Today, the odds are pretty high that you’ve at least heard of cryptocurrency and have a vague idea about how it works. But, if not, never fear, for there are many sites and trading platforms out there that can teach you all you need to know about the crypto world and how to claim your piece of it. But why invest in the crypto world? Here are a few reasons why investing in the crypto world could set you up for financial success in the years to come.
The Future of Decentralized Finance
Cryptocurrencies are run on blockchain networks, encrypted ledgers of exchange that reduce risk in all transactions. One of the greatest draws of the crypto world is its decentralized nature, meaning no third parties like banks are necessary for lending or trading. Cryptocurrencies with specific market caps can help hedge against inflation and offer quick, reliable, and secure transactions. When asking yourself, ‘how do cryptocurrencies work,’ consider accessing a dedicated knowledge base such as FTX to learn about the crypto world and the latest market value.
Opportunity for Financial Gain
There are many opportunities for you to generate gains through your crypto investment. If you’re an investor who hasn’t considered their digital portfolio options, you should look at the investment opportunities. Creating a portfolio of digital assets could help you diversify your current investment portfolio and generate high rewards over time as your investment grows along with the crypto market. There are a few ways you can generate returns over time; the two main methods are staking or lending your crypto.
You need to invest in a blockchain built on a proof-of-stake model to stake your cryptocurrency. Proof-of-stake models allow coin owners to act as nodes on the network and verify transactions on the blockchain. These coin owners will stake their crypto as collateral for a chance to be selected to verify these transactions. If they successfully verify the block in time, everyone with a stake in the pool will receive a reward. The more crypto staked in a pool, the lower your percentage of rewards, but the higher the probability that your node will be selected to verify more blocks. Staking, if appropriately done, could generate 10% or 20% returns on your initial investment, a strong incentive for anyone looking to grow their investment over time.
Yield-farming or liquidity farming is similar to staking in that you will lock your investment in a pool for a specific period. Your crypto will then be lent out to borrowers in exchange for fees, interest, and new coins. Just as with borrowing from any bank, there are always risks involved for lenders and borrowers. Yield farming could be highly lucrative for anyone looking for long-term crypto investment. You can check the health of a liquidity pool based on the total value locked into the pool. The higher the TVL, the better the health of the LP, and the more likely successful farming is to occur.
The NFT Hype
Non-fungible tokens or NFTs are encrypted digital assets bought and sold on blockchain networks. NFTs are all unique and typically will encode a digital artwork. Buying NFTs is similar to purchasing art to diversify your investment portfolio. Some NFTs have sold for millions online, and anyone can create and sell their own NFT collections. Investors who can strategically select collections and artists to purchase from stand to make a killing reselling the pieces or holding them to accrue value over time. Check out an NFT marketplace like FTX to see what options you have for investment.
