In our opinion Investing in cryptocurrencies is an activity that should always be carried out. It is necessary to set aside some of the funds now, so that due to the effect of time, the invested funds will grow many times. What is the advantage and “strength” of investment? It lies in the fact that we take from ourselves a small part of our income now and do not radically change our way of life, we do not switch to “bread and water”.
Often among the inhabitants there is an opinion that investments are the lot of the rich – those who have “a lot of money and have nowhere to put their money”. However, this is not at all the case. First, a lot of rich people actually became rich through investment. Secondly, investing is putting aside a small part of your savings, which will not force you to change the structure of your expenses and infringe on yourself in something. Common Cents Lab co-founder Wendy De La Rosa says that most often at the end of the month people regret the impulsive spending they could not have done, and such spending easily fits into 10% of a person’s income or even exceeds this figure. This means that this amount can be spent on investments without worsening the quality of life.
Many investors and psychologists say that spending 10% of your income on investments will not affect the comfort of your life. We gave up some impulsive and unnecessary purchases today – we got a big plus in the future. This is how investments work.
Investing can be compared to buying trees. Let’s imagine that you want a tree to grow next to your house, or better – ten. To buy, bring and plant a tree next to your house, you need to hire a special company with special equipment (after all, an adult tree has an extensive root system that needs not to be damaged), bring it to your site, plant it (again, with the help of a specialized company) and water abundantly for a while. It will be expensive because in nurseries such trees are sold for a considerable sum. For the price of this tree, you can buy one hundred seedlings of the same type, and in ten years you will have your own mini-grove.
What else is the power of investment? Historically, the markets grow over a long time interval, and this applies to the crypt by 100%. Money is getting cheaper, consumed by inflation. This means that the amount of dollars that you invest now will turn into a larger amount of the same currency in the future.
Various investment options
To compare different investment options, consider several instruments: bank deposits, the stock market (MICEX index, RTS index), shares of leading companies and cryptocurrencies.
Well, one cannot look at the offers of banks without tears. US banks offer from 0.01% to 0.05% on deposits. The income received depends on the amount of investment. As you can see, interest rates on US deposits are quite low. It should be noted that some banks may charge money for opening and servicing.
Each of us every day goes to the store for groceries and knows firsthand the true inflation rate. It is much higher than 7% per year, and sometimes even reaches 25%. Of course, there is no need to talk about any preservation (and even more so, augmentation) of funds with the help of bank deposits.
Here the situation is more interesting. Let’s consider the MICEX index and the RTS index as the main indicators of the Russian stock market.
The first, since 2011, has grown from 1650 to the current 3750 points. The difference is 2100 p.p. or 127%. The RTS index (dollar index) from 2011 to the current moment showed no profitability at all, remaining at a figure of about 1600 points. However, it should be borne in mind that this index is calculated in dollars, and since 2011 the dollar has grown in value against the ruble. Thus, investors have received their profitability, and it is approximately equal to the growth of the dollar against the ruble over the past 10 years. In May 2011, the dollar was worth about 30 rubles, and now it is 73 rubles. Thus, the profitability of investors since 2011 amounted to 43 rubles per dollar, which is equal to 143%. Not bad, too, compared to bank rates.
Shares of companies. For example, consider the shares of five large enterprises:
|ISSUER||SHARE PRICE||PRICE IN OCTOBER 2021||PRICE CHANGE IN USD||PROFITABILITY IN %|
|TESLA||46 USD (june 2019)||1025 USD||979 USD||2128%|
|APPLE||38 USD (december 2019)||150 USD||112 USD||294%|
|BOEING||140 USD (november 2016)||215 USD||75 USD||53%|
|JOHNSON & JOHNSON||120 USD (march 2020)||164 USD||44 USD||36%|
Conclusion. We can see that only one company made a good profit in a short period of time. But how to guess that it will give a great return on investment? Almost nothing. It’s a bet on luck. The rest of the companies also made a profit, but investments in them were delayed. We can’t wait long to get pennies in years.
Profitability of cryptocurrencies
The situation is different with cryptocurrencies. There is no point in assessing their profitability over 10 years, since in 2011 most of the currencies that are now heard were not yet available. And bitcoin was the lot of a small number of technologists who communicate on GitHub. Therefore, it makes sense to take for comparison the profitability of a crypto over the past 5 or even 3 years.At the beginning of 2011 the cryptocurrency cost $ 1, and six months later is already $ 32. But let’s even take $ 32 as a benchmark. Suppose you, back in 2011, decided to abandon the purchase of Xbox and, to spite your mother’s classmates, bought 3 bitcoins worth $ 100. Already now, with the current price of $ 40,000 per BTC, you can buy three Skoda Kodiaq cars, well, or flat in St. Petersburg. And if you are patient and keep your bitcoins for another 5 years, you can buy a whole business – for example, a chain of coffee shops, or an apartment in Moscow. Or you can simply transfer bitcoins to Ethers, stake them. Here you need a link to an article about staking them in nodes and receive at least 7% per annum in Ethers. Which, by the way, also always gets more expensive. And provide yourself with old age.
Aside from the Bitcoin topic, let’s look at the performance of several other well-known cryptocurrencies, namely Eth, Stellar, Ripple, Litecoin, and Monero. Let’s take a 5-year time horizon as a time horizon. Data for all cryptocurrencies are given in the table (according to Coinmarketcap data):
|CURRENCY||TOKEN PRICE IN 2016 (USD)||CURRENT TOKEN PRICE (OCTOBER 2021)||PRICE CHANGE IN USD||PROFITABILITY IN %|
|ETH||21.5 usd||4228 usd||4206.5||19565 %|
|Stellar||0.002 usd||0.38 usd||0.37||18900 %|
|Ripple||0.0062 usd||1.12 usd||1.11||17946 %|
|Litecoin||4 usd||195 usd||191 usd||4775 %|
|Monero||10 usd||286 usd||276 usd||2760%|
Need more comments?
Cryptocurrency outperforms traditional markets in terms of profitability, and strongly.
Do not forget that the crypto market is still very young, it is only 12 years old. As much as bitcoin. When the market rises, coins will rise in value even more.
In addition, I included in the table only well-known cryptocurrencies that have been on the market for a long time and have been heard by people. What can we say about other, younger tokens, which showed more than 10 times profitability only since the beginning of the year. The same BNB, for example.
Other opportunities in cryptocurrencies
In addition to simply buying a cryptocurrency and holding it, there are other ways to make money in them: profitability pharming, staking, trading, landing protocols, etc. And these are the capabilities of the crypto. You can investing in cryptocurrency, earn already inside the cryptosphere using DeFi tools, without investing more fiat money. We will tell about all such possibilities in our lecture series.
Cryptocurrencies are a new but promising line of business. With the right approach, it can bring a good profit to a patient and competent investor. However, this path must be passed. Moreover, you need to change yourself, gain new knowledge and develop the necessary skills. It’s not difficult (like everything else in the world, however). But you need to be patient and gradually, step by step, learn the interesting world of crypto.