional Finance although we do know they are other corrupt dealings still. There are other ways to enter the market of assets such as joint partnership.
In my own opinion I believe savings and staking with a crypto platform far advances the traditional system and should be encouraged and Defi might be complex but still worth it as I have come to know of the introduction of RWA.
Just few questions I will like to know;