Używamy plików cookies, aby Twoje doświadczenia były lepsze. Czytaj więcej
How to become a stablecoin millionaire
IMPORTANT NOTICE: This article does not constitute financial advice and is for informational purposes only. The price of digital assets can go down as well as up and you may lose all of your capital. Investors should consult a professional advisor before making any investment decisions.
For many of us, the possibility of saving enough to become a millionaire any time in the foreseeable future might seem preposterous, or just far too time-consuming. But what if there was a way to save a reasonable amount of money every month and become an honest-to-God millionaire in time to actually enjoy all that cash? We’ll give you a hint: it’s possible to achieve this with decentralized finance (DeFi).
In the world of traditional investing, the sorts of returns that are still available in DeFi are long gone. In fact, traditional investing is currently battling the three-headed dragon of rising inflation, rock-bottom interest rates, and a lack of income across the majority of asset classes. Against this backdrop, the challenge today for those investing in traditional asset classes, such as bonds and equities, is to avoid losing their purchasing power, or the number of goods and services money can buy.
For those choosing to keep their money in a traditional bank account, the challenge is even more acute. This year, the average interest on a bank account in the US ranges from 0.03% to 0.09% – negligible, when compared to the 5.4% year-on-year national inflation rate reported in September. On an investment of $100,000, that’s just a $300-$900 in annual interest, while inflation eats away more than $5,000. Essentially, savers entrusting their money to a bank account are losing their purchasing power every day, and at an alarming rate.
Savers across the world find themselves in this predicament after central banks poured unprecedented amounts of money into the economy to help businesses survive the Covid-19 crisis. Keeping interest rates low allows central banks to minimize the costs of maintaining this debt, but the opening of economies after 18 months of standstill is creating inflationary pressures. Though it is hard to predict how out of hand this situation will get, it is clear that we are unlikely to be seeing an opportunity to become millionaires from traditional savings and investments any time soon.
The appeal of stablecoins
All the more exciting, then, that the opportunity to become a millionaire remains open to those willing to venture into the wonderful world of DeFi. DeFi investment strategies offer returns that are simply no longer viable in traditional finance without taking on huge amounts of risk. And these gains are available on the safest of digital assets: the humble stablecoin.
Stablecoins are cryptocurrencies that are pegged to real-life, or “fiat”, currencies. Examples include USD Coin (USDC) and USD Tether (USDT), both of which are pegged to the US dollar. Compared to other coins and tokens, like Bitcoin or Ether, stablecoins see far less volatility. The clue is in the name, and the more stable nature of these assets has attracted new users to DeFi who might not have considered investing in cryptocurrencies previously. It should be noted, however, that stablecoins (like any digital asset) face risks from regulatory intervention and other technical or fundamental reassessments of their value.
DeFi stablecoin strategies offer returns never before seen on any asset combined with the low volatility of fiat money. For example, YIELD App offers a base annual percentage yield (APY) of 12% on its USDC and USDT strategies. Users then gain an additional reward on their investment based on their Tier level, as the chart below demonstrates.
The Tier levels are dependent on how many YLD tokens YIELD App users have in their wallets. The base level is Tier 1, for those holding between 0 and 4,999 YLD in their wallets, and this gives an additional reward of 2% on the stablecoin investment, paid in YLD. Tier 5 is available to those that have 20,000 YLD or more in their wallets, resulting in an additional 6% reward. This means the total APY available to Tier 5 users on a USDT or USDC portfolio is 18%.
Making a million with DeFi
Let’s take a look at how Tier 5 users can become millionaires by investing a proportion of their assets into a USDT and USDC strategy. With a 18% APY, this goal is well within reach, and it may come as a bit of a surprise how little initial investment is needed to reach that magical $1,000,000 landmark.
After an initial investment of 1,000 USDT/USDC and 20,000 YLD, Tier 5 users would need to invest 1,100 USDT/USDC every month for 15 years, and, voila! The investment value at the end of the period will be $1,024,632 USDT/USDC, with some $825,632 USDT/USDC of this making up the total earnings over the period. This means the overall investment over the period is just $198,000 USDT/USDC – or $13,200 USDT/USDC per year – (plus the initial 20,000 YLD investment). Quite a reasonable annual investment for 15 years if it means becoming a millionaire at the end.
If a user were to begin investing at the age of 40, for example, they could become a millionaire by the age of 55. That’s a potential early retirement and quite a substantial amount of cash to enjoy it, too! A million dollars can buy a swanky apartment in the heart of New York or even a small private island. Or why not the next newsworthy piece of NFT art? Of course, there is also the option to continue investing it to fund a comfortable retirement.
For Tier 1 users making the same investments, it will take a little longer to become a millionaire. With an APY of 14% for Tier 1 users, it will take 18 years of the same investment strategy to get to $1,083,346 USDT/USDC, with a total investment of $237,600 USDT/USDC over this time period. This example demonstrates the value of the Tier system in helping investors reach their goals more quickly.
The path to $1,000,000 through investing is a great example of the power of compounding interest, which is the concept of exponential growth. At a lower APY, the same investments grow in value much slower, while high APYs make the money compound faster, reaching those all-important financial goals in less time.
Equally, this strategy also employs the concept of dollar cost averaging, which we have discussed in a previous blog. Dollar cost averaging is the practice of systematically investing equal amounts of money spaced out over equal time periods: for example, once a month or once a week. There are many benefits to this practice, and getting to a million is just one of them.
So how do you become a stablecoin millionaire? As we have demonstrated, it is an achievable goal to reach with YIELD App’s market-beating APYs. But it does take some time and commitment, so a key lesson to take away from this is not to put off investing until a later date. Those that start early can reap the benefits of this strategy earlier, and for longer.