Can you become a stablecoin millionaire?

Updated: Nov 3, 2021

PLEASE NOTE: 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.

As an investor I try to keep an open mind, especially when it comes to alt coins. The crypto space is constantly evolving and there are some fantastic projects that are constantly looking to innovate and push the boundaries. Unfortunately it is a harsh reality that many of these will fail; we saw this happen after the 2017/18 bull market and it will happen again. As the space matures the market will ultimately decide those that will survive and go on to be industry leaders and for the investors who are astute enough to have the belief in those projects will be rewarded incredibly well.

Although cryptocurrencies have without doubt shown to be the best performing assets the world has seen for the average investor the idea of putting their money into such a volatile and uncertain asset class can be a little disconcerting. Regardless of what amount of research you are prepared to undertake on a project one should never consider investing more than you are comfortable losing. With that being said most of us are unfortunately left between a rock and hard place as being able to achieve any meaningful yield on fiat money is becoming more of a challenge and the mere thought 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 a millionaire in time to actually get to enjoy the money?

Well, believe it or not it is possible to achieve this with decentralized finance or DeFi.

In the world of traditional investing, the type of returns that are achievable in DeFi have long since gone. In fact, traditional investing is currently battling storms that are emanating from three fronts: rising inflation, interest rates at all time lows, and a lack of yield across the majority of traditional asset classes. With these storms converging and gathering strength it is becoming an ever bigger challenge today for those investing in traditional asset classes, such as bonds and equities, to be able to avoid losing their purchasing power, or the number of goods and services their money can ultimately buy.

If you choose to simply keep your money in a traditional bank account, the challenge is exacerbated further. The average interest on a bank account in the US in 2021 is between 0.03% to 0.09% – which is insignificant when you factor in the 5.3% year-on-year national inflation rate reported in August. However, one could argue that these figures have been massaged to suit the political narrative. If you look at the estimate of inflation for today as if it were calculated the same way it was in 1990 that figure is actually closer to 10%.

On an investment of $100,000, in a bank account one would receive a mere $30-$90 in annual interest! Then if you factor in inflation using the ‘massaged’ inflation rate, more than $5,300 would be eaten from the true value of your money. So basically with savers entrusting their money to a bank account they are losing a significant proportion of their purchasing power every day, which should be concerning to anyone.

The predicament exists for savers all across the world after central banks decided to keep their money printers working overtime resulting in unprecedented amounts of money flooding into the economy.

Printing is probably the wrong word to use as no money is physically printed, however it works like magic all the same. With a few strokes on a computer, the Federal Reserve for example can create dollars out of nothing, virtually “printing” money and injecting it into the commercial banking system, much like an electronic deposit. By the end of the 2020, the Fed purchased some $3.5 trillion in government securities with these newly created dollars, one of many tools it has used to help try to prop up the ailing economy during the COVID-19 pandemic.

The Fed’s goal: to keep markets functioning after they had seized up in fear. The strategy also makes credit easier to obtain, with a bigger money supply and lower interest rates. By 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. Although it is hard to predict the future and how out of hand this situation could potentially get, one thing is absolutely clear and that is it is highly unlikely that we will be seeing an opportunity to become millionaires from traditional savings and investments any time soon.

Why are stablecoins so attractive?

By turning your attention to the cryptocurrency sector you might be pleasantly surprised to hear that the opportunity to become a millionaire remains open to those willing to venture into the innovative world of DeFi. DeFi investment strategies and the easily attainable returns surpass anything available in traditional finance without taking on huge amounts of risk. Furthermore, these gains are achievable on the safest of digital assets: the lowly stable coin.

Stable coins are essentially cryptocurrencies that are pegged to real-life, or “fiat”, currencies. Popular stablecoins include USD Coin (USDC) and USD Tether (USDT), both of which are pegged to the US dollar. Compared with other coins and tokens, like Bitcoin or Ether, stable coins are significantly less volatile. Given the more stable characteristics of these assets they have 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 potential risks from regulatory intervention and other technical or fundamental reassessments of their value. With that being said USDC for example has been in existence since 2018 after it was launched by the Centre consortium, a partnership between Circle and Coinbase. They adopt a very conservative model, in fact the Coinbase website describes the USD Coin as being completely backed by dollars “in a bank account.” Regardless of any hostilities shown towards stablecoins from the likes of Janet Yellen given the fact that Coinbase is a publicly listed company, one might argue that they are probably positioned better than anyone to navigate any potential head winds presented by the regulators in the years ahead.

