Editorial

Is buying USDC a suitable investment for novices just starting out?

Cryptocurrency is sometimes seen as the “Wild West” of speculation by stock market investors, a perception that seems to be supported by the market’s extreme volatility. However, income investors are beginning to take on greater risk in this context of low-interest rates in order to have a chance at considerably more large payments. This situation has created a perfect storm for investors.

Stablecoins should be the primary point of concentration for income investors who have the goal of earning high interest in cryptocurrency while maintaining a price on their original investment. One of the most widely used stablecoins is called USD Coin (USDC 0.27 percent), and it is an investment offered by Coinbase Global (COIN 16.02 percent).

USD Coin may always be exchanged for U.S. dollars at a rate of 1 to 1. In contrast to other stablecoins, the price of USD Coin, often known as USDC for its abbreviated form, has remained pegged at $1 throughout its existence. At this moment, there is more than 34 billion dollars worth of USDC in circulation.

You have earned this

The present yield of 0.15 percent on Coinbase for USDC holdings is a major drawback of investing in this cryptocurrency. The most prominent cryptocurrency trading platform in the world, Coinbase, intended to launch a Coinbase Lend program in which it would offer income investors 4% in annualized interest if they let Coinbase borrow the stake to lend out until they needed it back. However, the proposal was scrapped after the Securities and Exchange Commission (SEC) voiced opposition to it. Coinbase Lend was supposed to offer income investors 4% in annualized interest.

In light of this situation, a number of smaller venues have recently surfaced as potential channels for wringing further output out of USDC. BlockFi, which was selected by The Ascent as one of the top cryptocurrency applications and exchanges for the month of November, offers investors a return of at least 8% on their USDC holdings. In addition to providing an interest rate of at least 9 percent on USDC, Voyager Invest has just this week released a debit card that will enable customers to buy cryptocurrency with debit card at any location that accepts Mastercard. At the beginning of this month, Celsius Network increased its profits rate on USDC to 10.02 percent from its previous rate of 10.01 percent.

Avoid ignoring the possible implications.

The high exchange rates for a cryptocurrency pegged to the US dollar may sound appealing at first, but there are a few factors to consider. For starters, these high yields aren’t available everywhere, and even when they are, there’s no guarantee they will always remain. Even in places where they are now legal, this is not guaranteed.

The most essential warning is that there may be drawbacks. These aren’t bank products covered by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation, which would reimburse you in the case of a bank failure. When platforms lend, pledge, or otherwise use digital money to generate interest, they increase their risk.

Be careful, but don’t be afraid to distribute your assets over other platforms if you’re willing to take on some risk for larger returns. You don’t have to buy crypto credit card on your idle capital if you don’t want to, but you should be aware that bigger yields come with greater risks.

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