Hey Jessinvestors
The chase for yield is on with the popularity of DE-FI and all these staking coins; investors are now chasing interest rate returns instead of good old price pumps like the ICO phase. Cryptocurrencies are all trying to establish a yield curve to entice capital to their ecosystem.
When you can control your inflation, you can offer better returns; that's why we see all these shitcoins offering 1000s of percentage point returns for staking their coins.
The fact is, this is all a marketing gimmick; just like shitcoins captured people with the unit bias; they are now doing it with interest rate figure bias.
People are programmed to think that the higher the interest rate, the better the return, but this isn't actually the case. I've spoken about the fisher effect it comes to fiat currency, but the same rules apply for cryptocurrency.
I am not picking on anyone coin, but let's take a look at the inflation rates of the top 20
- Ethereum - 4.65% inflation
- XRP - 4.77%
- LTC - 3.85%
- Cardano - 20%
- Chainlink - 9.36%
- Theta - 14.88%
- Tezos - 8.8%
- Tron - 7.46
So in theory if you're taking or lending out any of these coins and getting a return less than the inflation rate, you're effectively getting diluted of purchasing power.
Yes this can be offset slightly by the growth in market cap in fiat terms, but all these currencies will eventually reach a point were the market cap cannot make up for the dilution.
Eventually this turns into a game of fiat where the highest stakers and lenders gain more of the purchasing power as the network is diluted.
Bitcoin is interest rate positive
The current Bitcoin inflation rate is around 1.78% per year, which means lower inflation rate than gold's average inflation, and we're on our way to the next halving, which would see that shrink even further to 0.89%.
Bitcoin interest rates with various lenders like BlockFi, Celsius Network, Luno, LEDN and Nexo range between 3.4% and 6.1%, which may seem low in an absolute numbers perspective, but it's actually really high if you consider the positive return you're getting.
If I am getting the low end of the interest rates available at 3.4% and I remove Bitcoins inflation rate of 1.78%, I am getting a 1.62% increase in my ownership of the Bitcoin network.
On the high end of the scale, I am getting a 4.32% return, but I am obviously taking on more risk to get that, so it's always important to hedge against these various platforms and not have too much of your Bitcoin further out the risk curve.
It's not about absolute numbers it's about percentage ownership of the network
Bitcoin is not about the amount of Bitcoin you have, or the price of Bitcoin you have but the percentage of the network you own. The market cap and the price I believe will continue to grow and while many focus on how much fiat they can extract out of the network for me I want to own as much of the hardest currency around.
I do not risk all my Bitcoin to gain interest, but an amount I am willing to risk. Each month or week I get an interest payment I get to compound that and when combining that positive return in interest plus the annual growth rate of the network, I cannot see a better turn around.
In fact it seems pointless to take on more risk than this, Bitcoin is the best investment of the last decade and it's to me, I cannot see anything that can compete with that in terms of risk adjusted returns.
Have your say
What do you good people of HIVE think?
So have at it, my Jessies! If you don't have something to comment, "I am a Jessie."
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