HOW-TO
CRYPTO
(Strategies)
As higher-education costs keep rising, traditional savings plans struggle to meet those expenses. The introduction of crypto in 2009 paved the way for new financial tools to emerge. Since then, the crypto market has grown to out-perform both the stock market and US Treasury bonds (see Crypto Total vs SPX & US20Y).
Decentralized Finance (true crypto) is comprised of smart-contracts (programs) that allow anyone to run them at any time. Depending on the program, some incentivize users to lock-up their crypto by offering lucrative return rates.
Below are some crypto savings strategies with and without the use of smart-contracts.
HOLD CRYPTO
The easiest approach without the use of smart-contracts, holding crypto simply means purchasing a fixed amount and not selling it. Once the value rises to a level of your comfort, you may sell it all or just a portion.
DCA CRYPTO
Similar to holding crypto, Dollar-Cost-Averaging means buying crypto on a regular basis (e.g. weekly, monthly, quarterly). By spreading the purchases over a longer term, the average cost per coin should be lower than a single bulk purchase. Once the value rises, you may sell it all or just a portion.
STAKE CRYPTO
Staking crypto involves the use of smart-contracts that reward you with an APY for promising to lock-up your crypto for a fixed length of time, similar to Certificate-of-Deposits. At the end of the lock-up period, all the compounding rewards and principal are distributed at once.
FARM CRYPTO
An advanced version of staking, farming involves staking equal amounts of two different crypto coins in return for an APR, but without a time commitment. Best of all, rewards accumulate immediately and can be collected at any time. However, one risk is that you may end up with unequal amounts of the initial coins (impermanent loss).