Month: September 2022
Even though cryptocurrencies are a relatively recent phenomenon, they will definitely catch on. The crypto world has a lot to offer.
Cryptocurrencies are traded 24/7
One advantage that cryptocurrencies have over banks is that the crypto market is always open. Coin mining takes place around the clock and transactions can be booked at any time. So you don’t have to wait for any exchange to start trading for the day when you want to buy, sell or trade cryptocurrencies.
This development had such a major impact. Even normal stock exchanges are now examining whether stocks can also be traded outside of regular bank opening hours. Although it could take some time until then. Therefore, for investors who trade 24 hours a day, 7 days a week, cryptocurrencies could be the best way to generate returns outside of normal trading hours.
The rising inflation rate poses some dangers for consumers. In order to avoid more far-reaching consequences, solutions must be found urgently. But what do the trendy cryptocurrencies such as Bitcoin have to do with it?
Cryptocurrencies are intensively discussed in the media. While some are still skeptical, others are highlighting the benefits of the decentralized currency. Cryptocurrencies are considered by many to be a revolutionary replacement for the official monetary currency, meanwhile, you can even buy Bitcoins with PayPal or even trade them on platforms such as Bitcoin 360 AI. Business journalists, on the other hand, fear that digital currencies will harm the economy in the long run.
In today’s market economy, the prices of goods and services are constantly changing. While inflation hasn’t been a big issue for years, inflation rose to over five percent in November for the first time in nearly 30 years. The risk of rising inflation: Over time, the value of the currency decreases, inflation reduces purchasing power and the value of money, and people can buy less for their money. Could the criticized digital currency counteract and help as a solution to rising inflation?
Dangers of inflation and possible protective measures
A rising inflation rate, i.e. an increased price for certain services or goods, can lead to a loss of purchasing power. This means that for a certain amount of money, less can be bought than before because the value of the money decreases. For example, for a price X, less gasoline or less food can be bought than before. However, since the demand for certain goods remains unchanged, low-income earners are clearly at a disadvantage.
Because the more inflation rises, the more the value of one’s own assets decreases. If you want to protect your assets from devaluation, you should, as always with investments, pay attention to a broad diversification of assets through investment in many different investments. For example, an investment such as real estate can make sense, but investing in stocks or precious metals such as gold can also be worthwhile.
In addition, however, cryptocurrencies could also be a solution to rising inflation.
ALSO READ: Bond Investing & The Fundamentals of Bonds
Cryptocurrencies as protection against inflation
Crypto experts claim that cryptocurrencies can provide protection against inflation. In fact, people who need economic security often resort to cryptocurrencies such as Bitcoin.
An example: Argentina has been in the midst of an economic crisis for years. Thus, Argentines are still exposed to the consequences of the hyperinflation of 1998. Although the effects of the so-called Argentina crisis were only recorded until 2005, the aftermath is still not over. Many no longer rely on the domestic peso and save on foreign currencies such as the US dollar or the euro – but the purchase of foreign currencies is limited.
Cryptocurrencies such as Bitcoin are therefore considered a popular alternative. The idea behind the cryptocurrency Bitcoin is to be able to use an alternative currency outside the purview of governments and federal agencies. If the cryptocurrency is bought, the regulation is due to the respective private company and not to the legal system of the country. Bitcoin is not susceptible to inflation compared to the normal currency and thus a possible solution to counteract the consequences of inflation.
Bitcoin as a means of payment
Bitcoin as a means of payment offers many other advantages in addition to its non-susceptibility to inflation. For example, transactions can be concluded faster and cheaper. In addition, the digital inventory allows users to make transactions abroad without paying high fees. Those who decide to buy the currency as an investment can do so in a variety of ways.
The purchase of coins is possible on various crypto-Internet marketplaces and exchanges, such as Binance, Kraken, Bitstamp, and Paymium. Furthermore, coins can be purchased outside of such marketplaces. There are different payment options in the different transaction markets.
