Today's investor is living in a completely different world than the world that our parents, and grandparents saw. The thought used to be that all you needed to do to eventually become wealthy was to work a 9 to 5 job; and then deposit as much as you could into a bank savings account. Then you could just let the interest ride and let compound interest work it's magic. It might sound hard to believe, but in the not so distant past, savings account interest often averaged from 7.5-8.5%. In 1975 the interest rate actually peaked at a rate of 14.6%. An incredible rate.
During that time, people didn't need to worry as much about how they would beat inflation or grow their own wealth for retirement. The answer was very simple. Just go to work, deposit the money into your bank and let it ride.
But, that is no longer the case. You would be incredibly lucky to find a bank that offers even 1% as a return. The reality is that most banks offer an interest rate closer to 0% and sometimes even has a negative rate. A negative interest rate means that the bank requires you to pay them a percentage to hold your funds. I can't understand why anyone would want to do that. Basically you would be giving money to the bank to have them lend it to other people, and you would be paying them for that privilege. All-the-while your funds would have absolutely no growth.
What can you do?
We are all trying to build a better life for our futures and while I am all-into bitcoin; for some people investing into bitcoin or other cryptocurrencies can still be too volatile or risky for money that they cannot afford to lose. But, does that mean the people that are going through financial hardships, or just wanting to get ahead cannot find other ways to invest that could help them. No, thankfully there is another option.
I have discussed several times how I love to use lending services to grow a yield on my bitcoin; such as Celsius, BlockFi, Nexo, Ledn and more. I have used these places to yield a 6%+ interest yield on my bitcoin that has helped me to grow a great form of passive income. Like I mentioned just above, perhaps using the typical form cryptocurrency such as bitcoin or ethereum, isn't the best option for you right now. But there is a much less risky option available to you there.
Stable coins.
If you don't know what a stable coin is; it is coin that is often priced at 1:1 of the U.S. Dollar. The price remains unchanged. For every $1 of the coin, they have $1 in their reserves. So in essence; when you save stable coins, it is very similar to saving cash. Some of the most popular stable coins are USDT, USDC, BUSD, GUSD and DAI.
But here is where the real benefit comes into play. Many of the lending services that I just mentioned above also pay incredible interests rates if you decide to deposit your stable coins with them. At most places, you will be able to find a typical interest rate ranging from 8-10%. But there are some places that even offer upwards of 12%. It is a flashback to the heyday of incredible interest rates that our parents and grandparents were able to enjoy. Finally, we have another option to make a great return by just saving cash.
But maybe you are still on the fence about this idea. There are other positives that come along with it as well. You can access your funds anywhere, across the world. The market is never closed and you can send your coins to anywhere in the world, anytime you want to. Finally, there have been great strides recently with several companies now offering debit cards in which you can use your stable coins to pay with the card. All-the-while you can earn interest on the funds not being spent. The list of reasons to save Stablecoins instead of cash is growing every single day.
The Drawbacks
At the moment, a majority of the Stablecoins have been built on the ethereum blockchain and at the moment they are experiencing high transaction fees. Which means if you are wanting to send your coins to a different wallet, or perhaps swap it for a different coin; the fees will be quite high right now. And in many cases this can be unavoidable if you are wanting to use one of the above lending services, because you need to first send the Stablecoins there in order to begin receiving interest. The good news is that this situation can be avoided if you are smart with your money. First you need to decide where you will be wanting to lend your Stablecoins. If you choose a place where you can also buy coins; then there would be no need to send the stable coin there. You can just buy it directly and begin earning that great interest. Places like Voyager, BlockFi, Nexo and others allow you to purchase coins on the service. Just be sure to decide what you want to do with your money before you use any of it.
One other thing to keep in mind is that while you will still have access to your funds. It is a process to get your funds back into your bank account if you were to need them. First you need to sell them, and then withdraw the cash back to your bank account. Depending on the service, this could take a few days. So don't put any money on the service that you need immediately.
While most people might not be able to get rich by doing this. You won't have the great upside potential that you can have by holding bitcoin. But, you also won't have the downside potential as well. This is a great tool to outpace inflation, and start a great cornerstone in your journey towards financial freedom. While admittedly I still prefer to use bitcoin as my savings account. It would be reckless to be 100% into bitcoin and I think that having a nice portion in Stablecoins is a great way earn a yield on your assets that is a little less risky.
How about you!? Have you been using Stablecoins as your cash reserves and also lending out it to earn a yield on it? Which lending service is your favorite?
As always, thank you for reading!
Great one...