Crypto Passive Income Has Changed Forever

Earning passive income with your crypto has changed forever, and now we must adjust if we want to not only succeed in this market but survive it.

Looking back only a few years to 2020, the crypto market seemed like a much simpler place. At the time Bitcoin and other crypto weren’t correlated to macro factors, and earning passive income with your crypto was extremely easy. In retrospect, perhaps those were the golden days that we should have appreciated much more than we did.

Within the last year, there has been one negative event after another when it comes to earning a passive income in this industry. Nearly the entire crypto lending industry became insolvent with user funds being frozen on the service. Never knowing if they will get cents back on the dollar for their crypto, or if they won’t receive anything at all. In the past, there were endless options to lend out your crypto. The services were all very similar and also offered interest rates that were all in line with each other. It was easy to find services to earn at least 6%–8% on your Bitcoin, Ethereum, or any other crypto. And then there were stablecoins where rates of 8%-15% could be easily found. You could just set it and forget it, it was as easy as that.

But as we now know, the risks were much higher than most people recognized and in the end, we learned it isn’t worth picking up pennies in front of an oncoming freight train. While we all re-taught an extremely valuable lesson of “not your keys, not your crypto.” There is no denying that this easy method to earn a significant passive income will be missed.

These services becoming insolvent was a shock for many, but before that, the SEC began to attack the crypto lending industry beginning by fining BlockFi for $100 million. In short, crypto lending services probably always were destined to have a short life before being regulated to become a lesser product. Many of us knew in the crypto market knew this, and were trying to take advantage of the opportunity while it lasted.

And so we needed to pivot. Since earning a passive income by lending out Bitcoin was no longer viable, the next best thing was to earn a passive income by staking your cryptocurrency. Most proof-of-stake blockchains such as Ethereum, Polkadot, Solana, and countless others of staking abilities. Since this earning ability was baked into the protocol, the theory was that this would be a safe way to earn a passive income. By necessity or convenience, many people chose to stake their crypto on exchanges or other services. Everything seemed great.

But then last week happened.

The SEC fined Kraken $30 million for offering staking services and forced them to shut down these services in the USA. This was an event that sent shockwaves throughout the industry. Likely, Kraken won’t be the last company that the SEC targets for this. Smaller companies will be forced to comply and will likely end these services. Other larger companies like Coinbase or Binance, might be willing to take on the SEC over this.

However this ends up, once again the crypto passive income game has changed. We are learning the same lesson time after time, the importance of taking self-custody. Centralized services such as lending on BlockFi/Celsius, or staking on Kraken may disappear and no longer become an option. With that said, staking while maintaining custody or through decentralized services will become the go-to method. For example, in the past, if you didn’t own enough Ethereum to run your own validator. Many people would stake their coins on an exchange like Kraken or Coinbase. But now they will need to use options like Rocketpool or Lido. Even those services will likely be tested to see how decentralized they are. We may end up learning that they were much more centralized than we thought and can be controlled or even taken down by the government. In the end, staking by running your own validator will be the safest option.

Earning a passive income with your cryptocurrency hasn’t died, but it has been changed forever. It isn’t as easy as it was before, but that doesn’t mean you shouldn’t try to do it. Earning a passive income with your crypto, especially when the asset’s value is heavily increasing can be life-changing and potentially make you financially independent.

What does this all mean?

In the past, likely, many people didn’t put extensive thought into the crypto they were buying, where they were buying it, and what they would do with it after that. Your crypto strategy is becoming more and more important by the day. If your goal is to earn passive income with your crypto, then Bitcoin or other coins that you won’t be able to own enough to run your own validator might not be the best option for you. When it comes to crypto accumulating goals, there have always been two golden goals that everyone should be striving toward. Accumulating 1 full Bitcoin, and/or 32 Ethereum. Owning 1 Bitcoin could give you financial freedom in the future and is the gold standard in crypto. Owning 32 Ethereum will allow you to run your own validator and have a lifetime of great crypto passive income.

How about you? Have you changed your crypto passive income strategy?

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