Recently, it is also possible in the USA to buy, sell and hold Bitcoins with PayPal. When PayPal will offer this new feature to its German users is not yet known. Klarna, Visa, Giropay, Mastercard, Skrill, Advcash, and Etana also allow the payment of Bitcoins. These vary depending on the location of the transaction, because not every exchange supports every payment transaction. For payments by Sofortüberweisung, care should be taken to ensure that the provider covers the costs of the transaction, so that there are no fees for the payment.
Cryptocurrencies are currently establishing themselves as an asset class in their own right. As with any other asset class, various organizations are gradually developing many financial products for cryptocurrencies, including the so-called crypto loans.
1. What are crypto loans?
Crypto loans are secured loans where a certain amount of an asset (cryptocurrency), often kept in cold storage, must be deposited as collateral to obtain a loan. As a rule, the applicant must perform an identity check and if accepted, the merchant can deposit crypto and get a loan. If the recipient of the crypto loan is unable to repay the stated amount on time, the lender could liquidate the cryptocurrency that the recipient used as collateral.
From a business point of view, crypto loans have two sides: one side is the granting of the loan to a customer on the agreed terms and the other side is the financing of this process. There are platforms that offer crypto loans and provide liquidity with income products such as rental, staking or savings accounts. As a rule, customers invest money for a certain period of time in order to achieve interest and passive income.
2. What are the advantages of crypto loans?
Apart from the fact that they are much easier and faster to get than a traditional loan, crypto loans are so popular because a loan against cryptocurrencies means that you can keep your digital assets in case the price rises.
With a crypto loan, you can HODLen and at the same time ensure that you have new funds. Such a loan can be considered if you are convinced that the coin will hold its value, but need a certain amount of liquidity and available funds to pay for everyday expenses, rent, bills, and other things.
Crypto loans are based on a blockchain. That is, they are immutable because transactions cannot be changed. This makes them more trustworthy. In addition, it often takes only one day to get a loan, as the identity check is often minimal. However, this varies from platform to platform. The only requirement is usually an official identification document (since there is no need to carry out a credit check unlike in bank loans where you need to improve your credit score by getting a Net 30 account from companies like FairFigure).
3. What are the risks of crypto loans?
The first and biggest risk is that companies that make such loans may become insolvent, as in the case of the crypto platform Celsius, which recently filed for bankruptcy.
Another risk is the way the cryptocurrencies or collateral are stored. There are two types of crypto exchanges. On the one hand, centralized exchanges such as Coinbase or Nebeus, where control is largely in the hands of a third party. In addition, there are also decentralized exchanges where the private keys (and thus access to your digital assets) are stored only by the owner of the account and not by a third party. Both types of exchanges have their advantages and risks.
Another risk to consider is the volatility of cryptocurrencies. If a user takes out an entire Ethereum (ETH) as a loan at a price of 4,000 US dollars and the price drops significantly, the value of the security is lower and there could be a demand for additional margins. That’s a risk that comes with the volatility of cryptocurrencies in general and isn’t necessarily related to loans. But this risk must be taken into account in any case.
In addition, there are tax and regulatory risks associated with decentralized platforms, as many of these companies do not adhere to regulatory protocols such as identity checks or anti-money laundering measures. Decentralized lending is therefore accompanied by a certain degree of uncertainty. Centralized platforms, on the other hand, comply with such regulations. Therefore, the above risk does not exist with these and consequently, they are safe.
4. How to take out crypto loans?
To borrow money, you have to choose the right platform. There are many platforms that offer crypto loans, but not all of them are safe and compliant.
Before you apply for a loan, you should definitely make sure that the platform is secure. It is always advisable to carefully review the Platform and consider the Platform’s registrations, licenses, trusted partners, and security measures, such as the approach to asset retention and insurance.
When looking for the right platform, you also have to choose the right provider for your own needs, because not everywhere the same assets are accepted as collateral or the same credit conditions are offered. For example, you cannot get a loan in $MATIC on all platforms.
