Cryptocurrency has become one of the latest crazes around the world as tokens like Bitcoin and Ethereum have been featured more and more in traditional media outlets due to the high gains they have created. It is easy to see why crypto personal finance is so hot right now.
While we are not here to tell you that you will become a millionaire by investing in Bitcoin, there are certain benefits and opportunities that cryptocurrencies can provide you with when it comes to investing and generating passive income.
In this article, we will give you a basic explanation of what cryptocurrency is and some ways in which you can take advantage of them to improve your personal finances. You don’t want to miss this opportunity!
Crypto Personal Finance is an Opportunity
It is not a secret that access to financial services such as banking and credit cards have continuously opened up to more people as years go by. Crypto personal finance may be the next area with explosive growth.
Whereas having access to a bank account used to be a privilege of the rich back in ancient Rome for the storage of coins and jewels, a report by the World Bank showed that 69% of adults around the world had access to a bank account back in 2017, showing consistent increase along the years.
Chances are that you are one of those people with access to a bank account and the financial services it entails: loans, credit cards, interest-yielding, etc.
However, while technology and globalization have made access to financial services more accessible for people of all classes and backgrounds, there are still barriers preventing access to other opportunities.
Investing in commodities like precious metals and real estate have been some of the most popular investment opportunities for centuries, but while they certainly have become more accessible with access to services like bank loans, they still remain greatly inaccessible to the general population.
If you have actively considered investment opportunities at some point in your life, you are probably aware that investing in the stock markets also have been one of the most profitable financial activities over the past years, but regulations around the world have made it difficult for the average person to engage in them.
Crypto personal finance is still a new area, but it is growing fast. It isn’t limited by geography, and offers many ways to diversify away from fiat currency. More on that below!
The Problem With Traditional Markets
While the trend has changed over the past years with Apps like Robinhood becoming a major opportunity for people from all backgrounds to actively participate in the stock market, the stock market is still pretty inaccessible to the average person.
If you paid attention to the news in early 2021, you might be aware of the movement led by the Reddit Community known as “WallStreetBets” in which thousands of internet users came together to actively “fight “against entrenched Wall Street interests.
By using different digital applications like Robinhood, the community was able to cause struggle for institutional investors while generating big profits for themselves. Crypto personal finance may be another area that delivers amazing profits, but it is risky as well.
While this event was a reflection of a growing interest by the general public in actively participating in traditional markets by taking advantage of the growing opportunities that financial applications offer, it also highlighted some of the biggest issues that have prevented millions of people from doing so: Private interests prevail over general interests.
Decades of dominance by big investors have turned traditional markets and financial systems into highly centralized ecosystems that have helped to maintain the status quo.
However, this inequality in financial opportunities they created also became one of the major reasons for the inception of a tool that would bring financial revolution to the masses: Cryptocurrency.
Covering all the different aspects of cryptocurrency is a tedious matter that could take a book to explain in detail. However, an easy way to understand them is as a digital form of money that offers more security than traditional (fiat) currency.
While traditional money depends on a central bank managed by a government to keep, decrease, or increase its value, most cryptocurrencies are decentralized in nature. This means that all the members participating in the project, be it by holding or developing, have the opportunity to decide its future.
This decentralization not only means that no single authority can take decisions when it comes to the future of the currency, but also allows the cryptocurrency to be highly resistant to censorship, manipulation, or any other type of interference.
Crypto personal finance requires that you learn some new ideas, so you fully understand how different it is as a market.
While cryptocurrency can operate like any other currency, not all of them have been created with that idea in mind. Some cryptocurrencies could be compared to “Coupons” used to pay for a service provided by the project that issues it, or even as a “share”, gaining value from the interest other parties have on what they represent.
Cryptocurrency also has the benefit of offering a high degree of privacy compared to fiat currencies, which has gained them criticism for playing an important role in illegal activities. However, studies have shown that the use of crypto in such a way is not only considerably rarer than the use of Fiat but also has decreased over the years.
Another point of criticism is that cryptocurrencies are highly volatile when compared to stock, commodities, or fiat, but this is the same quality that has made them so popular among investors. This volatility is also expected to decrease as the industry matures, which has been occurring as a result of the increase in adoption.
