Passive income or protection from inflation. Destroying myths about cryptocurrency

There are several popular opinions about digital assets, which are often presented as indisputable. But how are things really going? 

Due to certain ideological, image and marketing features, cryptocurrencies are often attributed to almost unlimited omnipotence. Without a deep dive into the issue, it may seem that cryptocurrencies are ideal for transferring funds between countries, saving their savings from inflation, and even for providing daily earnings or passive income.

Indeed, many cryptotechnologies position themselves as a deflationary and transparent alternative to uncontrolled money supply, most projects claim the ability to transfer funds anywhere in the world in one click without the necessary approval from banks, and educational portals and private channels in Telegram advertise cryptocurrencies as a means of earning money available to everyone.

Content
Transfer of funds abroad
Protection against inflation
Passive income
Transfer of funds abroad
It is really possible to send funds from one country to another in the form of cryptocurrency, while the amount of funds does not matter at all — with the same commission in most networks, you can send $ 100 or $ 1 million. Capital flows between two cryptocurrency wallets anywhere in the world are fast, trouble-free and extremely cheap. Difficulties and problems, however, may arise when buying and selling cryptocurrencies for fiat money.

Each jurisdiction has its own constantly changing features of buying and selling cryptocurrencies, which begin to play a significant role when sending large funds. For example, in Istanbul, which is of interest to many Russians, you can easily exchange USDT of any popular blockchains in a variety of exchangers for cash lira, but will such a process be comfortable and safe if tens of thousands of dollars are to be exchanged?

If the final goal of the user is to receive funds in an account with a foreign bank, then in most cases you will have to take care of the necessary documents — the bank will ask about the origin of the funds and the final decision on crediting will be in the hands of bank employees and officials, and not the indifferent crypto currency program code.

Verdict: in order to use cryptocurrencies for cross-border transfers with subsequent exchange into fiat money or crediting to a bank account, you will have to think in detail about a plan individually for each case, or use the help of specialists. In most cases, solutions are found, but it may take a long time to work out the options. The simple transfer of cryptocurrencies between wallets in different countries without interaction with the classical financial structure does not present any difficulties.

Protection against inflation
Are the deflationary models of cryptocurrency projects so well calculated and can new technologies help save money in conditions of severe inflation in many countries? Unfortunately, most cryptocurrencies are too volatile, and deflationary formulas have not been tested enough by time to talk about them as a universal tool for every user. Even the least volatile bitcoin and Ethereum lose more than 50% of their value at the moment of correction.

On the horizon of several years, however, these assets are showing good dynamics. For example, all users who bought BTC and ETH before 2020, at the moment, despite the current market correction, are in the black. It is also worth remembering that statistically bitcoin and ether are traded at the peak of the price for a much shorter time, compared with prolonged periods of correction.

In this regard, the price dynamics of the flagships of the crypto sector is in a coordinated way different from the blue chips of the American stock market, whose assets show continuous and uniform growth without deep corrections for many years and even decades.

Will DeFi solutions in pairs with stablecoins help protect against inflation? Most likely, inflation will be faster than the annual interest rate for providing liquidity to pairs of stablecoins. The average profitability of time-tested platforms for stablecoins ranges from 1-5%, which is, nevertheless, many times higher than the banking percentage of most countries. You can also find higher returns, but using new stablecoins and platforms will significantly increase the risks.

Verdict: skillful use and maneuvering between different pools of liquidity of stablecoins can to some extent protect capital from inflation, however, this solution implies active monitoring of DeFi offers and entails risks of using smart contracts. The most profitable strategy remains to buy the flagships of the BTC and ETH sector for a long time.

Passive income
If you have the skills to work with blockchain technologies, an understanding of the market and a desire to earn steadily in this sector, it would be most logical to find a job in one of the many crypto projects. New and existing platforms supply a huge variety of jobs to the labor market, success in finding which is much more likely than becoming a successful trader.

At the same time, the whole attractive halo of crypto work remains — users are waiting for an analysis of charts and the market, discussions about decentralization, the ability to work remotely from the beach of any country in the world and other joys of crypto professions, without the risk of losing their deposit, the probability of which is extremely high for traders.

Periodic passive income can be organized using farming in DeFi liquidity pools. This feature is available exclusively in a growing or flat market for well-chosen couples. If all conditions are satisfied, users can really feel the magic of cryptocurrencies in action, withdrawing only farming rewards for everyday expenses and not touching the fixed capital.

Verdict: there is no free and easy money in cryptocurrencies, as in other spheres of life. Nevertheless, if someone is really attracted by the dream of living in cryptocurrencies every day and getting paid in them, it is quite possible to do this by getting a job in a crypto startup. Passive income can be organized to some extent through the use of DeFi services, but it will be possible to fully live on the rewards of liquidity pools only when opening sufficiently large positions. Income will also not be completely passive — you will have to regularly check pools, turn off those that are not working and look for new ones, on the go studying the work of blockchain bridges between networks where assets are located, and exploring users' opinions about the security of new platforms.