When applying for a crypto loan, the amount of the loan depends on the amount of collateral that an investor can deposit. A common measure is a loan-to-value ratio, which refers to the amount of the loan and the value of the collateral. Crypto loans usually have very low loan-to-value ratios due to the volatility of the crypto market, but that depends on the particular platform.
One of the platforms that enable crypto loans is Nebeus. This uses cold storage, which means that the private keys or access to your cryptocurrency are kept offline where hackers can’t reach them. Through Nebeus you can get a quick loan with 0 percent interest for 3 months.
Loans can be obtained immediately. The only thing that is needed is an identity check, crypto collateral, and the acceptance of the loan agreement. This entire process is handled almost immediately via the app or desktop platform.
Nebeus also offers flexible loans that have a loan-to-value ratio of up to 80 percent. More than 9 coins are accepted as collateral. Nebeus also offers the ability to buy or sell cryptocurrencies and stablecoins at the market rate with a fixed fee of 0.5 percent per trade.
5. How can you lend or borrow your cryptocurrency?
With this business model with crypto loans, the question arises as to how the platforms finance the loans offered.
Several platforms use profitable products such as crypto renting or staking, where a client blocks their digital assets for a certain period of time and receives rewards for this, which they can use for the purpose of liquidity. Here, the platforms use the money that has been blocked for a certain period of time to provide liquidity for the loans.
If you want to borrow your cryptocurrency, you need to find a good platform for it. Here you have two options. With a fixed interest rate, the exchange rate is set by a control center, such as the platform used. A flexible exchange rate depends on the level of supply and demand at the time of a transaction.
When lending cryptocurrencies, it is important how long the assets are locked and unavailable for trading, as this varies depending on the platform and they are subject to market fluctuations. However, lending stablecoins, which are usually not affected by the volatility of the market, is worthwhile if the user does not want to use them in the short term.
Some platforms specialize in only one crypto financial solution (such as granting crypto loans), while others offer multiple services. For example, Nebeus also offers four crypto loan programs where you can borrow over 20 coins: two allow you to borrow cryptocurrencies that offer up to 6.5 percent return per year, and the other two allow you to borrow stablecoins that offer up to 12.85 percent return per year. In addition, there is the peculiarity that you can borrow one coin and be rewarded with another.
You’ll be hard-pressed to find a more volatile market than cryptocurrency. It’s an incredibly exciting space, but one that can also be incredibly risky. If you don’t take the necessary precautions before diving in, you could end up losing your money. Probably, this is the least thing you want to happen. After all, who wants to lose their hard-earned cash?
Thankfully, there are ways to minimize your risk and increase your chances of success when it comes to investing in cryptocurrency.
Before you make a decision to buy any coins, you’ll want to make sure you’re as informed as possible. If you’re new to cryptocurrency, you’ll want to spend some time learning about the different types of coins and their underlying technology. This will help put you in a better position to make informed decisions about which coins to invest in.
You’ll want to take the time to explore the different types of coins out there and understand what they’re trying to do.
If a token is trying to solve a problem that you’re interested in, it might be worth taking a closer look.
Only Use Money You Can Afford to Lose
As we’ve mentioned before, crypto is incredibly risky. The vast majority of people lose money when they invest in crypto. If you’re going to get involved in crypto, you need to be prepared for the fact that you might lose your money.
It’s important that you only invest money that you can afford to lose. The last thing you want to do is get yourself into debt because of crypto. If you do decide to invest in crypto, it’s important to only use money that you can afford to lose. You don’t want to invest money that is intended for something else.
Make Sure You Have Life Insurance
This may sound morbid, but make sure you have life insurance, especially if you’re in Canada. This is especially important if you have a family that depends on you financially.
If something were to happen to you, they would receive a substantial amount of money that could help them get through tough times. That’s why it is important to have Life Insurance for Estate Planning in Canada.
It’s possible your crypto investments could make you a millionaire, but they could also completely wipe you out. Make sure you have something to fall back on in case the worst happens.