12/21/2020

How to live off the interest from your stablecoins

IMPORTANT NOTICE: This article does not constitute financial advice and is for informational purposes only. The price of digital assets can go down as well as up and you may lose all of your capital. Investors should consult a professional advisor before making any investment decisions.

Stablecoin strategies are particularly well suited to long-term investment, as this allows the high annual percentage yields (APYs) to compound over time, leading to wealth accumulation. However, not everyone is looking to invest small amounts on a regular basis or to leave their money invested for long periods of time. What about those investors that are looking to live off the interest from their stablecoins?

The good news is that, with the double-digit APYs available on stablecoin strategies, drawing a regular passive income from your digital assets is now easier than ever. However, unlike the dollar cost averaging approach we have covered in a previous blog, in order to live off the interest generated from stablecoin investments, a significant initial lump sum investment is needed. It might surprise some users, however, that even a relatively affordable initial investment can generate attractive passive income every single month.

Regular income

Different investors are looking for different results from their passive income strategies. For those looking to draw regular amounts every month, this could be a way to supplement their existing income, perhaps to pay for additional luxuries or to allow for reduced working hours and more free time. Others may be happy to invest a larger lump sum in return for a monthly income that would allow them to ditch work altogether.  

In this blog, we explore how to generate three levels of monthly income: $500, $1,000 and $2,000. We take a look at how an investor can earn each of these amounts with YIELD App by investing in stablecoins and holding our native token, YLD, in their wallets.

READ: How to become a stablecoin millionaire

The most efficient way to achieve these goals with YIELD App is by becoming a Tier 5 user, which means holding at least 20,000 YLD tokens in one’s wallet. At the current price of $0.43 per YLD (as of September 30, 2021), this amounts to $8,600. 

Tier 5 users receive the highest APYs of 20.5% on the stablecoins USDC and USDT. Stablecoins are digital currencies that are pegged to fiat currencies, in this case to the US dollar. The higher the APY, the lower the initial investment will need to be to reach that all-important monthly goal, whatever it may be. So becoming a Tier 5 user is a worthwhile first step.

IMPORTANT NOTICE: YLD is not pegged to a fiat currency and so its price can and does fluctuate significantly. The price can go down as well as up and investors may lose all of their capital.

Earning $500 a month: every little helps

Let’s start with the lowest of the three amounts. How can an investor draw a regular monthly income of $500 from their stablecoin strategy?

An initial investment of 20,000 YLD (currently valued at around $8,600) would take the user in question to Tier 5, meaning the total APY on USDT or USDC is 20.5%. This comprises a base APY of 10.5%, plus an additional 10% bonus APY on the stablecoin held, paid in YLD. On top of this, investors will also earn interest on their YLD holdings at an APY of 10%, also paid in YLD.

Based on this, and the current YLD price of around $0.43, a Tier 5 user would need to make an initial investment of $25,100 in USDC alongside their 20,000 YLD to draw $500 of income per month. This makes the total initial investment necessary to draw $500 per month roughly $33,700 - less than 1 bitcoin! 


YIELD App's handy rewards calculator


You can run these, or any other numbers to calculate your desired monthly income by heading to our token page and using our handy rewards calculator, as pictured above!

READ: What is digital wealth management?

Earning $1,000 a month: supplemental income

For some users, $500 of passive income a month may not be quite enough. Perhaps they want to get the most out of their existing savings and have a higher initial sum available. Let’s look at what it would take to reach a monthly income of $1,000.

In addition to the initial investment of 20,000 YLD (currently valued at around $8,600), a Tier 5 user would need to deposit $54,500 into a stablecoin strategy with YIELD App. Earning the maximum annual APY of 20.5%, this would generate an income of around $1,000 every month. 

This means the total initial investment needed to generate an income of $1,000 per month would be around $63,100.

Earning $2,000 a month: living off your stablecoins

Both of the examples above would allow an investor to earn significant passive income on a regular basis to supplement existing income. But what if you are looking to draw enough every month from your stablecoins to be able to live?

READ: Cryptocurrency and DeFi use cases: Stablecoins for seniors

In this last example, we take a look at how to earn $2,000 a month from a stablecoin strategy – a monthly amount one person could live off in most parts of the world. 

In addition to 20,000 YLD, an investment of $113,000 in a USDT or USDC strategy would be needed in order to draw an income of $2,000 every month, adding up to a total starting investment of $121,600.

Saving for an income 

Voila! This is how you can live off the interest from your stablecoin strategy – or at least use it to supplement existing income and make life that little bit easier. Of course, the initial investment is not negligible. However, for those that don’t have the cash to invest upfront, using a long-term holding strategy to accumulate the lump sum is an option. 

READ: What is dollar cost averaging and why does it matter for investors?

For instance, if a user were able to deposit 20,000 YLD straight away to earn the highest APY of 20.5% in a stablecoin strategy, they could then start with an initial sum of just $1,000 in a USDT or USDC strategy and top this up with $500 a month. In three years they would have $26,503 - enough to generate an income of $500 per month.

IMPORTANT INFORMATION: All figures are for illustrative purposes only. The price of digital assets can go down as well as up and an investor may lose all of their capital.

Projected earnings after three years

Source: https://www.thecalculatorsite.com/ 

Meanwhile, an investment of $1,000 in USDT/USDC topped up with $1,100 every month for three years would result in a lump sum of $56,087, some $15,487 of this in earnings. This would be enough to earn $1,000 a month from a stablecoin strategy henceforth.

And finally, an initial investment of $5,000 in USDT/USDC topped up with $1,000 every month for five years would result in a total amount of $117,633 - enough to generate a comfortable $2,000 a month!

However, it is important to remember that any investment in digital currencies is not without its risks. Digital asset investment accounts are not like traditional investment accounts, since the sector remains largely unregulated. And, unlike a traditional bank account, there is no guarantee that your money will be safe, though we at YIELD App take many steps to secure our users’ funds. 

As such, it’s important to only invest what you can afford and avoid putting all your proverbial eggs in one basket. In addition, it is worth researching the tax rules for cryptocurrency in your jurisdiction, as this can affect your take-home amount.

READ: What is the capital gains tax for digital assets in Europe?

For those with the funds to invest, though, it is possible to earn attractive passive income from stablecoins on a monthly basis, perhaps even enough to live off. And for many, that is the ultimate financial dream.

Do you want to make up to 20% APY on your USDT, USDC and ETH? Sign up for a YIELD App account today!

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