The End of Bitcoin Passive Income?
Throughout the last few years, many of us in the Bitcoin market began lending our coins to earn a passive income. After all, why shouldn't we? There were two options we had. Either have your BTC in cold storage or sitting on an exchange doing nothing. Or lending it out to third-party services to earn a nice passive income. Most of us who have conviction in Bitcoin know the name of the game is to acquire as much BTC as possible and this was a great way to accumulate even more of it. The lending market was in peak form. It was incredibly easy to find "respected services at the time" offering 6-7% for Bitcoin lending. If you ventured out to less-known services, you could find rates much higher.
The process was so easy as well. All you had to do was deposit your coins and begin earning. Literally just setting it and forgetting about it. All the while earning Bitcoin passively. Influencers in the crypto market were almost always sponsored by one of the services. Lending out your Bitcoin had become mainstream. New users to the space had dreams that this would allow them to accumulate much faster and help turn around their lives financially. Other users who had been in crypto for a few years had dreams that this could become a passive income avenue that may eventually grow large enough to supplement their regular income.
And then we became addicted to it. We forgot about all of the risk. Many users even felt these services were completely safe.
We had forgotten the golden rule in Bitcoin. "Not your keys, not your Bitcoin." Some lessons are learned hard, but often they are the most important lessons you will ever learn. This was a refresher of that important lesson for many of us.
In what seemed like an instant, the opportunities to make a passive income with Bitcoin disappeared. Unlike Ethereum, which has passive income now built into the protocol by being able to stake and protect the network. Bitcoin doesn't have any passive income opportunities built into the protocol. That is the reason that crypto lending first took off. People wanted to find ways to make money with the Bitcoin assets they already had.
It should be mentioned that there are other opportunities to make Bitcoin passive income. The first is mining. Unfortunately, this is out of reach for most people due to the high cost of mining ASICs, and the energy that is required to mine. There are other options such as providing liquidity to dex's, puts, and call options. But these too have risks that could have you either lose your Bitcoin or sell at a price that you didn't want to. You could set up your own Lightning channel node but currently would bring in very little money. To sum it up, there is nothing that was as user-friendly as Bitcoin lending.
For many people making a great passive income is one of the things that they like most about being in the cryptocurrency markets. You would be hard-pressed to find banks that pay interest rates above 1%. Meanwhile, rates in the crypto market can regularly be found at 10% and above. It seemed like a no-brainer for many of us. Even though Bitcoin is the king of crypto, and the one that started it all. These people may begin to view Bitcoin less attractively because there is no option to earn passively. They may begin to invest in other crypto assets instead.
To that, I say "Not so Fast."
It is true that there are no native passive income methods built into Bitcoin. It is also true that many other coins in the crypto market offer high staking rates. With that said, it is also true that most of those coins' price will trend toward zero when compared to Bitcoin. Just look at this market cap snapshot from August 2017 during the midst of the last bull run.
Of the top 15 coins, only 3 currently remain within the top 15 today. One of them, BitConnect, turned out to be a Ponzi scheme where people lost all of their money. While it is wonderful to be earning a great passive income by staking, participating in DeFi and the list goes on. Earning 15% on a junk crypto asset that is trending towards zero isn't very helpful. That is why so many Bitcoin maximalists argue that all you need to do is buy Bitcoin and hold on to it. They believe that it is the greatest asset that you can buy, and that it will only continue to accumulate in the future. Still having the potential to go up thousands of percent. Why worry about earning an extra 5% here and there, when it is destined to go up much more? Instead, your main priority should be taking your own custody and protecting your Bitcoin. As I mentioned before, when you lend, participate in DeFi, and bridge to other chains, there is a chance you could lose everything. Many of the people who lent out their crypto on Celsius, Voyager, and Vauld never thought this disaster would actually happen. But, it did.
But If passive income with Bitcoin is your thing, In the future other methods may be possible.
There may be additional ways to earn passive income with your Bitcoin or BTC ecosystem tokens. In the grand scheme of things, Bitcoin is still very young and has a lot of development to go. A BIP proposal called Taro plans to allow stablecoins, and would also allow other tokens to be built upon Bitcoin. This could potentially open up the doors to unlocking full DeFi on Bitcoin. There has long been the theory that whatever is built on other blockchains will eventually find its way to Bitcoin. It will just take longer than many of us would hope. Naturally, if this proposal is approved it could bring plenty of passive income opportunities to Bitcoin.
Another possibility is that Bitcoiners will get tired of waiting for these protocol developments to come and will decide to wrap their Bitcoin and move it to other chains. For example, wrapped Bitcoin on Ethereum can participate in DeFi and perform many other functions. In the future, if you are wanting to HODL your Bitcoin you may keep it on the base Bitcoin chain and put it into cold storage. But, if you are wanting to earn passively then you may be forced to wrap it to other chains.
Many people will not like this next possibility because so many people were burned by it this cycle. But, I strongly believe that Crypto and Bitcoin lending will make a strong comeback. With that said, that doesn't mean we should trust them initially. FTX has bought Voyager, has a stake in BlockFi that could change into full ownership, and rumor has it they may be interested in Celsius as well. One thing is for certain, when this industry comes back. There will be more regulations and many lessons will have been learned. The rates likely offered will be much lower than we were seeing last year, but that will make the market more sustainable in the long run.
One of the things that you can count on most in life is that humans will be greedy. It's in our D.N.A. Which makes me believe without a doubt that developments will come to Bitcoin, or new businesses and services will be started that allows users to make passive income with Bitcoin. But, there will always be risks. This is when you need to put in your own research and decide if the risk is worth it for you. Especially considering Bitcoin's future price trajectory potential.
How about you? Are you willing to take on risk to earn passive income with your Bitcoin?
As always, thank you for reading!
I have little or coins of Bitcoin. Haven't search totally but we are heading into financial revolution and we hope that it benefits not just one country but many and the countries around.