Why Cryptocurrency Trumps Traditional Saving and Investing Methods…Significantly
Taking care of your personal finance can be daunting. Budgeting, investing, inflation, saving for retirement, and the list goes on. There’s an alarming amount of information out there to learn and be aware of. Still, when you consider the current economy and the problems many people are facing not only in America, but around the world, I think it’s time to start understanding not only the current system, but also better alternatives. Specifically, the world of cryptocurrency.
So where to begin?
If you’re like me, your main focus your whole life has been primarily on making money, then saving that money as much as possible (outside of the occasional Amazon purchase or fast-food run). Investing has always been intriguing, but also risky and intimidating. So we choose to be content with the interest our bank pays us on our savings.
But what is the difference between actively investing and earning passive interest? How does cryptocurrency fit into this system, or beat it? These were some of the baseline questions I felt I had to answer for myself.
This is what I learned:
A Basic Overview:
Banks pay you back a small percentage on the money you keep in your account. How do they make this money to give you? They loan it out and charge the loanee a higher interest as it gets paid back. Basically, they let people borrow your money, then those people pay the bank back more than they originally borrowed in the first place. The bank then pays you a small percentage as a way of saying “thanks.” You are guaranteed to get this money, but it really doesn’t amount to much. Low risk, low effort, low return.
Actively investing in the stock market certainly puts you in more control of your money and what you’re putting your money towards. You also have more visibility, and can see what your money is doing for you. It’s possible to make a ton (most likely not a literal ton) of money. It’s also much more possible to protect yourself against inflation, though there are always fluctuations and the possibility that you can lose money. More risk, more effort, more (possible) returns.
Banks charge an obnoxious amount of interest when they loan money out. But who sees that money? Not you, that’s for sure. Banks usually charge at least a 9% interest, but how much are you making on your savings account? 0.06% on average. That’s a huge difference. Banks are basically using your money to make money, then not giving you a fair share. At this interest rate, you’re actually losing money due to inflation. Every time the Federal Government pumps new money into the economy, or the economy fluctuates, your dollar loses some of its value. The average annual inflation rate of the U.S. dollar is 3.22% since 1913. That means we’ve seen an overall 2275% inflation of our dollar in just over 100 years. That’s not really a number to just shrug off.
Investing is a better safeguard against inflation, but again, there is no guarantee. It requires more work, more knowledge, and more management. You have to be willing to either put in the work learning and analyzing trends, or you have to pay someone else to manage your money for you. Depending on how expensive they are, how good they are, and how much money you are investing, the return of investment (ROI) could be very low. There are also high fees when it comes to brokerage accounts and moving funds around.
These are just some of the reasons not only cryptocurrency, but also Digifox, is so appealing. You get to be your OWN bank.
Digifox allows you to use your own money to invest. You get to choose which cryptocurrency you invest in, and you get to keep every penny you make. You’re able to earn interest on your crypto using a service called Celsius. They also allow you to instantly borrow against it, meaning you can put up your crypto as collateral, and get half of that value instantly as cash. Instead of getting a mere 0.06% on your savings, 80% of the profits that would have traditionally gone to the bank, now goes to you.
Cryptocurrency is considered easier and more secure to invest in than the more traditional options, and they give you a higher ROI. According to this article on Roninani.com, “Firstly, crypto’s main appeal is the relative volatility of the market. In no time, investors can double or even triple their investment, something that traditional stocks really do not have the ability to do. If you are successful in the stock market, you could make a 5–15% ROI. However, investing in Bitcoin exactly 12 months ago would yield approximately a 144% return.” And, “…it’s very hard for an individual to recognize, analyze, and capitalize on trends in the greater stock market. This is not the case with cryptocurrencies, and crypto price increases and decreases are much more tied to one another, as the market hits peaks and valleys more or less with one another.”
On top of all that, almost all crypto is finite, meaning it’s value cannot be lost due to a new influx of coins. It mimics finite resources like gold, and is discovered or “mined” in a similar fashion.
In summary, I learned traditional, centralized systems are outdated, risky, and simply not profitable. Cryptocurrency is providing a way for people to not only hold onto the purchasing power of their money, but also invest and save in a far more profitable and secure manner.