Price volatility within the cryptocurrency space isn’t exactly a secret. Critics often point to the rapid price swings as being the reason cryptocurrencies will never achieve mass adoption — after all, who wants a currency that can spike in value by 30% off the back of a tweet from the Bố già?
I remember it like it was yesterday — a nerve-wracking, gut-wrenching experience that caused me to question every decision I’d ever made.
I’m of course talking about the first time I had to endure watching Bitcoin do its best Titanic impression.
Having watched Bitcoin soar for so long, I was completely thrown by the sudden price reversal, and my lack of mental preparedness ended up losing me a lot of money. I knew that Bitcoin could be volatile, but I wasn’t ready for that volatility to be on such a downward trajectory.
When most people think of Bitcoin and cryptocurrency, their first thought is biến động giá and they assume it involves an increased mức độ rủi ro. As a result, many people end up avoiding the space entirely, based on a misconception.
Not all cryptocurrencies are wildly volatile. In fact, the industry-rise in recent years has led to the birth of several “stablecoins” such as Tether (USDT) and USD Coin (USDC): cryptocurrencies specifically designed to remain in line with the value of the US dollar.
I know what you’re thinking: What’s the point if the price is stable and my investment won’t grow in value?
Tôi rất vui vì bạn đã hỏi.
The stability offered by these coins means the risk-averse among us are able to gain exposure to cryptocurrencies without the risk of excess volatility. But the icing on the cake is that you can hoàn toàn still make money.
In 2020, the average interest rate on savings accounts in the US was 0.07%, meaning that $1,000 left in a savings account would earn around $0.70 in interest after one year. Don’t blow it all in one place, you hear?
It’s for this exact reason so many people are realizing that “cash is trash,” and looking for somewhere else to park their money. So how do stablecoins help?
Cryptocurrency trading platforms such as BlockFi và NEXO make it incredibly simple to exchange US dollars for stablecoins, and they offer initial interest rates as high as 8–14%. At this rate, our hypothetical $1,000 is suddenly earning around $100 worth of interest after one year, a far cry from the measly $0.70 interest earned in the bank!
So why you should keep your hard-earned money in a bank as opposed to converting it to cryptocurrency?
One thing that the banks have going for them is safety. Consumer deposits are protected by the FDIC in the United States and the FSCS in the UK, meaning that if your bank were to go belly-up overnight, your deposits (up to a certain threshold) are insured and will be repaid.
Protection like this is virtually non-existent in the cryptocurrency space. Most governments strongly advise against cryptocurrency investments, arguing you should be prepared to lose your entire investment if you do.
Aside from a lack of FDIC protection, the only real risk you face comes from the rapid devaluation of the US dollar. As the dollar falls in value, the value of your investment will fall alongside it in relation to other assets.
Ưu điểm
- Stablecoins provide risk-averse investors with exposure to cryptocurrencies.
- Investors can exchange US dollars on a 1:1 basis for stablecoins, and could earn more than 10x the interest they would earn on cash deposits held in a bank.
Nhược điểm
- Lack of government protection for deposits.
- Devaluation of the US dollar would lead to a decrease in investment value.
The contents of this article are the opinion of the author and should not be interpreted as investment advice. You should always conduct your own research before undertaking a new investment.
Coinsmart. Đặt cạnh Bitcoin-Börse ở Europa
Source: https://jonpeterswrites.medium.com/wary-of-bitcoins-volatility-13b5ed560e63?source=rss——-8—————–cryptocurrency