The relatively safe DeFi stablecoin strategies offer investors returns never before seen on any asset combined with the low volatility of fiat money.

Lets take a look at a company such as YIELD App. It offers its customers a base annual percentage yield (APY) of 10.5% on its USDC and USDT strategies. Users are then able to gain an additional reward on their investment based on a Tiered system that they operate.

Yield App has their own native cryptocurrency YLD, and the tier levels are dependent on how many of those tokens their 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 10% reward. This means the total APY available to Tier 5 users on a USDT or USDC portfolio is 20.5%.

Although there is a necessity to hold the YLD token to achieve a higher interest rate one needs to consider that the token is an asset that has the potential to appreciate in value significantly. Given that the company is growing rapidly, for example they have double the number of users to around 60,000 over the last few months, it is probable that the value of the YLD tokens will increase.

Another point worth mentioning is that although the price action in crypto market has been going sideways for the past few months after seeing some extraordinary gains at the beginning of the year, historically the market is very cyclical and at a point in time in the not too distant future the market will turn bearish. When this happens it is conceivable to think that investors will turn to DeFi products offered by the likes of Yield App in order to park their capital and earn yield during the down turn. This will be positive for the price YLD tokens.

Can you really make a million with DeFi?

Staying with Yield App now let’s take a look at how Tier 5 users can potentially become millionaires by investing a proportion of their assets into either a USDT or USDC strategy.

With the power of compound interest and a 20.5% APY, this goal is achievable, and it may in fact surprise you how little of an initial investment is needed to be able to reach that magical $1,000,000 landmark:

  • Initial investment of 1,000 USDT/USDC and 20,000 YLD ($9,000 @ the market price of $0.45 per YLD).

  • Tier 5 users would then need to continue investing 850 USDT/USDC every month for 15 years.

  • The investment value at the end of the period would then be $1,039,704.23 USDT/USDC, with some 855,704.23 USDT/USDC of this making up the total earnings over the period.

  • This means the overall investment over the period is just $153,000 USDT/USDC – or $10,200 USDT/USDC per year – (plus the initial 20,000 YLD investment).

  • This is quite a reasonable annual investment for 15 years if it means becoming a millionaire at the end.

If the investor 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 saved to allow for one to enjoy it with.

So, now let’s consider Tier 1 investors making the same investments with an APY of 12.5%.

  • Initial investment of 1,000 USDT/USDC and up to 4,999 YLD ($2,249 @ the market price of $0.45)

  • It will take 21 years utilizing the same investment strategy to reach $1,052,894.48 USDT/USDC, with a total investment of $214,200 USDT/USDC over this time period.

  • This example really demonstrates the power of compounding the higher APY amounts and the advantages that can be obtained by adopting the different tier levels in helping investors reach their goals.

Smart saving

These examples demonstrate of the immense power of compounding interest, which is the concept of exponential growth. At a lower APY, the same investments grow in value at a slower rate, while high APYs make the money compound considerably faster, allowing the investor to reach their all-important financial goal in less time.

Furthermore, this strategy also adopts the concept of dollar cost averaging. Dollar cost averaging is arguably the simplest and most effective investment strategy one can employ. It is essentially the practice of making regular investments of equal amounts of money spaced out over equal time periods: for example, once a month or once a week. There are many benefits that can be gained by adopting to this investment strategy, and allowing one to reach million is just one of them!

So, as you can see becoming a stablecoin millionaire is indeed possible. This milestone is an achievable goal that you can reach as a consequence of the type of APYs offered by DEFI companies like YIELD App. But it does take some time, commitment and consistency. As such a key lesson that you might take away from this article is to not put off investing until a later date. Those who start early can indeed reap the benefits of this strategy earlier, and for longer.

IMG_0098 (1).jpg

I'm Paul

I am on a mission to help people start a journey to financial freedom. The key to long term success is education and understanding the incredible opportunity that exists right now.

Post Archive