Bitcoin is a decentralised cryptocurrency that has overtaken traditional investment options like equities, gold, and real estate. The answer is yes if you ask, “Is cryptocurrency a decent way to grow wealth?”
Bitcoin’s rapid growth is genuinely mind-boggling. When Satoshi Nakamoto released Bitcoin in 2009, its value was $0.08, but by 2021, it had grown to well than $68,300.
Since 1921, digital currencies have risen in value by 627 per cent compared to gold, the closest investment asset to digital coins, which has increased in value by a mere 627 per cent over the same time, from $283 to $2,060 in August 2020.
Even though Bitcoin began trading for $0.0008 in July 2010, it remained in the $10 area for the first several years until soaring to $250 in April 2013 and then $68,300 in 2021. On the other hand, there have been several misconceptions about Bitcoin on its volatility.
The cryptocurrency’s journey has been fraught with severe volatility. Sharp falls, and challenging hikes have both occurred. A tumultuous session in May 2021 saw Bitcoin drop by 30% to over $30,000 before stabilising around $30,000. After hitting a peak of $64,829 in mid-April, the drop has been more than 50% since.
It is difficult for newcomers to profit from Bitcoin due to its high level of volatility. But following a beginner’s guide on trading Bitcoin portends a great way to start trading. Also, you can begin to sell Bitcoin from any part of the world by trading on a credible platform, and you earn in fiat currencies. For instance, when you sell Bitcoin in Ghana, you make money in Ghana cedis.
Stablecoins, which are price-stabilized digital currencies, have been the exception rather than the rule when investing in cryptocurrencies. In contrast to volatile cryptocurrencies, the value of stablecoins is at peg to a significant reserve currency, such as the US dollar or gold.
Stablecoins are a unique type of cryptocurrency because they don’t have the same high volatility as other cryptocurrencies.
Bitcoin As A Tool For Wealth Preservation
Bitcoin can serve two purposes regarding wealth preservation: it can serve as a reliable money reserve or help keep inflation at bay. Because of its limited quantity and decentralisation, Bitcoin protects your capital and funds.
Because of Bitcoin’s decentralised nature, you can send and receive funds from anywhere in the world anytime. You have complete control over the funds because there are no financial restrictions. Moreover, in a financial crisis, an excellent option is to be able to sell your Bitcoin at a reasonable rate. Interestingly, Prestmit is the best site to sell Bitcoin in Nigeria and Ghana.
Bitcoin can be a lifeline for a person living in a country that is in the midst of an economic catastrophe. Consider Venezuela, where the annual inflation rate hit a staggering 80,000 per cent at the end of 2018; this is a typical example. People have fled the country at an alarming rate of more than 2.7 million since 2015.
Carlos Hernandez, a Venezuelan teen, has been using Bitcoin to fight inflation, which is unsurprising. Bitcoin has been his financial savior in the face of total economic upheaval. He has all his assets in Bitcoin and only takes out a tiny amount to cover his expenditures regularly.
Bitcoin is similar to gold regarding wealth preservation and inflation resistance. Even though there is a finite amount of gold and silver, it has been used as a store of value for thousands of years and is commonly accepted.
Crypto Investment: Understanding Stablecoins
The extreme volatility of cryptocurrencies may present an opportunity for expert traders to make money during bull runs, but this attribute is a sure killer of stability. Most people and businesses aren’t going to accept a payment method that could lose value in the blink of an eye.
In the absence of a stable cryptocurrency, investors sought a way to build wealth through a cryptocurrency that remained consistent in value.
As of February 2022, stablecoins had a market capitalisation of over $180 billion, a significant increase from the roughly $38 billion that they had a year before that date. Stablecoins’ role as the engine of decentralised finance (DeFi) had a big part in this.
Stablecoins were introduced as a bridge between traditional finance and crypto markets, supporting critical financial transactions such as lending, borrowing, derivatives, and more, providing a consistent base value for the Defi ecosystem.
There are two types of stablecoins: those based on fiat currencies like the USD or gold and those based on computational principles. Currency prices are kept steady in the first scenario by a centrally held reserve of fiat currency or assets.
When it comes to virtual currency, one example is the stablecoin, which can retain a million dollars and issue a million virtual coins. Stablecoins like Tether (USDT) and USD Coin (USDC) are well-known examples.
The algorithmic approach, on the other hand, makes use of digital assets as a form of collateral. Algorithmic coins use economic incentives to maintain the currency’s peg, thanks to their reliance on smart contracts for stabilisation.
Algorithmic currencies include Dai (DAI) and the US Dollar Index (USDX). Remember that custodial stablecoins are more stable than algorithmic counterparts. Both asset-backed and algorithmic stablecoins may be beneficial to have in your cryptocurrency investment portfolio.
How Can A Crypto Investor Make Money With Stable Coins?
1. Crypto Staking
Several protocols use the proof-of-stake (PoS) consensus method, which requires miners to stake coins before they can verify transactions. The stakes get rewards when nodes verify transactions using specific algorithms. The staking method provides a friendly approach for stablecoin holders to make money and expand their wealth.
2. Liquidity Mining
Providing liquidity to the DeFi protocol is the primary goal of liquidity mining. In the liquidity pool, also known as a smart contract, holders offer their digital coins to trading pairs like Polkadot (DOT)/USDC for crypto trading (different from crypto lending and borrowing).
In return, the user can access a token known as a liquidity provider. As long as users keep their tokens in the pool, they will receive the liquidity provider token and any native tokens created at each block or governance tokens.
3. Crypto Lending
Crypto lending mirrors traditional banking in that you deposit money with a bank and get interested in it. Stablecoins perform exceptionally well when it comes to generating passive interest. You can lend your stablecoins to DeFi protocols, where you will utilise them for lending, and you will earn extra coins for providing liquidity.
4. Store Of Value
You can effectively store the value of stablecoins if you desire to avoid volatility. They are great if you want to keep your money safe and out of the turbulent world of cryptocurrencies because they hold their value over time. Stablecoins are an excellent option if you don’t want to get caught up in the wild price swings of cryptocurrencies.
Conclusion
Cryptocurrency can be a robust wealth preservation and growth tool if used correctly. Cryptocurrencies, like Bitcoin, have been how millions of people have become worldwide. The key to success in crypto investment is to recognise the downturn, ride the bullish phase, and invest for the long term.
