Ctrl+shift+V is what you should do. Ctrl+V is used by shells for I believe inserting characters without doing some sort of evaluation. I don't remember the specifics though, but yes Ctrl+shift+V to paste.
And your default shell is a POSIX compliant shell, usually dash or ash, so that's what I mean by sh. You can set it in ~/.config/alacritty/alacritty.toml with:
All.