Investors are seeing a massive rise in Bitcoin, having amassed more than 170% profits year-to-date.
Most recently, the Bitcoin economist, Nouriel Roubini, softened his views, arguing that Bitcoin could be “part of the value of the store”. Several prominent names in the financial and business sectors have confirmed Bitcoin, from legendary investor Paul Tudor Jones to venture capitalist Chamath Palihapitiya and billionaire investor Stanley Druckenmiller.
This week, Larry Fink, CEO of BlackRock, the world’s largest asset management company with $ 7.5 trillion in Assets Under Management (AUM), announced that Bitcoin could evolve to become Global market assets and this coin will reach new highs in the coming years. Fink also notes that Bitcoin’s market cap is over $ 350 billion and has surpassed the size of global companies like MasterCard and Coca-Cola.
Institutional investor’s attention towards Bitcoin continues to be underpinned by three main drivers:
Historically Low Interest Rates: US Federal Reserve President Jerome Powell confirmed that we can expect interest rates to close to zero in the near future, negatively impacting portfolios There is an investor’s fixed income in bonds and treasury, and provides room to allocate it to alternative investments.
Inflation: With the Federal Reserve setting an average inflation rate of 2%, investors using cash or low-yield instruments are increasingly concerned about currency devaluation. .
Geopolitical instability: As political tensions increase between the United States and China and the dollar’s reserve currency is increasingly questioned, holding a dollar-dominated portfolio poses a risk. inherent risk for long-term investors.
Recognizing these risk factors, public companies such as MicroStrategy, Square and Mode Global have chosen Bitcoin as a hedge against currency risk. Many retail investors have followed suit, holding their Bitcoin tighter than ever. In fact, more than 60% of all Bitcoins in the circulating supply have not moved in the past 12 months. Current Bitcoin price predictions range from $ 200,000 to $ 300,000 over the next 24 months, encouraging investors to continue hoarding digital assets.
As Bitcoin’s bullish trend continued, another industry emerged, products with interest in cryptocurrencies.
Products like BlockFi, Nexo, and Celsius offer accounts with interest, helping investors earn between 6% and 12% annual percentage return (APY) on their Bitcoin holdings. For investors who anticipate that Bitcoin will continue to increase in value, accounts with interest are a great way to maintain cash flow without selling any of the rising digital assets.
However, centralized platforms like these carry inherent risks, requiring users to trust a new era of ‘crypto banking’, team, custodianship, and regulation. their submission.
A new wave of alternatives is coming from the decentralized finance industry. Decentralized apps use smart contracts for interest payments to increase transparency significantly. From loan and loan protocols, to insurance, to asset management, auditable smart contracts allow investors to view and track their funds on-chain simultaneously. get outstanding profits.
An example of this type of protocol is Kava’s Hard Protocol, which allows depositors to ‘reap profits’ from Bitcoin and other non-Ethereum assets. A user stakes their cryptocurrency to an asset pool, then the smart contract can securely mortgage their loans to a group of borrowers. This creates a decentralized lending and lending platform that automatically, without any middlemen, guardians or their fees. Similar to popular DeFi platforms MakerDao and Compound, the leading DeFi protocols of the Ethereum asset, Kava prides itself on providing profitable opportunities for non-Ethereum assets like Bitcoin, XRP, and BNB. HARD offers investors a way to generate cash flow from their Bitcoin holdings without first encrypting their Bitcoin.
“With the world increasingly turning to Bitcoin as a store of value and a hedge against economic instability, KAVA and HARD money market services are well positioned as companion products. for this new wave of digital asset investors as they offer a rare opportunity for Bitcoin holders to maintain their exposure while securely earning double digit returns “. According to Brian Kerr, founder and CEO of Kava.
At the moment, Hard Protocol leads the industry in Bitcoin returns, having an APY of 70%. While the proportions are not guaranteed, the trend is clear. Returns on decentralized platforms are significantly better than returns on centralized platforms for Bitcoin.
As more prominent investors continue to enter the DeFi space, the promise of entering a better financial system is too tempting. However, DeFi-based profitability protocols are still in their infancy, despite the promise of significant efficacy for fixed income products. There have been a number of false starts in the space from the YAM Protocol’s smart contract incident to the anonymous Sushi Swap founder withdrawing developer funds. Investors should be cautious when entering these new technologies and continue to do their own research.