You’ve done it! You discovered that cryptocurrencies aren’t just another fad the nerds in Silicon Valley cooked up for their amusement. You’ve realized that the blockchain technology which allows for anonymous and secure transactions isn’t even the most impressive thing about cryptocurrencies.
Instead, it’s the fact that cryptocurrencies are becoming a veritable solution to the potential devaluing of fiat currencies due to policymakers extending the supply of cash.
U.S. Congress, for instance, spent over $6 trillion in 2020 and is looking to conjure up even more cash through a proposed infrastructure bill.
Traditionally, such inflationary measures made investors purchase more gold and other “rare metals” to offset their potential loss in cash assets. However, these resources are still saddled with being unquantifiable in terms of total circulation and thus subjected to the whims of market forces.
Case in point: the price of gold peaked in August 2020 but has since retreated despite vast injections of newly minted cash into the U.S. economy. This means gold is no longer a surefire bet in uncertain times.
Decrypting Cryptocurrencies for Everyone
On the other hand, cryptocurrencies have a limited or pre-determined, publicly trackable supply. Of course, cryptocurrencies are not without their flaws.
For starters, the low barrier to entry to starting one’s digital currency means we’ve seen cryptocurrencies created for a lark or created with inadequate security protocols.
As of January 2021, there were over 8,000 cryptocurrencies in existence. But, unfortunately, most of these digital currencies do not have the same fervent community and support behind them as their more well-known counterparts, leading to their demise.
Those are not the only challenges facing cryptocurrencies, however.
They are still widely misunderstood as irregular forms of currencies. Coupled with how robust centralized banking systems don’t appreciate being circumvented, cryptocurrencies have an uphill battle before being firmly entrenched in society. However, Bitcoin and Ethereum are leading this charge as indicated by their market values and support from PayPal, Expedia, Shopify and Subway.
However, we’ve also seen that what is giveth can be taketh away. For example, Bitcoin jumped in price after Tesla announced it would be accepting it as payment. Still, before the cheers had subsided, Bitcoin’s value dropped back down to earth because Elon Musk had a change of heart, citing environmental concerns for Bitcoin’s energy consumption. There is also the looming threat of government regulation to consider.
So yes, let’s not beat around the bush: cryptocurrencies are in a volatile state. But this doesn’t make them any less viable as alternative currencies. Instead, all the uncertainty cryptocurrencies are experiencing can be chalked up to the growing pains of a revolutionary transactional mechanism.
Light at the End of the Tunnel
While a single tweet from a capricious billionaire can alter the value of a cryptocurrency, the good news is that there are ways to hedge your digital stash.
For starters, you can divest some of your holdings in Bitcoin and Ethereum and purchase stablecoins. These are cryptocurrencies that are pegged to conventional fiat currencies like the U.S. dollar.
Examples include DAI, USDT, and USDC. Yes, we were griping about inflation earlier, but we have to admit that, for now, the house is still rigged to win. The U.S. dollar has more powerful entities backing it up than all cryptocurrencies put together, so there are good reasons to hold on to fiat-backed cryptocurrencies.
Now that you’ve squirreled away a decent amount of digital currency, you can either wait for the significant headlines announcing that Walmart has started accepting Ethereum, or you could put them to work immediately.
Platforms like Hodlnaut provide the cryptocurrencies we’ve been talking about, an opportunity to earn compound interests of up to 10.5% APY. In addition, they offer weekly payouts and none of those prohibitive lock-in periods or minimum deposits, so your whole notion of investing in cryptocurrency for liquidity is preserved.
To anyone unfamiliar with the concept of cryptocurrency generating interest, it’s easy to wrap your head around. Financial institutions are constantly itching to maximize their investments, so platforms like Hodlnaut provide them with a way to take out low-interest loans against their cryptocurrency assets. Hodlnaut keeps a little of that interest earned and passes the rest along to their users.
So run along, check them out, and get your cryptocurrency working for you today.
References
U.S. Government Spending 2020:https://datalab.usaspending.gov/americas-finance-guide/spending/
The total number of cryptocurrencies (as of Jan 2021):https://www.cryptovantage.com/news/why-do-some-cryptocurrencies-fail-and-others-succeed/
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
