Crypto Finance Has Arrived.
Cryptocurrencies have garnered a lot attention of late with Bitcoin price skyrocketing once again and new assets such as NFTs showing new, innovative ways to apply the technology.
Today, the cryptocurrency industry is estimated to be worth more than $792.53 million and is expected to reach more than $5 trillion by 2026. With its ballooning market cap and ever increasing retail and institutional interest, a new set of companies and platforms have emerged that allow people to do even more with cryptocurrencies. This has led to what some people call a “parallel financial services industry”.
Put simply, a crypto savings account is no different to a traditional savings account. You put money in and watch it earn interest. To most people this sounded too good to be true, and in some cases it is. That’s why it’s always worth doing your due diligence. However, it’s pretty simple, people can lend or borrow with these platforms. If you borrow, you pay interest, that interest is then paid to the lender and the platform takes a cut. Just like any other bank. The main difference is that crypto lending platforms overcollaterlize. That means that in order to borrow five Bitcoin, you’ll need to put 10 Bitcoin up as collateral. It essentially makes the loan risk free for all parties.
Whilst lending is pretty simple to wrap your head around, getting a crypto loan may seem stranger. Why would you want to get a crypto loan? The main reason people do it is because it saves them from having to liquidate their cryptocurrency holdings and create a taxable event. Let’s say you want to get a kitchen renovation. You could sell your crypto, pay capital gains tax on it and miss out on its upside. Or you could just use it as collateral to get a loan to pay for the kitchen, keep your Bitcoin and enjoy its upside without any taxable event occurring.
Crypto credit cards
Imagine being able to pay for goods with a credit card that rewarded you in Bitcoin instead of frequent flyers. Well, now you can. There’s a whole bunch of platforms launching such credit cards over the coming months. They vary in rewards offered, fees, availability and more, but this will be hitting like a tsunami in 2021.
You’d be surprised the differences in fees, prices of crypto, security, trustworthiness, country available and more. Crypto exchanges vary wildly and there are now thousands of them. Only a few years ago you only had a handful to choose from with Coinbase generally being at the top of the list.
Bitcoin and crypto IRAs are now a thing? You bet. Imagine being able to put a tax optimised IRA to work with the best performing asset of the last decade. Sounds like a dream and now there’s a whole bunch of platforms to choose from who so it.
How do you choose?
As you can see, the crypto industry isn’t just exploding in price, but it’s also exploding in amazing financial services that can help you do more with your assets.