The Power Of Compounding Crypto

Most of us know the old stories of compounding interest and how if you put your money into things like savings accounts, CD's and Bonds that you can build wealth this way through what is know as compounding interest.

The idea of it all is to take a little money every paycheck about 10% (or more) and apply it to these systems. As you do this over time both the capital you are putting in plus the interesting being earned gets compounded either daily, monthly or yearly depending on the terms of that contract.

Let's take this example.

You start with $10,000
You add $250 each month
It compounds monthly at a rate of 4.5% (which is what a high yield savings account is currently paying)
For 5 Years
You'll end up with this... (granted that 4.5% holds true)

You total investment would have been $25,000 ($10,000 right away and $250/monthly over the last 5 years)
That means in interest with compounding interest you made a little over $4,000 or just shy of $1,000 a year.

Here's the kicker though that sounds great but when you factor in rate changes, the fact that interest rates and banks where paying out nearly 0% for years and inflation of 20% you've actully lost buying power with your money and that's something we are all facing today.

So you think to yourself... There has to be a better way right?

Rich people will tell you to invest in assets like Gold, Silver, Real-estate etc as a way to store and improve that value and while in the long run this has proven to work well it's very manipulated anymore.

What about Crypto?

There's always lots of risk with high APRs and we have seen this time and time again in the crypto world and fiat worlds where banks promised or gave out too high of APRs that where only funded if the price of everything kept going up and more people dumped money in. At some point a system like that blows up and that's exactly what we saw happen with the famous FTX and other banks. But we also saw this with traditional banks as well that lent out too much money and didn't have enough on hand to pay out people.

Well crypto is starting and can remove the bank middleman and instead make you and the collective of the crypto community "the bank" allow you to profit like the bank and there are so many options to this.

Today I want to focus on a current one here on the Hive blockchain called HBD or Hive Back Dollar. It means that at any given time you should be able to swap out 1 HBD for 1 dollars worth of the Hive blockchain token.

It's what's known as a algorithmic stable coin which does a decent job at holding it's value.

If we take the same values above and apply them to HBD with a current 20% APR right we get the following chart over the next 5 years.

Nearly DOUBLE what you'd make in a bank and you can see after year two those compounding rates start to explode.

Now this is of course if HBD holds it's 20% APR which could change higher or lower at any given time based on witness votes so it's important to note that this is a variable interest rate and that the stable coin is in no way guaranteed to hold a $1 peg value.

This is just one example of how higher risk could end up being a much higher reward for you. However with any type of investing there is some level of risk.
*This article is for entertainment purposes only and is not financial advice.

Posted Using LeoFinance Alpha