Cryptocurrencies have been an absolute hit for years. Many people got rich on them, especially during the incredible rise in the value of Bitcoin a few years ago. Now prices have stabilized, but they are still a very profitable investment because most people profit. As a result, more and more people are wondering how to save cryptocurrencies.
As it is a fully digital currency, so is savings digital, because you cannot physically store something that does not physically exist. And it works differently than you are used to with ordinary money you save in brick and mortar banks. You can find out how it all works and everything you knew about savings accounts in this text.
What are cryptocurrencies?
To understand how savings accounts work, you must first be clear about the concept of cryptocurrencies. You are using them in the same way you would buy using dollars but they are created in a completely different way. It is created by so-called mining, which is performed by computers. It used to be much more cost-effective than it is today, so today people are more based on trade than mining.
The main reason is that the computers that miners need to be extremely powerful and consume a lot of electricity. That is why it is more profitable to trade and wait for the price to rise. Whoever bought Bitcoin in the beginning, earned several thousand times for every Bitcoin he had. The biggest advantage, and at the same time a potential problem, is that transactions with cryptocurrencies provide you with complete anonymity. What is certain is that this will become an increasingly popular method of payment and that it is already significantly changing the financial market.
Things you didn’t know about cryptocurrency savings accounts
1. Savings in cryptocurrencies are not subject to inflation
The money we are used to is subject to inflation. Inflation usually has such an impact on the money that it decreases in value over time, due to changes in prices and other influencing factors. The economic policy of the country has the greatest impact on inflation, so there is no way you can influence it. Sooner or later, your money will lose significantly in value. On the other hand, cryptocurrencies are not subject to inflation, because they are not under the jurisdiction of any central bank in the world.
Therefore, there is no one who can flood the market with money, which central banks do from time to time. For example, the Federal Reserve System, the central bank of the USA, put trillions of dollars into circulation during the pandemic. In this way, the value of the dollar fell. This cannot happen when you save in cryptocurrencies, because there are only as many as there are miners. Find out more about Bitcoin savings.
2. The profit is great
The so-called yield is significantly higher compared to the classic savings and can amount to as much as 10 percent, while otherwise it is more common that you get below 1 percent. The reason is that banks do not have as many reserves, nor can they have them due to the mining process, as is the case with brick and mortar banks and then they attract customers with high yields.
3. You cannot withdraw funds whenever you want
In ordinary banks, you are used to being able to withdraw funds several times a day without any consequences. This is not the case here and the number of withdrawals is very limited. You may get very high penalties if you do this often, so make sure you check how many times you can do it without consequences, as it varies greatly. We cannot tell you the usual number of permitted withdrawals, because just as there is no central bank, there is no one to regulate the rules.
4. Your cryptocurrencies are not entirely yours
When you put your cryptocurrencies in a savings account, it is a little different than when you put money in a bank account. In the bank, it still remains fully owned by you, while in this case you practically lend funds to someone else, while he pays you interest for it. It can be very profitable, but it is certainly a risk because you lose ownership of it temporarily.
5. Savings account is different from wallet
To have this type of currency, you need to have a special type of wallet for them. Without it, you can’t start trading at all or anything else in that market. While some think the savings account and wallet are a similar concept, it actually isn’t. This will not be difficult for you to understand, because it is not different from what we are used to. What we have in our wallet is ours and will neither decrease nor increase without our influence on it. While with a savings account you earn extra, but you also don’t have it in your wallet right now. When you put it in a savings account, you also give your keys temporarily, which carries a risk. And the wallet is completely safe, but also without the possibility of additional earnings.
6. This type of savings has many benefits
As everything related to this currency is decentralized, which is the difference in relation to dollars, euros and everything else, so the savings are completely under your control. No one determines the terms of your savings, transactions or anything else. Everything takes place exclusively peer to peer, which means exclusively between you and the other party, without intermediaries. For this reason, there is no paperwork or payment of any commissions or intermediary services. You don’t pay for account maintenance and similar expenses that you are used to paying. Also, no one has insight into your account, everything is completely anonymous.
Cryptocurrencies certainly represent the future and we advise you to research this topic after reading this article. Let this serve as a guide for things you did not know before, and you try to deepen your knowledge in order to better navigate this market.