Steve's note: We're in stimulus mode today... And you're probably worried about the long-term financial picture. Well, my colleague Eric Wade says this is setting up a unique opportunity in cryptocurrencies like bitcoin. I don't write much about this volatile space. But if you're interested in how to grow your wealth in cryptos, read on...
The next crypto bull market is coming...
Governments around the world are using unprecedented money-printing to keep their economies afloat. This is eroding faith in government currencies... and pushing people to look for alternatives.
The industry is also attracting an array of new buyers. Over the past few years, some of the biggest names in the world have driven and invested in crypto-related projects... such as Visa, Facebook, and JPMorgan Chase.
In other words, we're seeing more interest in cryptocurrency than ever before. The industry is on the verge of going mainstream.
And while we wait for the next bull market, there's a way to grow your wealth significantly...
You see, cryptos have always been a speculative investment. But cryptos have steadily been moving away from pure speculation... And now, many of them are income-producing assets. Bitcoin, stablecoins, and many other cryptos can create cash flows for you.
So today and tomorrow, I'll show you three ways to let your money work for you. You can use these yield-generating ideas to grow your crypto holdings, no matter what the market's doing on a day-to-day basis.
Let's get started with our first two today...
The simplest way to earn yield on your crypto is by lending it out.
In the early days of crypto, that meant connecting directly with a borrower and agreeing on a loan term and rate. Several platforms make it simpler today. You can deposit your crypto and instantly earn yield without having to find or interact with borrowers.
You might be wondering why people borrow crypto in the first place. There are three big drivers for crypto loans...
First, users may want to tap their crypto equity without selling it. That's because when you sell your crypto, you're taxed on the capital gains – just like with a stock.
For example, you could borrow some money against your bitcoin holdings and pay back the loan without selling your bitcoin. You've tapped the "value" of your bitcoin without spending or selling it (and without generating a tax bill on your capital gains).
Second, a borrower might need a specific token for a short period of time. For example, a user could borrow tokens that they need for an online game, or they might want to hold a token to participate in a governance vote.
Finally, borrowing platforms offer a way to leverage trades. Folks who own Ethereum (ETH) can borrow against their holdings to buy tokens in another project without selling their ETH tokens, for example. Or they can borrow a token they want to bet against, then sell that token with the hopes of buying it back cheaper in the future. This is a popular strategy for hedging and short selling.
In short, crypto loans are growing in popularity. And you can profit... by acting as the lender. Depending on which platforms and cryptos you're working with, you could earn up to 6% annually on your holdings – and sometimes more.
The second way to make income with cryptos is through something we call "staking." To explain it, I'll give you an example using Ethereum...
Ethereum is undergoing one of the crypto industry's biggest changes. It launched with the same proof-of-work ("PoW") mechanism as bitcoin. (Now, this might sound complicated... But all it means is that the network is secured by powerful computers performing difficult calculations.)
As long as a network can attract enough participants, it's remarkably secure. Bitcoin, for example, is the most powerful computing network in the world.
But PoW comes with significant tradeoffs. It requires vast amounts of energy and sophisticated computers, and it's difficult to scale.
PoW works fine for bitcoin. For Ethereum, though, the plan is to convert to a new consensus mechanism called proof of stake ("PoS"). With PoS, the network is secured by users "staking" or locking up their crypto as a pledge that they won't cheat the system. If users try to cheat, they lose their tokens. If they operate honestly, they earn more tokens.
Staking is similar to renting out your house on Airbnb. You still own the house, but you're giving up control over it for a short period of time in exchange for a financial reward.
Staking doesn't require powerful computers... So it's much cheaper and less energy-intensive. It also promises faster, cheaper transactions, and, most importantly, better scalability than PoW – all things Ethereum needs for mass adoption.
Eventually, users will also be able to stake Ethereum and earn a yield on it. That will essentially make ETH an income-producing asset, which could make it much easier to value... and bolster the case for holding it long term.
There's a lot more to these subjects than I can share today. But for now, I hope you see the potential of earning safe income through crypto.
Tomorrow, I'll share our last way to generate income with cryptos...
Good investing,
Eric Wade
Editor's note: Last week, Eric sat down with Stansberry Research founder Porter Stansberry for a controversial interview. They discussed where all of the Fed's money-printing will lead... how it will affect your wealth... and the seven cryptos best positioned to benefit as the world's financial system is reordered. If you missed it, watch the replay here before it goes offline.
Further Reading
You've probably heard of bitcoin before. And while it makes headlines fairly often, the media hasn't been especially helpful in explaining how the technology works. But there's much more to blockchain technology than just one coin... Get the full story here: Become a Blockchain Expert in Less Than Four Minutes.
"You can find cryptos for banking, advertising, voting, investing, betting, making music, tracking our food supply, verifying art... and hundreds more uses," Eric says. But how do you tell which ones are worth owning? Get Eric's full write-up on how to spot cryptos with massive upside right here.
The crypto market offers a variety of moneymaking opportunities. And if you're a first-time crypto-user, you'll need to follow these steps before buying your first bitcoin...
NEW HIGHS IN 'PICKS AND SHOVELS' FOR SCIENTIFIC RESEARCH
Today, we're checking back in on a company that works behind the scenes...
Regular readers know that we like to invest in companies selling "picks and shovels." These companies provide the goods and services that an entire industry needs – like Levi Strauss did for miners during the California gold rush. So whether their customers "strike gold" or not, the businesses selling them tools win out. Today's company provides tools for science labs...
Agilent Technologies (A) is a $30 billion leader in life sciences, diagnostics, and more. It provides equipment and services for doctors and researchers... And whether or not its clients rise to the top in pharmaceuticals, forensics, and more, Agilent profits. Even though its business was disrupted by the COVID-19 pandemic, the company still made $1.2 billion in revenue last quarter – flat, but not declining. It also reported strong operating cash flow of $313 million, up 24% year over year.
Agilent shares are up more than 155% in the past five years, including dividends. And they recently hit a new all-time high. As Agilent keeps providing the tools scientists need, that trend should continue...
