How has crypto revolutionised financial freedom?
Opportunities come and go, but a financially life-changing opportunity rarely knocks on one’s door. And, when it does, it is easy to overlook in this world full of abundant information. What if I said that such an opportunity has presented itself in the form of cryptocurrencies? Suppose a young fin-tech geek suggests that an investment in cryptocurrencies can earn you financial freedom in 4 to 5 years compared to 10 to 12 years on a traditional investment like a mutual fund. It is likely to raise eyebrows even among the most aggressive investors. Though financial freedom is going to look different from one person to another. Ultimately, the common denominator is the freedom to choose to do what the person wishes. There are a lot of ways to accomplish financial freedom. So, we will probe why cryptocurrencies have successfully created enormous wealth for individuals, earning them the financial freedom most people dream about for decades.
The concept of decentralisation changed everything. For example, the internet was one of the major forces that helped reduce the role of a central authority and gave power back to the people. But one thing missing was reliable internet money where one can send money over the internet from one person to another without needing an intermediary like a bank. So here’s where a group of people commonly referred to as the cypherpunks decide to design the concept of uncensorable digital money, which eventually culminated in the form of Bitcoin in 2008.
The technology behind this Bitcoin is known as Blockchain, which is designed to function as a decentralised ledger. In simple terms, everybody in the network holds and updates the ledger to keep track of all global transactions so that no one cheats the network by introducing a fraudulent one. It’s been 11 years since the inception of Bitcoin, and nobody has been able to hack the network. With the success of Bitcoin, many cryptocurrencies were launched and traded on exchanges all over the world. Now, let’s understand what cryptocurrencies offer that separates them as an asset class from traditional investments.
The technology behind cryptocurrencies has been proven and stress-tested for 10 years now. Naturally, any new application involving Blockchain technology will have an inherent value deriving from the strong fundamentals, and the value grows as more people adopt it. So an efficiently designed cryptocurrency that has some utility has a shot at attracting a lot of investors. For example, while gold grew by 34% in 10 years, Bitcoin appreciated in value by an astronomical 48,00,000% over the same period. Second is the availability of the same on-chain market data to everyone. Blockchain data is accessible to whoever is keen to study and analyse. There isn’t much that a manipulative actor can do without raising alerts across the system. Ultimately this levels the playing field, unlike stock markets where people take advantage of transgressions like insider trading.
However, as rosy as the picture looks, one must understand that this extreme volatility is one of the reasons why investors were able to make life-changing earnings. So blindly throwing money into crypto won’t guarantee you great returns. There will be days where you deal with gut-wrenching intraday swings or experience bearish market movements for years altogether. So as with any investment, achieving financial independence will require emotional discipline and education. But there’s a flip side to it.
Only 1% of the world’s population is currently dabbling in the world of cryptocurrencies, just like the 90s when the internet was taking off. History doesn’t repeat itself, but it does rhyme. And now, it rhymes with Bitcoin, the best performing asset class of the last decade. Get in while it’s still early!