The point is that if you don’t want to jump into the technical aspects of cryptocurrency, you can think of it as a digital currency that can also grant you the opportunity to participate in the decision-making process of some projects, all while offering improved security, transparency, and privacy.
Doing Your Research is Fundamental
While cryptocurrency is not as complex as most people think unless you want to understand all the technical and financial aspects, it is important to do your research before investing in it. If you were to invest in a major fiat currency, it would be easy to choose USD or EUR (the equivalent to Bitcoin and Ethereum).
However, investing in a currency that has promise despite not being at the top, might generate higher gains in the long term. This makes research imperative when choosing what cryptocurrency to acquire.
Crypto personal finance may mean waiting for the markets to move in your favor, even if you do loads of research.
There are several ways in which crypto investors can research cryptocurrencies prior to investing: by understanding the industry a certain cryptocurrency project is targeting and how it will be impacted by it, being on top of the news and acting quickly before others do, getting advice from experts, and many more.
Just make sure not to flip a coin!
One of the best ways for new investors to research and learn about the crypto market is by taking advice from experts. This can be hard sometimes as many crypto influencers might be biased toward a certain project they are investing in, or might not understand all the aspects of the market.
However, there are services like Crypto Society from Motley Fool that combine multiple experts not only to teach you the latest strategies but also to keep you up to date when it comes to specific cryptocurrencies and their behavior.
Crypto News aggregators can also be a great way for you to keep track of the latest developments in the market, allowing you to adjust your portfolio depending on the trends.
How to Start Investing in Crypto
Be it Bitcoin, Ethereum, Dogecoin, Cardano, or any other cryptocurrency you believe will give you the biggest gains, the first thing you will need to start investing is being able to transform your Fiat currency (Dollars, Euros, Pounds, etc) into crypto.
There are several ways to do this, be it buying it from a friend who has crypto, a local service that allows the purchase of crypto, or the most secure: buying it using a well-known online crypto exchange or investment app. Whatever you choose, make sure to do your research to ensure you can trust the option you chose.
Crypto personal finance means doing a lot of research, so if you need to find current information, be sure to check out trusted sources that aren’t biased by commercial interests.
One of the most popular apps to invest in the crypto market (as well as the traditional market), is Robinhood. The application was created to allow everyone to invest while paying low to non-existent fees, which made it the most influential app on the WallStreetBets’ movement.
This app allows you to invest any amount of money you wish to acquire in real-time, as well as to create a balanced portfolio by offering support for the most popular cryptocurrencies, allowing you to adopt different strategies as you expand your knowledge of the crypto market.
Other platforms like BlockFi, Binance, Coinbase, and eToro, also allow you to purchase and hold cryptocurrencies by using fiat and are all reliable and well-known ecosystems that ensure the safety of your money.
Gain Interest by Holding Crypto
While a lot of investors decide to actively trade in the crypto market to generate gains, this is not recommended for new investors who might be lacking knowledge of the ecosystem and the platforms.
If you are new to the crypto market, you might want to choose to invest in the long term by holding to the cryptocurrency you purchase, independently of the drops or gains it experiences in the short term.
Investing in the long term not only ensures your chances to gain money increase if you are investing in a reliable project, but it also opens the door to strategies like staking or interest accounts that will generate passive gains for you in the form of crypto.
Crypto personal finance platforms actually offer investors good returns on passive investments, which is something to consider.
The difference between gaining interest with crypto and a bank account is that crypto will not only give you a higher interest rate but also gains depending on the changing value of the currency you are holding.
Platforms like BlockFi offer interest accounts that can allow you to earn up to 8.6% Annual Percentage Yield that is paid monthly but gained daily. As this type of account does not charge fees, you are gaining money just by holding your crypto, no matter the balance you have.
BlockFi also allows you to borrow money with low interest rates and offers a crypto Debit card, which means you will always be able to use your money at any moment you choose as well as access other financial services. Keep in mind that due to the volatility it is better to use crypto as a saving method, and not your cash for daily needs.